Europe vs China Why is EU imposing heavy tariffs on imported Chinese EVs

According to the EU, EV manufacturers who cooperated with the investigation will face an average duty of 21 per cent, while those who did not will face a 38.1 per cent tariff.

The European Commission also announced specific tariffs for major Chinese companies, which are:

BYD: 17.4 per cent

Geely: 20 per cent

SAIC: 38.1 per cent

 

Additionally, non-Chinese car companies producing EVs in China, including European brands like BMW, will also be impacted by these tariffs.

When will these new tariffs take effect?

The new tariffs are set to take effect from July 4, unless ongoing discussions with Chinese authorities yield a different outcome.

Why has the EU decided to impose tariffs on imported Chinese EVs?

This decision follows the EU’s investigation into claims that Chinese EVs are being sold in the European market at unfairly low prices, subsidised by the Chinese government.

The EU cited the “threat of economic injury” to local EV producers due to Chinese manufacturers benefitting from “unfair subsidisation.” This move follows the United States’ recent decision to increase tariffs on Chinese-made EVs to 100 per cent to protect its domestic industry from perceived unfair trade practices.

European Commission investigation findings

The Commission’s investigation provisionally concluded that the Chinese BEV value chain benefits from significant subsidies, posing an economic threat to EU BEV manufacturers. The investigation also assessed the potential impacts of these measures on EU importers, users, and consumers of BEVs.

The European Commission has reached out to Chinese authorities to discuss the findings and seek a resolution in compliance with World Trade Organization (WTO) rules. If these discussions fail, the provisional duties will be applied by customs in each EU Member State and collected if definitive duties are imposed.

Electric vehicle market in China

China dominates the global EV market, with over eight million EVs sold in 2023, representing 60 per cent of the global total, according to the International Energy Agency’s annual Global EV Outlook.

New electric car registrations in China reached 8.1 million in 2023, a 35 per cent increase from the previous year. The rise in EV sales has driven growth in China’s overall car market, despite an 8 per cent contraction in the market for conventional internal combustion engine cars.

China also became the largest auto exporter in 2023, exporting over four million cars, of which 1.2 million were EVs.

China’s response to the EU’s new tariff rules

In response to the EU’s decision, Beijing has urged the EU to reconsider and avoid escalating trade tensions. China has indicated it will take measures to protect its interests and emphasised the mutual benefits of economic cooperation between the two regions. State news agency Xinhua described the tariffs as a move in the “wrong direction.”

China has also criticised the move, describing it as protectionist and a violation of international trade rules.

Implications for India’s EV market

The increased tariffs in the US and EU have raised concerns that India might become a target for Chinese EV and battery exports. Some media reports speculate a potential change in the Indian automobile industry due to Chinese firms seeking partnerships, while others argue that India’s high import duties will prevent such dumping.

This development marks a significant step in the ongoing global trade tensions involving China’s rapidly expanding EV market. It highlights the EU’s commitment to protecting its own industries from perceived unfair competition.

First Published: Jun 14 2024 | 6:19 PM IST