EU Votes for High Tariffs on Chinese EVs; German Carmakers Object
"The voting results on October 4th are a significant signal for the fate of the European automotive industry. What is needed now is for the European Commission (hereinafter referred to as 'the EU') to reach a settlement with China swiftly to prevent a trade conflict from which no one benefits," said a spokesperson for the BMW Group in response to a journalist's inquiry regarding the EU's imposition of tariffs. On October 4th local time, EU member states officially voted to determine the imposition of an additional anti-subsidy tax of up to 35.3% on Chinese-made electric vehicles, on top of the existing 10% tax, for at least five years, with the plan to take effect by the end of October.
In terms of specific tax rates, Tesla will be subject to an additional 7.8% surcharge, while BYD, Geely, and SAIC will be levied with anti-subsidy taxes of 17%, 18.8%, and 35.3% respectively. Other electric vehicle manufacturers involved in the investigation but not individually sampled will face an additional 20.7% surcharge.
Following the release of the voting results, opposition from various quarters has emerged. To date, the Ministry of Commerce of China and the China Chamber of Commerce to the EU, among others, have expressed "firm opposition." Meanwhile, multinational automotive companies such as Mercedes-Benz, BMW Group, and Volkswagen Group have voiced their opposition or dissatisfaction with the EU's move.
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Several industry insiders pointed out in interviews with journalists that the imposition of anti-subsidy taxes could lead to a lose-lose situation. Cui Dongshu, Secretary-General of the China Passenger Car Association, stated in an interview: "The EU's practice of imposing anti-subsidy tariffs is entirely wrong. When China introduced international automotive companies like Tesla, it promoted the electrification transformation of China's industrial chain. The EU also needs a 'catfish effect,' vigorously encouraging Chinese automotive companies to develop within the EU and promoting the construction of the EU's electrified industrial chain."
"It should not be punitive tariffs; Chinese automotive companies investing in Europe should be given corresponding preferences. Chinese enterprises that invest locally in Europe, create job opportunities, and cooperate with local companies should receive corresponding preferences in terms of tariffs," said Oliver Blume, Chairman of the Board of Management of Volkswagen Group, in an interview with German media.
Up to 45.3% in Tariffs Required
The current automobile import tariff in Europe is 10%, which means that Chinese electric vehicle manufacturers entering the European market will face an ultra-high tariff of up to 45.3%.
"From what I understand, Tesla's low tax rate is because it has a very strong public relations team to deal with sampling surveys; BYD's low tax rate is because it has investments and factories in Europe, driving local employment. The EU's imposition of a 20.7% anti-subsidy tax on other automotive companies is based on the judgment that Chinese automotive companies still have a 30% to 40% cost advantage over local companies. They assume that by adding this tax, Chinese companies can still make a profit by selling electric vehicles at the same price as now," said Lu Shengxun, founder of Qian Jue Shen Zhi Consulting Company, to the journalist.
In fact, regarding the issue of whether to impose additional tariffs on Chinese electric vehicles, there has been ongoing debate within the EU. The journalist noted that Germany, Hungary, Malta, and four other countries voted against, while France, Italy, the Netherlands, and ten other countries voted in favor, with twelve countries abstaining.After the vote, the European Union (EU) issued a statement saying that the proposal to impose tariffs on imported pure electric vehicles from China has received the necessary support from EU member states. At the same time, the EU and China continue to work hard to explore alternative solutions that must fully comply with World Trade Organization (WTO) regulations, adequately address the damaging subsidies identified by the EU investigation, and be monitorable and enforceable.
According to a report by CCTV News, on October 4th local time, Hungarian Prime Minister Viktor Orban said in an interview with local media: "Oppose the EU's imposition of punitive tariffs on Chinese electric vehicles."
"Germany and Hungary voted against; France and Italy voted in favor. Germany and Hungary opposed the imposition of countervailing duties because these two countries have very close relations with China. China is the largest single market for Volkswagen Group globally, and Hungary is a hotbed for many Chinese car companies to invest and build factories," Lu Shengyun told reporters.
"Imposing tariffs is a government action and is never a purely economic issue. The decision made by EU member states themselves includes considerations of their own political (election), livelihood, employment, and local industry competitiveness factors," Yang Jigang, an industry researcher of "New Four Modernizations of Automobiles" and partner at Zhixing Tao Lue, pointed out to reporters. The EU's true intention is to use "imposing tariffs" to force Chinese car companies to invest and build factories in Europe. "You cannot both want Chinese car companies to invest in Europe and protect yourself by imposing tariffs."
Lu Shengyun analyzed: "As we all know, although Europeans have been actively embracing clean energy in recent years, compared to China, Europe's electric transformation has been relatively slow. Under these circumstances, some EU member states hope to protect the European electric vehicle industry through tariffs, allowing external shocks to come more slowly; at the same time, they hope that Chinese car companies can bring some cutting-edge technologies and the electric vehicle industry chain to Europe, promoting Europe's electric vehicle transformation, just like the 'catfish effect' triggered by Tesla's arrival in China."
