The dispute over electric vehicles is part of a larger trade conflict over government support for green technologies in China.
The European Union will raise tariffs on Chinese electric vehicles (EVs) on July 4 unless Beijing fails to agree to a “solution” to the subsidies, which the Union says are distorting the market.
The European Commission announced on Wednesday that it would increase tariffs on Chinese car manufacturers from the current 10 percent to 38 percent on July 4 unless the subsidy issue can be resolved through talks with China. The dispute over electric cars is the latest in a series of trade disputes between the EU and Beijing, which mainly concern green technologies.
In a press release, the EU executive said it had contacted the Chinese authorities to discuss the results of its investigation into the subsidies and to “explore possible ways to resolve the issues.”
The new import duties would come into effect on July 4, “should discussions with the Chinese authorities not lead to an effective solution,” it said.
The EU’s action was widely expected as investigations are currently underway into Chinese state support for Chinese car manufacturers, which benefit from the 10 percent tariffs, which are significantly lower than the tariffs imposed in the US or India, for example.
The Commission estimates that electric vehicles built in China are 20 percent cheaper than their European counterparts. This has contributed to imports – including vehicles from Western brands such as Tesla and BMW, which have car factories in China – into the EU soaring in recent years. According to Eurostat, the EU’s statistics agency, imports rose from 57,000 units in 2020 to over 437,000 in 2023.
According to the EU, Chinese brands such as BYD and SAIC are also increasing their market share because Beijing’s massive subsidies help them undercut European brands on price.
Bigger dispute
The dispute over electric vehicles is just the latest in a broader trade dispute over what the EU sees as unfair state support from China for the export of green technologies, including solar modules, batteries and wind turbines.
Given this ongoing debate and the high expectations surrounding the investigation, some took the Commission’s announcement calmly.
Cui Dongshu, secretary general of the China Passenger Car Association, said: “The EU’s provisional tariffs are basically in line with our expectations and will not have a major impact on the majority of Chinese companies.”
Chinese electric vehicle manufacturer Nio said that while it strongly opposes this move, its commitment to the European electric vehicle market remains unwavering.
However, the announcement was met with dismay in some quarters, including Germany, where the EU’s automotive industry is largest.
The German Transport Minister warned that the EU’s threatened tariff increase posed the risk of a “trade war” with Beijing.
“The EU Commission’s punitive tariffs are hitting German companies and their top products. Cars must become cheaper through more competition, open markets and significantly better framework conditions in the EU, not through trade wars and market isolation,” said Volker Wissing on X.
“As an export nation, we do not need increasing trade barriers. We should work to reduce trade barriers in the spirit of the World Trade Organization,” added Ola Källenius, CEO of German carmaker Mercedes Benz.