Brian Cavanaugh, AGS Senior Vice President
On June 12, the European Union announced it planned to impose new tariffs on electric vehicles (EV) imported from China as part of a wider strategy to counter act unfair trade practices by Chinese manufacturers and protect Europe’s own automotive industry. The EU’s tariffs are set to take effect on July 4 and will be applied in addition to the 10 percent duties already in place. The tariffs range from 17.4 percent to 38.1 percent for three of the leading Chinese auto manufacturers, BYD, Geely, and SAIC and were calculated based on the level of cooperation with European officials on a month’s long EU investigation into the Chinese practice of exporting EVs abroad to undercut the European competitors with the support of the Chinese government.
The EU defended the action, saying in a statement that their investigation which started in October of last year found that the electric-vehicle supply chain in China “benefits heavily from unfair subsidies in China, and that the influx of subsidized Chinese imports at artificially low prices therefore presents a threat of clearly foreseeable and imminent injury to E.U. industry.” Beijing criticized the tariffs in a statement from the spokesman for the Commerce Ministry, saying they lacked a “factual and legal basis” and accused the EU of “weaponizing economic and trade issues. EU officials noted that they are open to engaging with Chinese officials to resolve the issue and was open to discussions.
Following the announcement, shares of top Chinese EV makers surged as much as 38 percent during trading as some analysts concluded the EU tariffs were modest in comparison to the recently quadrupled U.S. tariffs. Last month, the Biden Administration announced American tariffs on Chinese EV imports of 100 percent, up from 25 percent, demonstrating the growing concern over China’s commanding position in the global EV market is a trans-Atlantic issue both the U.S. and EU are working to counter.
The automotive sector is a critical part of Europe’s economy and is the second largest market for EVs after China. It provides 13 million jobs across the EU bloc. The tariffs will seek to bolster the market position of Europe’s own manufactures at a time when China accounts for 37 percent of all EV imports to Europe, including non-Chinese brands that are made in China such as Tesla, BMW and Dacia. Economic analysts have warned that increasing tariffs to above 20 percent could result in disrupted trade routes and one analysis found that such increases could prevent $3.8 billion of Chinese EVs from entering the European market.
China’s rise as the global leader in EV production has alarmed developed markets like the U.S. and the EU, in part because it is a core part of the CCP’s “Made in China 2025” initiative which seeks to dominate markets and industries for critical future technologies, like EVs, then flooding the global market with their own products, displacing American and European technology. The top Chinese EV automaker, BYD, has set a goal of becoming the top EV supplier in Europe by the end of the decade. BYD has made significant investments in pursuit of this goal, such as the announcement last year that it reached an agreement with Hungary to build an EV factory there and would pursue setting up other plants elsewhere in the EU. China has pursued a similar strategy across other industries to dominate advanced electronic manufacturing for semiconductors, legacy chips, and display technologies.
AGS will monitor the situation and provide updates should there be any significant developments.
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