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EU hopes cost of tariffs on Chinese EVs will not hit consumers

Investigation looked at concerns China was subsidising its electric car industry, but some observers believe tariffs could escalate into trade war

BYD electric cars would face a tariff of 17.4 per cent under the EU move. Photograph: Getty

Jack Power
Wed Jun 12 2024 - 15:32

The European Union has moved to place substantial tariffs on electric vehicles (EV) imported from China, which an investigation concluded were unfairly undercutting the European market.

The European Commission on Wednesday announced it was levelling tariffs of up to 38 per cent on Chinese EVs bought by consumers in the EU. Senior EU officials involved in the anti-subsidy investigation of Chinese electric car producers said they hoped the tariffs placed on future imports would not be passed on to consumers in the form of “disproportionate” increases in the cost of EVs.

The decision to hike tariffs on EV imports from China follows an investigation started last October, into concerns China was subsidising its electric car industry, which was then flooding the EU market at costs that undercut European car makers. The trade measures are expected to lead to possible retaliation from China, which some observers have said could escalate into a trade war with the EU.

The tariffs will apply to cars imported into the EU that were produced by US or other multinational companies, if the factories where they were made were based in China. The commission, which is the executive arm of the EU, announced it was placing tariffs of 21 per cent on Telsa EVs imported from China.

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Vehicles produced by SAIC would face tariffs of 38 per cent, BYD would be subject to 17.4 per cent tariffs, and import duties of 20 per cent will be put on Geely, the Chinese company that owns Volvo. Other electric car makers in China who did not co-operate with the EU inquiry will be hit with tariffs of 38 per cent on future imports.

The trade investigation saw EU officials undertake site and factory visits to a large number of companies, as the commission sought to determine to what extent producers in China were given unfair advantages by the Chinese state. The investigation concluded that the EV industry and its supply chain in China was heavily subsidised by the state, according to one senior EU official.

The commission identified a range of examples of what it felt amounted to clear state assistance of the sector. This included the provision of materials at below-market prices, tax exemptions, bank loans with preferential rates for EV producers, as well as grants at local and provincial levels.

The new tariffs would be on top of existing levies of 10 per cent on electric vehicles imported into the EU

Cheaper Chinese EV imports have commanded an increasing share of the EU market, as a result of domestic car producers being undercut on price. The new tariffs are an attempt by the EU to correct the advantage currently held by companies importing electric vehicles from China, the commission has said.

The level of tariffs placed on different companies was determined based on calculations of how subsidised their business was by the Chinese state. It is understood some companies co-operated more than others during the commission’s investigation. One EU official involved in the investigation said the Chinese government was also less than forthcoming with information at times.

The anti-subsidy measures targeting China had been championed by France, with other member states, such as Germany, opposed to the escalation, over concerns about China retaliating with countermeasures that could hurt EU exporters. The new tariffs would be on top of existing levies of 10 per cent on electric vehicles imported into the EU.

The provisional tariffs will be levied from July 5th, but would fall due for collection several months later if the trade dispute between the EU and China is not resolved.

The China Chamber of Commerce to the EU said it was shocked and gravely disappointed at the commission’s decision, which it said would “distort” fair competition in the market. The organisation said it believed the EU’s investigation was “politically motivated” and the tariffs would be a “serious market barrier” to future imports.

Jack Power

Jack Power

Jack Power is acting Europe Correspondent of The Irish Times

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