Brussels confirmed on Tuesday its intention to impose a five-year surcharge on electric cars from China, including Teslas at a reduced rate, while remaining “open” to a negotiated solution with Beijing.
China subsequently said it “vigorously” opposed the measures, calling on the EU to take “concrete measures” and “appropriate solutions to avoid an escalation of trade frictions.”
Brussels will add to the 10% tax already in place a surcharge of up to 36% on imports of Chinese electric vehicles.
US manufacturer Tesla, which has its own factories in China, received an “individual” rate of 9%, which is significantly lower due to the lower level of subsidies received by the brand created by US billionaire Elon Musk, Brussels said. The bulk of the aid provided by Beijing for local production of the Model Y and Model 3 comes in the form of batteries at a lower cost than the market, a European official explained.
These customs duties will apply by the end of October for five years, subject to the approval of the 27, divided on the subject. They will then replace provisional taxes decided at the beginning of July, and going up to 38%, the Commission specified in a press release.
Beijing’s retaliation
While France and Spain actively pushed for proportionate measures, Germany, which is very involved in China, fought on the contrary, with Sweden and Hungary, to avoid sanctions, fearing reprisals from Beijing.
Berlin is particularly reluctant, because of the weight of its automobile industry in China. Manufacturers Audi, BMW, Mercedes and Volkswagen make almost 40% of their global sales in China. “The negative effects of this decision outweigh the possible advantages,” Volkswagen lamented in July when the provisional taxes were imposed.
The Chinese Chamber of Commerce in the EU had warned as soon as the European announcement was made of the “negative” consequences on relations between Beijing and Brussels, criticising disguised “protectionism”.
China has 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.
14.6 million employees
The EU hopes to protect the automotive industry, which employs 14.6 million people in the EU, while avoiding a deadly conflict with its second largest economic partner after the United States. The latter, for its part, announced customs duties of 100% in mid-May, compared with 25% previously.
Brussels also says it is “open” to any other solution coming from Beijing, which complies with the rules of the World Trade Organization (WTO), which China also seized in July.
“We believe that it is really up to China to find an alternative” to the surcharges, said a European official.
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.
The Commission also announced that it would not collect the provisional taxes that came into force on 5 July. They will continue to be paid but will remain blocked in a bank account before being returned.
The new taxes affect most Chinese manufacturers.
Brussels will impose surcharges of 17% on Chinese manufacturer BYD, instead of the 17.4% provided for in the provisional tax decided last month, 19.3% on Geely, against 19.9%, and 36.3% on SAIC against 37.6% in July. Other manufacturers will be subject to an additional average duty of 21.3%, against 20.8% decided in July, if they cooperated in the investigation or 36.3% (37.6%), if they did not.
These changes were decided after a dialogue with the companies concerned and taking into account some of their requests, the European official said.