Chinese automakers seek retaliatory tariffs on EU cars, state media reports

Chinese automakers seek retaliatory tariffs on EU cars, state media reports

Automotive News Europe — 2024-06-19

Automotive Industry

Chinese authorities have hinted at retaliatory measures after the European Commission said it would impose anti-subsidy duties of up to 38.1% on imported EVs.

Chinese automakers have urged Beijing to hike tariffs on imported European gasoline-powered cars in retaliation for Brussels' curbs on exports of Chinese-made EVs, the state-backed Global Times newspaper said on Wednesday, 19 June 2024.

In a closed-door meeting on 18 June 2024, China's auto industry "called on the government to adopt firm countermeasures (and) suggested that positive consideration be given to raising the provisional tariff on gasoline cars with large-displacement engines," according to the report.

The meeting was organized by China's Ministry of Commerce in Beijing and was attended by SAIC, BYD. European automakers Volkswagen Group, BMW, Mercedes-Benz, Stellantis, Renault and Porsche were also present, two people with direct knowledge of the matter said.

The main aim of the meeting was to put pressure on Europe and lobby against the tariffs that Brussels announced last week (second week of June 2024) to shield its car industry from Chinese competition, they added.

The ministry did not immediately respond to a faxed request for comment. The European carmakers either declined to comment or did not immediately respond to requests for comment.

Industry insiders say both Europe and China have reasons for wanting to strike a deal in the months ahead to de-escalate tensions and avoid the addition of billions of dollars in new costs for Chinese EV makers, as the EU process allows for review.

The European Commission said on 19 June 2024 that it was looking into the situation "with a view to discussing if a mutually agreeable solution can be found."

EU trade policy is turning increasingly protective amid concerns that China's production-focused, debt-driven development model could see the 27-member bloc flooded with cheap goods, including electric vehicles, as Chinese firms look to boost sales overseas due to weak demand at home.

The European Commission's 12 June 2024 announcement that it would impose anti-subsidy duties of up to 38.1% on imported Chinese EVs from July 2024 followed a move by the United States to hike tariffs on Chinese cars in May 2024, and opens a new front in the West's trade war with Beijing.

"Personally, I think it is unfair to start a tariff war solely on the basis of (China's) capacity utilisation rate and insufficient demand for China's new energy vehicles," said Zhang Yansheng, chief research fellow, China Center for International Economic Exchanges.

"We can see that China has adopted a package of policies to solve the 'overcapacity' problem, so this year, next year, and into the next four years, China's capacity utilisation will continue to rise," he added.

Hostile hints

The Global Times first reported late May 2024 that a Chinese government-affiliated auto research centre was suggesting China raise its import tariffs on imported gasoline sedans and SUVs with engines larger than 2.5 litres to 25%, from the current rate of 15%.

Chinese authorities have previously hinted at possible retaliatory measures through state media commentaries and interviews with industry figures.

The same newspaper in May 2024 also hinted that Chinese companies planned to ask authorities to open an anti-dumping investigation into European pork products, which China's commerce ministry on Monday, 17 June 2024 announced it would undertake.

It has also urged Beijing to look into EU dairy imports.

Big cars

Exports of passenger vehicles with engines bigger than 2.5 liters from Europe to China totalled 196,000 units in 2023, up 11% year-on-year, according to data from China Passenger Car Association.

In the first four months of 2024, exports of such vehicles from Europe to China stood at 44,000 units, down 12% from the same period a year ago (2023).

EU car exports to China were worth €19.4 bn ($20.8 bn) in 2023, while the bloc bought €9.7 bn of electric vehicles from China, according to EU statistics agency figures.

China accounts for about 30% of German automakers' sales, and Germany is by far the largest exporter of vehicles with engines of 2.5 liters or above, having shipped $1.2 bn worth to China since the beginning of 2024, Chinese customs data shows.

Mercedes-Benz's large GLE-Class SUV, S-Class sedans and Porsche's Cayenne are the three most popular imported cars from Europe in China, the three of which accounted for more than one-fifth of the total 155,841 imported cars of European brands in the first five months, according to data tracked by China Merchants Bank International.

Slovakia is China's fourth-largest and the EU's second-biggest provider of cars with large engines. In 2024 it has exported $803 m worth of SUVs.

The US, the UK and Japan all also export large numbers of cars with engines bigger than 2.5 liters, and would presumably stand to benefit most from the proposed tariff increase.