"BBA" speaks out against
"What I'm thinking is, what on earth do they want to do? Do they want to destroy my business model and make me economically unviable?" Daimler Group CEO Ola Källenius said on the "Berlin Global Dialogue" program.
The Daimler Group stated: "We firmly believe that countervailing tariffs will weaken the competitiveness of an industry in the long run. Free trade and fair competition will bring prosperity, growth, and innovation to all parties. Therefore, we believe that the European Commission's plan to impose countervailing tariffs is a mistake, which may lead to far-reaching negative results."
It's not just the Daimler Group that opposes this. In a statement, BMW Group said: "The EU's practice of imposing additional tariffs on Chinese electric vehicles is completely unworkable. Not only will this not enhance the competitiveness of European car manufacturers, but it may also harm businesses that are actively operating globally. Moreover, imposing tariffs will limit the supply of electric vehicles to European consumers, thereby delaying the low-carbon development process of the European transportation industry."
In fact, when the EU began imposing temporary tariffs of up to 37.6% on Chinese-made electric vehicles from July 5th, BMW Group CEO Oliver Zipse bluntly pointed out that such a practice is not only useless but may also be a "dead end," ultimately harming not only China's electric vehicle industry but also endangering the EU itself. Oliver Blume also believes that punitive tariffs on China will pose a danger to the German automotive industry and the Volkswagen Group.In interviews, several industry insiders believe that a significant reason for the opposition from German car manufacturers represented by Mercedes-Benz, BMW, and Volkswagen is their concern that electric vehicles produced in China will be subject to high tariffs when exported to Europe. They also worry that their sales in the Chinese market will be affected by trade frictions, such as exporting high-end models to the Chinese market.
"European fuel car exports to China, especially large-displacement luxury cars, may be impacted in this trade conflict, which will hit European car manufacturers," Yang Jigang pointed out.
Oliver Blume also mentioned this in an interview with German media. "This poses a huge risk to our Audi, Porsche, Volkswagen, Bentley, and Lamborghini brands, which export a large volume to China." When asked, "Even if punitive tariffs are as high as 30%, can Volkswagen's German cars still sell well in China?" Blume frankly stated, "We will be very passive in the Chinese market. Therefore, we clearly oppose these new regulations."
Will European consumers pay the bill?
It must be recognized that part of the "cost" of imposing countervailing duties will be borne by European consumers. In Lu Sheng's view, although imposing tariffs will reduce the price advantage of Chinese car manufacturers, consumers will place orders for electric vehicle products produced by Chinese manufacturers after weighing product advantages and brand advantages. This means that part of the tariffs will be passed on to consumers, which will undoubtedly harm the rights and interests of European consumers.
"In the field of new energy vehicles, consumers will ultimately choose good products, and the definition of good products is not just a good price, but also good performance, good experience, good reputation, and good competitiveness. The rise of Chinese new energy car manufacturers globally is due to the competitiveness of the entire industry chain, including the supply chain, upstream and downstream, and 'three electric' core technologies. The EU's 'tariff increase' strategy will not achieve its desired outcome," Yang Jigang said.
Fortunately, the plan to impose "countervailing duties" will take effect at the end of October, which means there is still time for negotiation. "Before the decision takes effect at the end of October, we still have time. My hope is that the EU can reach an agreement with China to form a fair solution for both parties," Blume called on the EU to consider adjusting the tariff rates.
Yang Jigang said, "It is estimated that the tariff game between China and Europe will continue for some time, and both parties have bargaining chips. In the long run, as long as it is not completely hijacked by politics (ideology) and not aiming for decoupling and breaking the chain, it is a high probability that Chinese car manufacturers will invest and set up factories in Europe."
It is worth mentioning that on October 4, the spokesperson of the Ministry of Commerce of China revealed that since the end of June, China and the EU have conducted more than ten bureau-level technical consultations and two deputy ministerial consultations on the electric vehicle countervailing case. On September 19, Wang Wentao, Minister of Commerce of China, and Valdis Dombrovskis, Executive Vice-President of the European Commission and Trade Commissioner, held a comprehensive, in-depth, and constructive meeting. Both parties clearly expressed their political willingness to resolve differences through consultation and unanimously agreed to start price commitment consultations to avoid the escalation of trade frictions. In just 14 days after that, the technical teams of China and the EU have conducted six rounds of technical consultations.
In addition to official negotiations, the companies under investigation have actively cooperated with the investigation. SAIC Motor mentioned in a statement, "During the countervailing investigation process, SAIC Motor actively provided thousands of documents and written evidence through submitting questionnaires, written defenses, and statements at hearings, among other methods. The EU's determination violates the principles of the market economy and international trade rules, severely damaging the interests of all parties."