The European Union said Wednesday it would impose additional tariffs of up to 38% on electric cars built in China, a move that would help level the playing field for automakers in Europe.
The tariffs, expected for months, come on top of existing 10% duties, but the level of their impact has been disputed. Some European automakers say they will start a trade war, but other experts have said they will not stop China's dominance in the industry.
Instead, they argue that incentives to make low-emission cars more attractive to drivers would be needed if the European Union hopes to reach its goal of banning the sale of new internal combustion engine vehicles in 2035.
What does this mean for consumers?
Industry experts predict that increased tariffs on electric vehicles from China will hurt consumers more than they do Chinese automakers by raising the price of the most affordable electric cars on the market.
But according to a European Union investigation, China's entire electric car supply chain enjoys government subsidies that allow local automakers to dramatically reduce production costs. This gives Chinese manufacturers an unfair competitive advantage over their European rivals, the European investigation found.
BYD's Dolphin model, for example, sells in Europe for about 32,400 euros, or about $34,900, compared to nearly 40,000 euros for the Tesla Model Y and 37,000 euros for the Volkswagen ID.4.
Clamping down on EV exports to EU countries could push more automakers in China to move assembly to European countries like Hungary or Spain, where labor and component costs are higher, resulting in higher costs. higher for consumers.
How will this affect European automakers?
Many European automakers are heavily dependent on China, the world's largest automotive market, for both exports and domestic production.
“This decision on additional import duties is the wrong way to go,” Oliver Zipse, BMW's chief executive, said on Wednesday. “The European Commission is thus damaging European companies and European interests.”
The German manufacturers, BMW, as well as Mercedes and Volkswagen, not only sell to the Chinese, but also have large manufacturing, research and development operations in China. They fear that any retaliation from Beijing could hurt their business.
Others remain interested in collaborations with the Chinese. Last month, Stellantis said it would start selling two models in Europe from its joint venture with Chinese automaker Leapmotor as part of efforts to get around the tariffs.
Was the EU simply following the US?
The Biden administration announced last month that it will impose new 100% tariffs on Chinese electric vehicles. This measure quadrupled tariffs previously levied by the United States on foreign cars in an effort to protect the American auto industry from Chinese competition.
Some analysts worried that tariffs set at a lower level might not be enough to prevent Chinese-made electric vehicles from entering the United States, given the large price differential between Chinese-made and American cars.
But Wendy Cutler, vice president of the Asia Society Policy Institute and a former U.S. trade official, said the 100% level would be high enough to block that trade. “This is what we call prohibitive tariff. It really reduces the compromises,” she added.
The European Union launched an investigation into Chinese subsidies for electric vehicles in October, citing what leaders called unfair competition, particularly from China's three major electric car makers, BYD, Geely and SAIC.
How did the EU get here?
The European Union is eager to avoid falling into a situation similar to that which occurred in the late 2000s, when Beijing invested huge sums of money in solar energy technology, allowing domestic manufacturers to make multibillion-dollar investments in new factories and gain market share globally.
The Chinese production boom has caused the price of panels to collapse, forcing dozens of companies in Europe and the United States to close. This led the European Commission to open an anti-dumping investigation which led to punitive tariffs on Chinese panels.
But China hit back, announcing its own investigation into European exports of wine and solar panel components, a move that has divided the bloc. This allowed China to pit them against each other, eventually leading the Europeans to back down.
More than a decade later, the German solar industry is still struggling and cheap solar panels from China dominate the market.
What happens next?
Even before Brussels announced the tariffs, demand for Chinese electric vehicles in Europe had started to slow, as Germany and France reduced subsidies for electric cars.
Last month, Great Wall Motors said it would close its headquarters in Munich, citing “the increasingly challenging European electric vehicle market, coupled with numerous uncertainties about the future.”
But BYD, China's leading electric car maker and sponsor of the 2024 European soccer championship starting Friday in Germany, remains focused on Europe. The company is already building a plant in Hungary and is considering a second.
Ana Swanson contributed by Washington.