europe-china electric car

European Union imposes steeper taxes on electric vehicles manufactured in China, reaching as high as 38%

Battery electric vehicle producers in the Asian country who refused to participate with the European Union's probe would face a 38.1% tariff, while manufacturers in the country who did comply but were not "sampled" will face a reduced 21% charge.

According to the European Union, Chinese electric vehicle imports "heavily benefit from unfair subsidies" and represent a "threat of economic injury" to European EV manufacturers, hence the EU has decided to impose higher tariffs on these vehicles.

The European Union's executive branch, the Commission, has drawn the preliminary conclusion that China's BEV value chain "benefits from unfair subsidisation" and declared that it would be beneficial for the EU to apply "provisional countervailing duties" on Chinese BEV imports.

An investigation by the European Union (EU) started in October led to the imposition of these new charges. In a statement, the E.U. Commission said the penalties will be implemented starting from July 4 if talks with Chinese officials fail to provide a satisfactory resolution. Currently, the duties are provisional. After the temporary responsibilities are put in place, the final steps will be taken within four months.

"The flood of subsidised Chinese imports at artificially low prices thus poses a threat of clearly foreseeable and imminent injury to E.U. industry," the Commission declared.

The probe was grounded in "facts and evidence," according to Valdis Dombrovskis, the European Union commissioner for trade, who told CNBC on Wednesday. He also mentioned that ongoing engagement with Chinese authorities and stakeholders regarding possible solutions was taking place.

According to comments translated by Google, a representative from China's Ministry of Commerce claimed on Tuesday that the European Union's decision was a "protectionist act" and that it was unfounded by facts and law.

"The conclusions presented in the European Union ruling are not supported by evidence or law," the ministry stated. According to the statement, the European Union disregarded WTO regulations and failed to take into account the fact that China's electric vehicle market dominance is due to free and open competition.

Creating and worsening trade frictions and "destroying fair competition" in the guise of "maintaining fair competition"—this is a clear example of protectionist policies, according to the spokesperson. "The European Union's decision does more than just hurt China's electric vehicle industry's legal claims; it will also wreak havoc on the supply chain for the entire automotive industry, including the EU."

Dissection of tariffs

The European Union has levied a 38.1% charge on battery electric vehicle (BEV) manufacturers in the Asian nation that have not been "sampled" yet, and a lesser 21% tariff on manufacturers in the same country that have cooperated with the probe.

Dombrovskis claimed that the particular tariffs revealed by the Commission were related to the amount of information they provided and their level of cooperation with the investigation. Companies who shared details are eligible for decreased rates, he added.

The main Chinese BEV manufacturer, BYD, was hit with a tariff of 17.4%, while Geely was hit with a penalty of 20%. Additionally, SAIC, an automaker, has been hit with the European Union's 38.1% tariff. The European Union investigation is still ongoing and included samples from all three companies.

Following a "substantiated request," Elon Musk's Tesla—which operates a giga plant in Shanghai—may "receive an individually calculated duty rate at the definitive stage," according to the Commission. According to Dombrovskis, who spoke with CNBC, Tesla was arguing for reduced tariff rates, and the Commission was considering this.

As for Tesla, he mentioned that they may face varied levels of countervailing charges depending on their specific situation and the subsidies they received in China.

In light of the news from the European Union, Nio has pledged its "unwavering" dedication to the electric vehicle industry. Increasing tariffs as a means to disrupt the regular international trade of EVs is something we vehemently reject. It said that this strategy "impedes rather than promotes" efforts to reduce emissions, protect the environment, and foster sustainable development on a global scale.

Unrest in the global EV trade

The decision to raise tariffs is the result of months of discussion among EU member states.

France was one of the countries that pushed for higher tariffs, citing the necessity for Europe to protect itself from the unfair manufacturing practices and massive subsidies practiced by China. More so than before, Germany is opposed to the measure, claiming it might spark a broader trade war.

There are dangers for European automakers, according to German auto executives, particularly if China retaliates.

Tensions in the trade war between China and the European Union have been rising for months, with a focus on electric vehicles. Some examples of this include the European Union's probe into Chinese government subsidies for electric vehicle manufacturers and claims that Beijing is flooding the international market with surplus vehicles.

The European Union is concerned that these actions may hurt domestic EV manufacturers in Europe and put them out of business. Any wrongdoing has been denied by China.

In May, taxes were increased on products imported from China, including electric vehicles, as the United States closely aligns with the European Union on the topic. Duties levied by the United States on imported electric vehicles are slated to increase from 25% to 100% beginning this year.

Leading Chinese automakers like BYD are vying for a piece of the rapidly growing electric vehicle (EV) market, which includes industry giants like Tesla. In an effort to undercut regional automakers on price, Chinese businesses have also been increasing their footprint in Western markets.



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