EU imposes up to 35% tariffs on Chinese EVs, Beijing takes matter to WTO

Chinese state-owned automotive giant SAIC Motor will pay the top tariff of 35.3 per cent, BYD 17 per cent, and Geely 18.8 per cent, in addition to the standard 10 per cent EU import duty

The European Union (EU) has announced the imposition of additional tariffs on electric vehicles (EVs) imported from China, citing concerns over alleged state subsidies that provide Chinese EV manufacturers with an unfair competitive edge in the European market. Following unsuccessful negotiations with Beijing, the EU has decided to move forward with duties of up to 35.3 per cent on certain Chinese EVs, a move set to be formalised into law imminently. China has condemned the move and lodged a complaint with the World Trade Organization (WTO), marking a significant escalation in ongoing trade tensions.

 

What new EV tariffs has the EU imposed on China?

A statement released by the European Commission on Tuesday evening revealed that a top tariff rate of 35.3 per cent will be applied to EVs produced by Chinese state-owned automotive giant SAIC Motor and its subsidiaries. This rate is in addition to a standard 10 per cent duty that applies to all EV imports into the EU. 

 

Major Chinese EV manufacturers BYD and Geely, along with their subsidiaries, will face lower additional tariffs of 17 per cent and 18.8 per cent, respectively. Meanwhile, Tesla, which negotiated separate terms with the EU, will see a comparatively lower duty of 7.8 per cent. 

Under the new rules, Chinese companies that cooperated with the EU’s anti-subsidy investigation will be subject to a 20.7 per cent duty. Those firms found to have been uncooperative, however, will be charged the maximum rate of 35.3 per cent. The tariffs are slated to be imposed for a five-year period, with collections set to begin from midnight following the implementation date. 

 

Why has EU imposed higher EV tariffs on China?

The EU’s decision follows an investigation by the European Commission, which found evidence suggesting that Chinese EVs benefit significantly from government subsidies, allowing them to be sold in the European market at prices that undercut local manufacturers. According to the EU, these subsidies present a ‘threat of economic injury” to the European EV industry, as domestic manufacturers struggle to compete on price. 

 

The Commission's investigation concluded that China’s battery electric vehicle (BEV) sector, which forms the core of its EV market, enjoys substantial financial support from the Chinese government, posing potential economic challenges to EU manufacturers.

 

Commenting on the ruling, EU Trade Chief Valdis Dombrovskis said, “We welcome competition, including in the electric-vehicle sector, but it must be underpinned by fairness and a level playing field.”

 

China’s response to tariff hike and WTO complaint

The Chinese government denounced the EU’s tariff decision, stating that they have filed an official complaint with the WTO on the matter, the country’s state media reported. Quoting China’s commerce ministry, a report by Xinhua said that Beijing declared that it “does not agree with or accept” the EU’s findings from the anti-subsidy probe and emphasised its commitment to “safeguard the legitimate rights and interests of Chinese companies.” The ministry has called for the resolution of trade conflicts through dialogue and indicated that it is undertaking a “new phase of consultations” with the EU.

 

The WTO complaint signals that the matter may escalate trade tensions between the EU and China, as the latter seeks to defend its position in the global EV market.

 

China’s dominance in the EV market

China currently leads the global electric vehicle sector in terms of sales. According to the International Energy Agency (IEA), Chinese manufacturers sold over eight million EVs in 2023, representing 60 per cent of the global market. Sales of electric cars in China reached 8.1 million in 2023, a substantial 35 per cent increase from the previous year.

 

Additionally, China has become the largest auto exporter worldwide, exporting over four million vehicles in 2023, of which 1.2 million were EVs. These high EU tariffs are likely to significantly impact China's dominance in the sector.

 

While these tariffs may come as a relief for European EV manufacturers by reducing the price advantage of Chinese imports, critics argue that it may instead lead to higher prices for European customers. This is based on the argument that fewer affordable EVs are likely to enter the European market in the future.