EU adopts up to 35% surcharge on electric cars imported from China

The European Commission has adopted Tuesday the regulation imposing additional customs duties on electric cars imported from China, which are accused of creating competition from loyal.

Despite Germany's hostility, Brussels has decided to add to the 10% tax already in place a surcharge of up to 35% on Chinese-made battery-powered vehicles.

The decision, which applies for a period of five years, was published in the EU Official Journal on Tuesday evening and is due to come into force on Wednesday.

The stated aim is to restore fair competition conditions with manufacturers accused of profiting from massive public subsidies. The aim is to defend the European automotive industry and its 14 million jobs against practices deemed unfair and identified during a lengthy Commission investigation.

The market share of Chinese electric cars has exploded in the EU, rising from less than 2% in 2020 to more than 14% in the second quarter of this year, according to figures from the European executive.

“We value competition but it must be based on fair competition rules,” said Trade Commissioner Valdis Dombrovskis, describing the European measures as “proportionate” and “targeted.”

Beijing has repeatedly denounced the EU's “protectionism.”

Until the last moment, Valdis Dombrovskis continued the dialogue with Chinese Commerce Minister Wang Wentao, in an attempt to find a negotiated solution. In vain.

Nevertheless, both parties agreed to continue consultations: at any time, the surcharges could be removed if an agreement was reached on other means to compensate for the damage identified by the European investigation.

– Opposition from Germany –

Press room during a virtual summit between European and Chinese leaders, April 1, 2024 © AFP – Kenzo TRIBOUILLARD

For its part, China threatens to strike European interests. It has already responded by launching anti-dumping investigations targeting pork, dairy products and wine-based spirits imported from Europe, including cognac.

Germany and four other countries (Hungary, Slovakia, Slovenia, Malta) voted against the Commission's proposed tariffs, while largely failing to muster the majority needed to reject them.

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The EU is taking the risk of triggering a “trade conflict”, reacted the German automobile lobby (VDA). The country's automotive flagships, strongly established in the world's largest market, fear paying the price.

The imposition of European customs duties against Chinese electric cars comes at a time when the Volkswagen group is in crisis, which is planning tens of thousands of job cuts and the closure of three factories in Germany.

The customs duties had, however, received the support of ten member states including France, Italy and Poland. Twelve others abstained, including Spain and Sweden.

“The European Union is taking a crucial decision for the protection and defense of our commercial interests, at a time when our automobile industry needs our support more than ever,” said the French Minister of the Economy, Antoine Armand.

But, in France too, the EU's approach worries business circles. The Cognac interprofessional body (BNIC) complained of being “abandoned” by the authorities, considering that its sector was being “sacrificed” in a trade conflict that does not concern it.

The Chinese Chamber of Commerce to the EU (CCCEU), which represents Chinese companies in Europe, condemned these new surcharges on Tuesday and called for an end to the measures it considers “protectionist”.

“We deeply regret and are dissatisfied with the politically motivated and inward-looking decision” taken by the EU, it said in a statement, urging Brussels and Beijing “to accelerate talks on establishing minimum prices and, ultimately, to eliminate” these customs measures.

This Sino-European exchange of arms is part of a broader context of trade tensions between the West, led by Washington, and China, accused of anti-competitive practices in several other sectors such as wind turbines and solar panels.

The European measures, which are intended to be based on facts and respect the rules of the World Trade Organization (WTO), differ however from the punitive and more political approach of the Americans.

In the United States, President Joe Biden announced on May 14 an increase in customs duties on Chinese electric vehicles to 100%, compared to 25% previously.

In Europe, the amount of fines will vary between manufacturers depending on the estimated level of subsidies received.

In detail, the additional taxes will amount to 7.8% for Tesla cars manufactured in Shanghai, 17% for BYD, 18.8% for Geely and 35.3% for SAIC, according to a final document sent to member countries on September 27.

The other groups that cooperated in the European investigation will be subject to 20.7% additional taxes, compared to 35.3% for those that did not cooperatecom

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