Automotive News Europe — 2026-02-01
Automotive Industry
After months of negotiations with China, the European Commission has agreed to let automakers propose minimum price floors for China-built BEVs exported to European Union markets as an alternative to tariffs of up to 35 percent.
The mechanism — called a “price undertaking” — sets floor prices by model and trim level, essentially baking tariff costs into vehicle prices.
So far, just Volkswagen Group has applied — for the Cupra Tavascan EV, which is built in VW Group’s Anhui factory in China and faces a 20.7 percent duty when exported to the EU. The details of VW Group’s proposal remain private, but experts said that the Commission could issue a ruling within weeks.
Warnings led to anti-subsidy investigation and tariffs
EU competition authorities have targeted China-built EVs for several years, after warnings from top auto executives and trade groups about low-cost BEVs flooding the European market, taking share from European automakers and threatening thousands of jobs.
An EU investigation that concluded in mid-2024 found that Beijing had illegally subsidized the BEV value chain, making it impossible for European automakers to compete on a level playing field. As a remedy, the EU imposed tariffs of 7.8 percent to 35.3 percent to battery-electric vehicles and extended range EVs, but excluded plug-in hybrid electric vehicles and full hybrids.
Chinese automakers have increased their PHEV sales sharply in Europe, avoiding the extra tariffs, while their BEV growth has flattened since the tariffs went into effect in November 2024. At the same time, their overall market share has doubled, and at least two automakers — BYD and Chery — have committed to European assembly.
Chinese automakers sold more than 812,000 cars in Europe in 2025 (including the U.K. which doesn’t impose extra tariffs), according to figures from Dataforce, a 99 percent increase over 2024, for an overall share of about 6.1 percent. BEV share was about 11 percent of the total, while PHEV share was about 14 percent. Those figures were even higher in December.
Automotive News Europe spoke to trade and automotive experts, and examined EU documents to answer several questions about minimum pricing.
Why is the European Commission considering minimum pricing for China-built EVs now?
Since the EV tariffs were put in place, the two sides have been exploring other solutions, with China asking the World Trade Organization to rule on the legality of the tariffs. At the same time, experts say, the global trade picture has shifted, with Europe seeking to expand its ties to Latin America, with the Mercosur pact; India, with a recently concluded free-trade agreement; and with China, amid new tariffs and ambivalence from the Trump administration.
“It’s a diplomatic/political argument that given the tensions with the U.S., we should somehow reduce tensions with China,” said Daniel Gros, director of the Institute for European Policymaking at Bocconi University in Milan.
Among those tensions is the threat of retaliation by Beijing against European automakers in China, a move that could hurt Audi, BMW, Mercedes-Benz and Porsche, which depend on Chinese sales.
“There is a fear that trade conflicts between the EU and China will only increase if the EU continues to stay with high tariffs on EV imports,” said Wulf-Peter Schmidt, a former Ford executive who teaches at CBS University of Applied Sciences in Germany. “The idea was to find a compromise that allows protection for the European auto industry without also upsetting the Chinese companies.”
Albert Waas, Boston Consulting Group’s automotive and mobility sector leader for Europe, the Middle East, South America and Africa, said another consideration is to protect European automakers that import EVs from China, including Cupra, Mini and Smart. “There was a lot of lobbying going on to ensure that it would remain a sustainable business model to import those cars after they have industrialized them in China,” he said.
What exactly is minimum pricing, and has it been used as a trade instrument before?
How does minimum pricing work? When would automakers choose it over tariffs? How would the Commission enforce it?
Minimum pricing — or what the Commission calls a price undertaking — establishes a pricing floor for imported goods, in some cases in tandem with quotas. In the most recent high-profile example, the EU imposed minimum price floors on Chinese photovoltaic panels in 2013, in an “anti-dumping” investigation. The floor remained in place for five years.
How would a pricing floor be set for Chinese imports?
Pricing would be set not only by model, but by trim level, the Commission said. Prices must “provide equivalent effect to duties,” essentially baking in the duty cost into the price of the car.
The Commission also requires that automakers “mitigate the risk of cross-compensation” — the possibility of offsetting a price floor with lower prices on other models to maintain market share. One possibility, the Commission said, is to include an annual volume commitment.
The Commission has offered two paths to setting a price floor: the floor should be no lower than before the start of the EU’s anti-subsidy investigation or it should be comparable to an equivalent non-China built model on the market in Europe.
Schmidt and others said the first option could be problematic, because overall BEV prices have fallen in the past two years, in part because European automakers are now offering low-cost models built within the EU. “If you had a new model it would be easy to bypass,” he said. “You could just say, ‘We don’t have a predecessor, now please hear our [pricing] case’,” he said.
The sales price applies to the first independent customer, which experts said applies to private buyers but also independent distributors or importers. A subsequent buyer from an independent importer would not necessarily be subject to the price floor, said Siobhan Kahmann, a partner at CMS Law based in Brussels.
How much interest is there from automakers for tariff relief through minimum pricing?
It’s not clear how many other automakers besides VW Group could seek minimum pricing — and experts told Automotive News Europe that price floors and tariffs will likely co-exist for years. The European Commission has said that it issued guidelines for other submissions after receiving VW’s request in December.
“I expect there will be interest” from other automakers, Kahmann said, adding that the Commission would need a lot of information from petitioners, and that the quality of that information could influence how long approval would take. Each application will need to be approved individually by the Commission.
Are there any other considerations?
The Commission has said preference could be given to automakers that commit to investments in the EU, but it’s not clear how that would work, Kahmann said. “This is an incentive, and it builds in some flexibility. The details will be hammered out,” she added.
A key concern is enforceability and traceability, which remain gray areas, experts said. The Commission’s guidelines say only that it “must be able to monitor and verify the company’s compliance” with “reasonable administrative effort.”
Exactly how this would be accomplished is unclear. Schmidt said the Commission itself could compare selling prices on a monthly basis, for example, but he said a more likely path would rely on competitors reporting potential infractions.
Gros said it could be a “nightmare” to monitor incentives or other indirect price reductions on the dealership level. “You have trade-ins, and you have an MSRP, which as we all know is negotiable,” he said. “I don’t know how the Commission would enforce it.”
Who are the winners and losers from minimum pricing?
By Gros’s calculations, the EU takes in about €2 billion annually in EV tariffs from China, at an average weighted rate of 20 percent per automaker. Under minimum pricing, that revenue would revert to the automakers’ balance sheets, assuming they kept market share; they could receive a guaranteed price that would likely be higher than they would charge in a free market.
“The minimum-price versions of these protectionist measures are likely to backfire, because with the exception of VW, they just strengthen the balance sheet of the Chinese producers,” he said.
Schmidt said he favors a purely market-based approach. “Tariffs and price floors are short-term measure that help European industry but undermine or reduce the pressure on the industry to innovate faster,” he said.
Kahmann said that minimum pricing could be an incentive for EU and Chinese negotiators to reach a more durable trade agreement. “We need to find wider solutions to Chinese overcapacity,” she said. “We can’t keep doing anti-dumping and anti-subsidy investigations.”