The European Union said on Wednesday it would impose additional tariffs of up to 38 percent on electric cars built in China, a move it said would help level the playing field for European automakers.
The tariffs, expected for months, are on top of the existing 10 percent duty, but the degree of their impact is disputed. Some European automakers argue they would start a trade war, but other experts say they won’t stop China’s dominance of the industry.
Instead, they argue that incentives to make low-emission vehicles more attractive to drivers are needed instead, if the European Union hopes to meet its goal of banning the sale of new internal combustion vehicles. engine in 2035.
What does this mean for consumers?
Industry experts predict that increased duties on electric vehicles from China will hurt consumers more than Chinese automakers, by raising the price of the most affordable models. electric vehicle in the market.
But according to a European Union investigation, the entire supply chain of Chinese electric cars enjoys government subsidies that allow automakers there to drastically reduce their production costs. This gives Chinese producers an unfair competitive advantage over their European rivals, a European investigation has found.
BYD’s Dolphin model, for example, sells in Europe for about 32,400 euros, or about $34,900, compared to nearly €40,000 for a Tesla Model Y and €37,000 for a Volkswagen ID.4.
A reduction in EV exports to EU countries could cause more Chinese automakers to move assembly to European countries like Hungary or Spain, where costs for labor and parts are higher. , resulting in higher costs for consumers.
How will this affect European automakers?
Many European car manufacturers rely heavily on China, the world’s largest market for cars, for both exports and production in the domestic market.
“This decision for additional import duties is the wrong way to go,” Oliver Zipse, chief executive of BMW, said on Wednesday. “So the EU Commission is hurting European companies and European interests.”
German manufacturers — BMW as well as Mercedes-Benz and Volkswagen — not only sell to the Chinese but also have large production and research and development operations in China. They fear that any retaliation from Beijing could harm their business.
Others remain interested in working with the Chinese. Last month, Stellantis said it would start selling two models in Europe from its joint venture with Chinese automaker Leapmotor as part of an effort to avoid tariffs.
Is the EU just following the United States?
The Biden administration announced last month that it would impose new tariffs of 100 percent on Chinese electric vehicles. That proposal would quadruple the tariffs the United States previously charged for foreign cars, in an effort to protect the American auto industry from Chinese competition.
Some analysts are concerned that tariffs set at a lower level may not be enough to prevent Chinese-made electric vehicles from making their way to the United States, given the large price difference between the Chinese and American cars.
But Wendy Cutler, the vice president of the Asia Society Policy Institute and a former US trade official, said a 100 percent level would be high enough to block that trade. “That is what we call a prohibitive tariff. It really cuts trade off,” she added.
The European Union began an investigation into Chinese EV subsidies in October, citing what leaders said was unfair competition, particularly from China’s top three electric car makers, BYD, Geely and SAIC.
Is this a setback for climate policy?
Tariffs like these have sparked debate among some economists and climate activists about whether they are an obstacle in the fight against global warming. Gasoline-powered vehicles are a major producer of greenhouse gas emissions that warm the planet.
The argument against tariffs is that they make electric cars more expensive, slowing the transition away from fossil fuels. The Chinese government and some German automakers have taken a similar line of argument, as have experts who point out that Western countries should be interested in cheaper electric cars if they want to meet their goals to combat climate change.
“Protective measures can only lead to higher car prices for consumers and, in this case, also kick the can of achieving the announced emissions goals into the long grass,” said ManMohan Sodhi. , a professor of supply chain management at Bayes Business School in London.
How did the EU get here?
The European Union is eager to avoid falling into a situation similar to the one in the late 2000s, when Beijing pumped huge sums of money into solar energy technology, enabling domestic manufacturers to make multibillion-dollar investing in new factories and gaining market share worldwide.
China’s production boom has caused the price of panels to fall, forcing dozens of companies in Europe and the United States to go out of business. That led the European Commission to open an anti-dumping investigation that resulted in punitive tariffs on Chinese panels.
But China retaliated, announcing its own probe into exports of European wine and solar panel components, a move that divided the bloc’s members. That allowed China to turn them against each other, eventually leading the Europeans to withdraw.
More than a decade later, Germany’s solar industry is still struggling, and cheap solar panels from China dominate the market.
What happens next?
Even before the announcement on tariffs from Brussels, demand for Chinese EVs in Europe had already begun to slow, as Germany and France cut subsidies for electric vehicles.
Last month, Great Wall Motors said it was closing its Munich headquarters, citing the “increasingly challenging European electric vehicle market, along with many uncertainties ahead.”
But BYD, China’s leading maker of electric cars and a sponsor of the 2024 European soccer championship that starts in Germany on Friday, remains focused on Europe. The company is already building a factory in Hungary and is considering a second.
Ana Swanson contributed reporting from Washington.
