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The European Union has officially voted to make provisional tariffs on Chinese-made EVs permanent for the next five years, following a nearly yearlong investigation into Chinese subsidies. The decision aims to protect European BEV producers from what the EU sees as unfair competition, yet it has the potential to strain EU-China relations. Talks between the EU and China are ongoing, and the tariffs could still be revised in the coming months. The permanency of the tariffs will come into effect on the 31st of October if the talks do not succeed in a solution.
These tariffs, which now reach up to 45% for some original equipment manufacturers (OEMs) such as SAIC, will primarily affect Chinese automakers, with most facing a tariff of 31.3%. In the EU vote, 10 member states supported the tariffs, five opposed, and 12 abstained.
Automakers reactions
The decision is already dividing opinions within the European automotive industry. VW, Mercedes, and BMW, some of Europe’s largest automakers, have expressed concerns. They called the tariffs the “wrong approach” and warned they could send a “fatal signal for the European automotive industry.” These manufacturers view China not just as a competitor but as a key export market, and they fear retaliatory measures from China. These companies have struggled to maintain market share in China, with declining profits as a result.
However, not all European manufacturers share this view. Stellantis, the multinational automaker, supported the EU’s move, stating that it backs “free and fair competition,” suggesting that the tariffs may help level the playing field for European automakers.
Charles Lester, Data Manager at Rho Motion, commented on the decision, saying, “This is a key development we have been expecting for some time. It is implemented to help safeguard and boost the European BEV industry, but it will certainly test the strength of EU-China relations.”
The EU still has a strong reliance on Chinese imported BEVs, but Chinese players may now target PHEVs
During the first half of 2024 China suppled nearly a quarter of all BEVs sold in Europe. This marks an increase from previous years, highlighting a strong reliance on Chinese-made EVs. In 2023, around one-third of EVs sold in the EU were imported from China.
While the tariffs may reduce BEV imports from China, there is still scope for Chinese automakers to increase exports of PHEVs, which fall outside the remit of the new tariffs. Chinese automaker Changan recently announced its plans to enter the European market, starting with a PHEV, while leaving open the possibility of BEVs in the future.
Chinese player considering different export strategies
The measures have already been in force for three months as provisional tariffs, and reactions from Chinese OEMs have so far been subdued. Many hoped the tariffs would be rejected, but with the new duties now permanent, some manufacturers may look for ways to adapt. Tesla is the only major player so far that has raised prices in response to the tariffs. However, other Chinese automakers are increasingly eyeing local production in Europe as a way to bypass the new trade barriers. These plans may now be accelerated.
Elsewhere, some OEMs are exploring alternative export strategies. SAIC, for example, is considering exporting vehicles from Thailand, while Geely is looking at establishing a production base in Vietnam, with plans to export from there.
Global Context and Future Implications
The EU is now just one of many trading blocs or states imposing tariffs on Chinese imported vehicles, but the EU’s graded system is a more nuanced approach compared to the blanket tariffs seen elsewhere.
Despite the permanence of the tariffs for now, ongoing talks between China and the EU mean there remains the possibility of revisions or reductions in the future. For now, however, the tariffs represent a significant shift in the relationship between China and the European automotive market.
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