The European Commission will impose additional and provisional tariffs of up to 38% on the import of electric cars from China. The new tax burdens are added to the current 10% rate to which all foreign vehicles sold within the bloc are subject.
The trade regulator began an anti-subsidy investigation against oriental manufacturers in October last year. The investigation has concluded that the entire value chain of these companies is heavily subsidized in China, which allows them to market their products at lower prices than their European rivals. “The objective of the provisional countervailing duties is to eliminate the significant unfair advantage of battery electric vehicles. The intention is to guarantee competition on equal terms. The purpose is not to close the European market to this type of imports,” the Brussels-based organization clarifies.
Added levies vary between companies. Tariffs were adjusted based on the level of subsidy each Chinese manufacturer receives, according to European authorities. BYD is subject to an added tax of 17.4%, Geely faces an additional charge of 20% and in the case of SAIC the figure rises to 38.1%. Companies that are not of Chinese origin, but that manufacture their products in the Asian country, will be taxed at rates between 21 and 38.1%, depending on their “level of cooperation.” The taxes will come into force on July 5. The anti-subsidy investigation will continue until November 2. When the process concludes, definitive rights could be applied with a validity of up to five years.
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Ursula von der Leyen, president of the European Commission, said last year that “global markets are flooded with cheap electric cars from China. “Too often our companies face competition from heavily subsidized foreign players.”
Lin Jian, spokesperson for the Chinese Ministry of Foreign Affairs, accuses in a statement taken up by Reuters that “this anti-subsidy investigation is a typical case of protectionism.” He adds that the new tariffs will damage economic and trade cooperation between China and the European Union and compromise the stability of the global electric car production and supply chain. He warns that China will take necessary measures to “firmly safeguard” its legitimate rights and interests.
Electric cars: between protectionist policies and green mobility
Analysts project that the compensatory taxes will have a negligible economic impact. The European Union imported nearly 440,000 electric cars from China between April 2023 and the same month of this year. The transactions reached a net value of $9.7 billion. However, Andrew Kenningham, chief economist for the financial research company Capital Economics, points out that “the decision marks a big change in the bloc’s trade policy, because although it has used trade defense measures in recent years, it had not done before for such an important industry.”
The battery electric vehicle sector plays a crucial role in the European Union’s environmental ambitions. The Commission assures that the tax changes will not affect its process of adopting ecological mobility. “The most effective and fastest way to achieve a successful green mobility transition around the world will be through fair competition and compliance with global standards. If these imports are unfairly subsidized, they unduly harm our industry and ultimately undermine the achievement of these goals. We must avoid strategic dependencies on foreign partners in this critical sector.”
Experts suggest that the change in position responds to the rapid and sustained progress that China’s automotive sector has registered in recent years. Its ability to produce basic components for electric vehicles is behind the trend. The country is a leader in the production of lithium batteries. It manufactures around 75% of the charging centers used worldwide. The Atlantic Council estimates that Chinese exports of these parts grew from $13 billion to $65 billion between 2019 and 2023. Two-thirds of the units were sent to Europe and North America.
Various economic powers have begun to take regulatory measures to stop the dominance, described as a threat to local industries. The United States Government announced last month an adjustment to its tariff policy. It quadrupled tax rates for electric vehicles and batteries made in China. He argued that the decision was vital to protect the US sector from “unfairly priced Chinese imports.”
