London
CNN
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The European Union has increased tariffs on electric cars imported from China, drawing criticism from Beijing, which views the bloc as a vital and growing market for its auto industry.
Additional Customs duties of between 17.4% and 38.1% will be applied on top of existing EU customs duties of 10%, according to a European Commission statement. This brings the highest overall rate to almost 50%.
The interim ruling follows an investigation into Chinese state support for electric vehicle makers. The European Commission, the EU’s executive body, launched an investigation in October to determine whether prices of Chinese electric vehicles are artificially low due to subsidies and whether this is hurting them. European car manufacturers.
The Commission said its investigation had provisionally concluded that China’s electric vehicle industry “benefits from unfair subsidies, which result in a threat of economic harm.”
The sharp increase in tariffs highlights the more protective stance taken by Brussels and Washington towards trade with China. Western officials fear that jobs and strategically important industries could be wiped out by cheap Chinese imports. The EU is also investigating China’s support for wind turbine companies and solar panel suppliers.
But the bloc must strike a balance between protecting its industry and meeting its commitments to make its economy greener, including banning the sale of new gasoline and diesel cars from 2035.
“The EU’s green transition cannot be based on unfair imports to the detriment of European industry,” the Commission said in a statement on Wednesday.
He applied different levels of new obligations towards three major electric vehicle manufacturers. BYD – which rivals Tesla (TSLA) to become the world’s largest seller of battery electric vehicles – has the lowest additional duty, at 17.1%.
Geely, owner of Swedish company Volvo, was hit with an additional 20% tariff and SAIC an additional 38.1%. As for other electric vehicle manufacturers in China, those who cooperated with the EU investigation will be subject to an additional duty of 21%, while those who did not will be subject to an additional duty of 38%. .1%.
Tesla, which manufactures many of its cars in China, could later benefit from an “individually calculated duty rate” following a request by the carmaker, the Commission said.
Europe is the main destination for Chinese electric vehicle exports. Last year, the value of European electric car imports from China was $11.5 billion, compared to just $1.6 billion in 2020, according to think tank Rhodium Group.
The new tariffs on electric vehicles are expected to kick off intense negotiations between Beijing and Brussels aimed at avoiding a damaging trade war. The EU must decide by November whether or not to adopt the tariffs permanently.
Beijing’s response to tariffs “could lead to a trade war (with Europe), which would be devastating for a region that still relies heavily on Chinese-dominated supply chains to achieve its lofty climate goals,” it said. Will Roberts, director of automotive research at consultancy Rho Motion, said in a statement Friday.
In response to the EU announcement, China’s Commerce Ministry accused the bloc of “creating and escalating trade tensions” and said the move would harm European consumers. He pledged in a statement to take “all necessary measures to firmly defend the legitimate rights and interests of Chinese companies.”
There are also risks for European car manufacturers. Many of them make cars in China and then sell them in Europe, a setup that will be more expensive due to higher tariffs. Additionally, German automakers rely heavily on China for sales, and retaliation from Beijing could make their lives more difficult.
According to Rho Motion, Tesla accounted for more than half of the battery electric vehicles imported by EU last year, with Volvo and Renault’s Dacia brand also supplying significant volumes. BYD has just 1.5% of the European market so far this year, but is aiming for 5% next year, Rho Motion’s Roberts told CNN.
“Beijing will likely use both carrots and sticks to generate opposition to the Commission’s arguments, in the hope that a sufficiently large group of (EU) member states… emerges to block the permanent obligations “, Rhodium Group analysts said in a recent press release. research paper.
For example, China could increase tariffs on EU vehicle imports to 25%, from the current 15%, or target other European exports such as wine and luxury goods, according to Rhodium.
Beijing has already launched an anti-dumping investigation into brandy imported from the EU and could impose tariffs that would hit French cognac producers.
Alternatively, Beijing could commit to investing in EU countries and promise greater access to the Chinese market for European companies, Rhodium analysts wrote.
EU member states, meanwhile, are divided on tariffs. While France and Spain are in favor, politicians and leaders of the German automobile industry are strongly opposed.
Speaking on Saturday, German Chancellor Olaf Scholz said protectionism and isolation “ultimately make everything more expensive and everyone poorer.” He added: “We are not closing our markets to foreign companies because we don’t want that for our companies either. »
Yet pressure to protect European automakers became more urgent last month after prices for Chinese electric vehicles were all but removed from the United States. President Joe Biden quadrupled import duties on Chinese electric vehicles to 100%, part of a broader package of tariffs on products from China, including semiconductors and batteries.
Given the competing priorities that European officials had to consider, they could not take such an authoritarian approach.
In a report released in April, Rhodium Group analysts said duties of 40 to 50 percent would likely be needed “to make the European market unattractive for Chinese EV exporters.” For BYD, tariffs would likely need to be even higher to be effective, they added.
Chinese manufacturers should be able to absorb some of the additional tariffs “into their padded profit margins,” commented Rho Motion’s Roberts.
Chinese electric vehicle makers could also find ways to circumvent the tariffs. BYD committed in December to opening a factory in Hungary, an EU country member. It would be BYD’s first passenger car factory in Europe.
Olesya Dmitracova and Mark Thompson in London, and Shawn Deng and Alex Stambaugh in Hong Kong contributed reporting. This story has been updated with additional information.