The European Union is planning to increase taxes on Chinese-made electric automobiles.
Germany’s Frankfurt (AP) — On Wednesday, the European Union decided to increase import duties, or tariffs, on Chinese-made electric cars. In a wider trade spat over Chinese government subsidies and the Asian country’s rapidly expanding exports of green technology to the 27-nation EU, EVs are the most recent flashpoint.
What action did the EU take?
According to the European Commission, the EU’s executive branch, China’s battery electric vehicle “value chain” profits from “unfair subsidization” that harms EU competitors, according to the early findings of its continuing investigation into the country’s EV subsidies. It intends to apply temporary tariffs of up to 38.1% on imports of electric vehicles from China. In addition, 10% of all imported EVs are subject to duties.
The commission announced that it would levy additional taxes of 17.4% on electric cars from BYD, 20% on those from Geely, and 38.1% on vehicles sold by China’s state-owned SAIC, targeting three of the largest Chinese EV players in Europe.
While SAIC is the owner of Britain’s MG, one of Europe’s best-selling EV brands, Geely is the owner of a stable of well-known brands, which include Polestar, Swedish automaker Volvo, and British sports car maker Lotus.
Duties of at least 21% would apply to other Chinese makers of EVs.
The duties will go into effect on July 4 if the commission’s efforts to “explore possible ways to resolve the issues” with Chinese officials are unsuccessful.
What prompted the commission to act?
According to research firm Rhodium Group, the value of battery-powered automobiles imported into Europe increased dramatically from $1.6 billion in 2020 to $11.5 billion last year. The majority of the imports come from Western manufacturers like Tesla and BMW which have plants in China.
However, EU officials claim that because of Beijing’s enormous subsidies, Chinese domestic manufacturers are gaining market share by undercutting European auto companies on price.
EU officials worry that imports receiving improper subsidies will harm the region’s green tech and manufacturing sectors. Additionally, European nations fund electric vehicles. In trade conflicts, the issue is whether subsidies are equitable and available to all automakers or if they favor one side by distorting the market.
The proposed tariffs are intended to approximate the amount of excessive or unjust subsidies that Chinese automakers are able to get in order to level the playing field. The panel stated that Tesla may receive an “individually calculated” rate if duties are finally levied, but it did not specifically target Western automakers.
What differences exist between the U.S. and EU tariffs?
Tariffs on Chinese EVs are being increased by the Biden administration from the existing 25% to 100%. Very few Chinese cars are being imported into the United States, but similar to the European Commission, the administration is concerned that subsidies harm US businesses and eliminate employment.
The majority of Chinese EV imports are blocked by US tariffs. On the other hand, in order for the European Union to meet its targets of reducing greenhouse gas emissions by 55% by 2030, it must import inexpensive electric vehicles.
How much do Chinese EVs really cost?
In the fiercely competitive domestic auto market, which is the largest in the world, Chinese automakers have learned how to produce electric vehicles at a low cost. According to data from Rhodium Group, BYD’s Seal U Comfort model retails for 21,769 euros ($23,370) in China but 41,990 euros ($45,078) in Europe. BYD’s small Seagull base model retails for about $10,000 in China and is scheduled to arrive in Europe next year.
According to Niclas Poitiers, a trade specialist at the Bruegel think tank in Brussels, cheaper Chinese automobiles help consumers and force European automakers to drop their costs and enhance their offerings—as long as a competitive business environment is fair. He claimed, “They put more pressure on other manufacturers who have been dragging their heels because they are very cost-competitive.”
