EU Tariffs on Chinese EV Imports Get Final Nod

The European Commission has announced the enforcement of additional import tariffs on electric vehicles (EV) imported from China, which comes after an investigation revealed that state subsidies allow Chinese automakers to undercut their European competitors.[para. 1] The new tariffs will range from a 7.8% levy on Tesla Inc. vehicles produced in China to as much as 35.3% on cars manufactured by state-owned SAIC Motor Corp. Ltd. and others deemed uncooperative during the investigation. These measures will be in place for five years and add to the EU's current import duties of 10% for cars. The tariffs specifically target battery EVs, also known as "pure" EVs. [para. 2][para. 3]

The decision to impose these tariffs was debated among the 27 EU member states, with ten countries, including France, Italy, and Poland, supporting the tariffs. In contrast, five countries, such as Germany and Hungary, opposed the measure. Meanwhile, 12 nations, including Spain, Portugal, and Sweden, abstained from the vote. The EU and China are working on finding alternative, WTO-compatible solutions, according to the European Commission.[para. 4][para. 5]

The first provisional tariffs were introduced in July after the investigation discovered that Chinese automakers' supply chains unfairly benefited from state subsidies. However, these initial duties were later revised downward in August. [para. 6]

China has responded to the EU's decision with criticism, labeling it as "protectionist." The Chinese commerce ministry has filed a complaint with the WTO and urged the EU to adopt a constructive approach that seeks solutions without escalating trade frictions. Furthermore, the ministry has expressed opposition to the EU negotiating separate agreements with individual Chinese automakers, having appointed the China Chamber of Commerce for Import and Export of Machinery and Electronic Products as the industry's representative for any pricing negotiations. [para. 7][para. 8][para. 9]

Retaliatory moves by China included launching an anti-subsidy probe into EU dairy products in August and announcing provisional anti-dumping measures on imported European brandy in October. [para. 13]

Despite these challenges, Chinese automakers continue to show interest in the European market, which is seen as having significant growth potential due to the low penetration rate of EVs. This was evident in their strong presence at the Paris Motor Show in mid-October, where nine Chinese automakers, such as BYD Co. Ltd. and XPeng Inc., participated. [para. 14][para. 15][para. 16]

EU member states have also approved a plan requiring all new cars sold in the bloc to be zero-emission vehicles beginning in 2035, aligning with Europe's environmental goals and China's shift toward new-energy vehicles. Chinese automakers aim to capitalize on this alignment, hoping European drivers will choose their electrified and technologically advanced offerings. [para. 17][para. 18][para. 19]

Zhejiang Leapmotor Technology Co. Ltd. is considering localizing manufacturing as a strategy to manage the risks related to the EU's tariff hikes, having already reduced prices on some models to remain competitive. The company's partnership with Stellantis NV, which has conducted trial production of Leapmotor's model in Poland, could potentially lead to further manufacturing collaboration. [para. 20][para. 21][para. 22]