Autmotive News Europe — 2024-10-02
Automotive Industry
France, Greece, Italy and Poland are among major EU members planning to vote in favor of tariffs up to 45%, while Germany is likely to abstain.
European Union governments are expected to approve plans to impose tariffs of up to 45% on imports of electric vehicles made in China despite concerns from Germany, which is worried about counter-measures from Beijing.
The European Commission, which is conducting an anti-subsidy investigation into EVs made in China, has sent its proposal for final tariffs to the EU's 27 member states ahead of a vote expected on 4 October.
Under EU rules, the commission can impose the tariffs for the next five years unless a qualified majority of 15 EU countries representing 65% of the bloc's population votes against the plan. France, Italy, Poland and Greece will vote in favor of the tariffs, officials and sources in those countries said. Together, they represent 39% of the EU population.
German opposition
Germany has been skeptical about the tariffs because of worries about igniting a trade war at a time when Mercedes, BMW and Volkswagen are selling hundreds of thousands of cars annually in China.
German Chancellor Olaf Scholz said on 2 October that his government, which abstained in a vote on the tariffs in July, may do so again given differences of opinion in its three-party government.
Germany's finance minister, Christian Lindner, said the government must oppose the tariffs. "A trade war with China would do us more harm than good for a key European industry and a crucial sector in Germany," he said.
Europe's auto industry has generally opposed tariffs, notably Germany's three carmakers, which each sell almost a third of their cars in China. Ahead of the vote, BMW, Mercedes and VW urged the German government to vote against the tariffs.
BMW CEO Oliver Zipse issued a statement saying: "Additional tariffs harm globally active companies in this country and could provoke a trade dispute from which no one gains."
Mercedes CEO Ola Kallenius said: "The EU should seek a negotiated solution with China instead of imposing tariffs."
VW said the tariffs do not improve the competitiveness of the auto industry. "The proposed tariffs are the wrong approach," a VW spokesperson said.
Commission President Ursula von der Leyen, who launched the investigation a year ago, said EU industry needed to protect itself against a potential flood of cheap Chinese EV imports benefiting from state subsidies.
The commission says registrations of China-built EVs rose from 3.5% of the EU market in 2020 to 27.2% in the second quarter of 2024 and Chinese brands' market share increased from 1.9% to 14.1%.
China's spare production capacity of 3 million EVs per year, which needed to be exported, was twice the size of the EU market, the commission said.
French support
French President Emmanuel Macron said that he supported tariffs and that the level of Chinese subsidies was "unbearable."
"Broadly we have to protect the level playing field in all the different sectors of our industry," he said in a speech in Berlin.
The Czech industry and trade ministry, while declining to say how it would vote, said it took seriously the commission's conclusions about "China's unfair practices" and noted that the United States, Canada, Turkey and Brazil had already taken action.
The position of Spain, a previous backer of tariffs, is unclear after Prime Minister Pedro Sanchez said on a visit to China in September that the EU should reconsider its position.
The commission could push through the tariffs with the support of only four countries. However, it can submit an amended proposal if it wants to secure greater backing.
Other options
The commission has said it is willing to continue negotiating an alternative to tariffs with China and could re-examine a "price undertaking" involving a minimum import price and typically a volume cap.
One option under negotiation is minimum import prices calculated using criteria such as the range, battery performance and size of the electric vehicle, along with whether it is two- or four-wheel drive, a source familiar with the matter said.
An alternative is a Chinese commitment to investment in the EU, with quotas for a transitional period.
The prospect of duties has spurred some Chinese automakers to look to invest in factories in Europe, despite higher labor and manufacturing costs. A number of brands, including BYD and Chery, are planning assembly sites in Europe.
The tariffs range from 7.8% for Tesla to 35.3% for SAIC, which owns the MG brand. These tariffs are on top of the EU's standard 10% import duty for cars.
If tariffs are implemented, Chinese EV makers will have to decide whether to absorb them or raise their prices to cover the billions of dollars in new costs at European borders at a time when demand at home is falling.
In moves seen as a retaliation against Brussels' investigation into EVs, China has this year launched its own probes into imports of EU brandy, dairy and pork products.