The European Union announced on Wednesday that it would impose tariffs of up to 38% on electric vehicles imported into the bloc from China, in what European leaders called an effort to protect manufacturers in the region against unfair competition.
The move, which comes a month after President Biden quadrupled U.S. tariffs on Chinese electric vehicles to 100%, opens a new front in escalating trade tensions with China amid growing fears over a glut of Chinese green technology products flooding global markets.
The actions of the European Union and the United States also reflect the challenges that traditional automakers in Europe and the United States face in the face of emerging Chinese companies based on electric vehicles and whose costs are much lower than those of their Western competitors.
But unlike U.S. automakers, several of their European counterparts are deeply tied to the Chinese market and their cars produced there will also be subject to higher tariffs. They criticized the European Union’s decision to increase tariffs by 10%, fearing retaliation from China, as well as an increase in market prices and a drop in demand for battery-powered cars.
The increases announced Wednesday, which are preliminary and will take effect on July 4, range from 17.4 percent to 38.1 percent for three of China’s major automakers, including BYD, Geely and SAIC. The tariffs were calculated based on the level of cooperation with European officials, who have spent recent months investigating the Chinese government’s level of support for these companies.
Other automakers producing electric vehicles in China, including European companies with factories or joint ventures there, face tariffs of 21 percent or 38.1 percent, the EU said. These rates also depend on their cooperation with the investigation.
The European Union defended the action, saying in a statement that an investigation opened on October 4 found that China’s electric vehicle supply chain “benefits greatly from unfair subsidies in China and that the influx of imports subsidized Chinese companies at artificially low prices” therefore presents a clearly foreseeable and imminent threat of harm to EU industry.
The European Commission, the EU’s executive branch, has opened an investigation into whether the Chinese government was effectively subsidizing its production of electric cars and sending them to Europe at lower prices than its European competitors.
The auto sector provides nearly 13 million jobs in the 27-country bloc, the world’s second-largest market for electric vehicles after China. Electric car imports from China reached $11.5 billion last year, up from $1.6 billion in 2020.
Around 37 percent of all electric vehicles imported into Europe come from China, including cars made by Renault-owned Tesla, BMW and Dacia. Chinese brands represent 19% of the European electric vehicle market. Their number is constantly increasing, according to a study by the Rhodium Group.
The EU left the door open for a possible deal, saying it had been in contact with Chinese authorities “to discuss these findings and explore possible ways of resolving the issues identified.”
Tesla, which produces its Model 3 and Model Y in Shanghai for the European market, has asked for duties on its cars to be calculated individually, the EU said. Other companies requesting an individual review have nine months to submit their request, the press release said.
Ursula von der Leyen, president of the European Commission, said last month that Europe was taking a “tailored approach” to calculating its tariff increase from the existing 10%, which would “correspond to the level of damage” caused. The tariffs applied to other exporting companies will be based on the weighted average of the duties imposed on the three companies that were the subject of the investigation.
Before this announcement, China had warned that it could retaliate by increasing customs duties on gasoline cars imported from Europe, as well as on agricultural and aeronautical products. China already applies a 15% tax on all electric vehicles imported from Europe.
These include cars made by BMW and Volkswagen, which not only sell in China but also have large production facilities there.
German automakers fear the tariffs could drive up prices in Europe and trigger retaliation from the Chinese, which would ultimately harm them in both markets. German Chancellor Olaf Scholz criticized the tariff increase last week during a visit to a factory in Rüsselsheim, which is owned by Stellantis’ Opel.
“Isolation and illegal customs barriers – this ultimately makes everything more expensive and everyone poorer,” Mr Scholz said. “We are not closing our markets to foreign companies, because we don’t want that for our companies either.”
Economic experts had warned that an increase in tariffs of up to 20 percent could disrupt trade routes. The Kiel Institute for the World Economy calculated that such an increase would prevent the entry into Europe of electric vehicles worth $3.8 billion from China.
But other experts point out that Chinese carmakers’ cost advantage over traditional European carmakers in producing components such as electronic modules and battery cells means Europe should impose tariffs. at least 50% to be effective.
Even if European automakers managed to close the gap, a decline in the number of Chinese models would drive up the overall price of electric vehicles, given higher labor and production costs, the institute said.
“It is by no means a foregone conclusion that European automakers will fill the gap,” said Julian Hinz, a business researcher at the institute. Another threat to European producers, he said, is that Chinese manufacturers are already planning to expand production in Europe.
BYD, China’s leading automaker, aims to become one of Europe’s leading electric vehicle makers by 2030. Late last year, it named Hungary as the location where it plans to build its first assembly plant in the EU. was considering setting up a second factory elsewhere in Europe.
Chery, another Chinese manufacturer, announced last month that it would open a factory near Barcelona, as part of a joint venture with Spain’s EV Motors.
During a visit to Spain last week, Chinese Commerce Minister Wang Wentao rejected Brussels’ accusations of unfair competition and urged the European Union to support collaboration and trade, based on rules. of the World Trade Organization.
“We support healthy competition, but firmly oppose any malicious attempts at suppression,” Wang said.
Other European countries also want Chinese automakers to set up operations on their territory, with the idea of creating jobs and strengthening national supply chains.
French President Emmanuel Macron has made a concerted effort to attract more battery production, particularly from Chinese companies, to a northern region where factory jobs are in decline. Bruno LeMaire, the French finance minister, went even further, declaring that the Chinese auto industry is “very welcome in France.”
Faced with the possibility of Chinese companies expanding in their own backyard, many European automakers emphasize that they are more concerned about increasing their competitiveness than about tariffs.
“For me, tariffs are a short-term issue,” Volkswagen Chief Executive Arno Antlitz said in a social media post last month. “Chinese competitors are planning to produce their vehicles in Europe by turning the competition locally and we must prepare accordingly,” he said.
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News Source : www.nytimes.com
