The European Union (EU) on Thursday imposed additional customs duties of up to 38% on imports of Chinese electric vehicles as a precautionary measure, before a final decision in November, accusing Beijing of having illegally favoured its manufacturers.
In the face of the “unfair subsidies” granted to Chinese companies according to Brussels, these “compensatory” duties will come into force on Friday, adding to the 10% taxes already applied by the EU to vehicles imported from China.
Following an anti-subsidy investigation launched in October, Brussels announced these surcharges on June 12, while launching discussions with Beijing to try to resolve the problem and defuse the risks of a trade war.
The Chinese Chamber of Commerce in the EU has slammed a “politically motivated protectionist measure”, hoping for talks to be concluded “as soon as possible”.
Cui Dongshu, secretary general of the China Federation of Automobile Manufacturers, told AFP that it was “a complete mistake” that could increase the cost of vehicles “to the detriment of consumers” in Europe.
The Commission now has four months to decide on definitive surcharges, which leaves a window open for dialogue. These definitive duties, which will have to be approved by the Twenty-Seven, would be valid for five years.
Brussels is following in the footsteps of the United States, which announced in mid-May an increase in customs duties on Chinese electric vehicles to 100%, compared to 25% previously.
A champion of petrol and diesel engines, the European car industry fears that its factories will disappear if it fails to stem the predicted surge of Chinese electric models. Beijing has taken the lead by investing in batteries for a long time.
In the EU, the market is booming ahead of the 2035 ban on sales of new combustion engine vehicles: Chinese electric vehicles account for 22% of the European market, compared to 3% three years ago, according to industry estimates. Chinese brands have an 8% market share.
“Contacts are continuing”
“Consultations with the Chinese government have intensified in recent weeks […] Contacts are continuing at the technical level” to reach “a mutually acceptable solution”, according to the Commission.
Brussels will impose surcharges of 17.4% on Chinese manufacturer BYD, 19.9% on Geely and 37.6% on SAIC (MG brand, etc.). Other manufacturers will be subject to an average additional duty of around 21% if they cooperated in the investigation, or 37.6% if they did not. These duties will only be collected if definitive duties are imposed.
Chinese manufacturer XPeng told AFP that it “will not change” its development strategy and will seek to find “ways to minimize the impact” on its European customers.
Its counterpart NIO says it “remains fully committed” to the European market and assures “to maintain the prices of its models at this stage”. MG France has for its part taken the lead by clearing customs and storing 2,600 vehicles, its management indicated.
Models of non-Chinese brands produced in China are also targeted: Tesla Model 3, electric Mini, Volvo EX40, etc.
If the surcharges are confirmed by Brussels, only a qualified majority of member states (15 countries representing 65% of the European population) could oppose their final adoption.
According to the German Kiel Institute, these additional duties could reduce imports of electric vehicles from China by 42%, a drop “largely offset by the increase in sales from European producers and imports from third countries”.
However, in the long term, this would not necessarily make the price of electric cars more affordable in Europe, he warns.
German reluctance
While France and Spain actively pushed for proportionate measures, Germany, which is very involved in China, fought with Sweden and Hungary to avoid sanctions, fearing reprisals from Beijing.
German carmakers Audi, BMW, Mercedes and Volkswagen generate nearly 40 percent of their global sales in China. “The negative effects of this decision outweigh the possible benefits,” Volkswagen said Thursday.
Beijing has threatened the EU with retaliatory measures: China already announced in mid-June an anti-dumping investigation into imports of European pork, after an investigation launched in January into EU wine spirits (including cognac). Wines, dairy products and high-powered cars are also in its sights, according to the Chinese press.
This new war of words is part of the growing trade tensions between the West and China, also accused of destroying competition in other sectors: wind turbines, solar panels, batteries, etc.
With the intention of curbing imports of Chinese electric vehicles without blocking them completely, the EU nevertheless assures that it complies with the rules of the World Trade Organization (WTO).
In this way, it hopes to protect a sector which employs 14.6 million workers in the EU while avoiding a deadly conflict with its second largest economic partner after the United States.