EU Imposes Up to 38% Tariffs on EVs to Protect Industry

EU imposes tariffs to protect industry
The EU imposes tariffs on Chinese EVs to counter unfair subsidies, targeting major brands like BYD, Geely, and SAIC to level the playing field

The European Union is set to impose tariffs of up to 38.1% on Chinese EVs to protect its domestic electric car industry from what it deems unfair competition. 

Following a nine-month investigation into state subsidies provided to Chinese manufacturers, this decision highlights concerns that these subsidies allow Chinese firms to sell EVs at artificially low prices, undercutting European rivals.

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Specific tariffs on Chinese manufacturers

Chinese manufacturers BYD, Geely, and SAIC are among the primary targets of the new tariffs, with respective duties set at 17.4%, 20%, and 38.1%. 

The EU Commission has determined that these companies benefit significantly from state subsidies, providing an unfair competitive advantage in the European market.

Other manufacturers that cooperated with the EU investigation but were not sampled will face a 21% surcharge, while those who did not cooperate will be subject to the maximum tariff of 38.1%.

Tesla, which cooperated with the investigation, will initially be subject to a 21% tariff. However, this rate could be revised next month based on further assessment of evidence submitted by the company.

Market impact and reactions

Will Roberts, Head of Automotive Research at Rho Motion, said: "European drivers are crying out for affordable EVs, and with the news today of sales plateauing in Europe, lower-priced cars will be critical to achieving the transition as planned."

Will Roberts, Head of Automotive Research at Rho Motion

He suggested that while Chinese manufacturers might absorb some of the lower tariffs due to their profit margins, the higher tariffs pose a significant challenge. According to Roberts, the real test will be Beijing's response—whether they will retaliate or seek an amicable resolution.

The reliance of European manufacturers on the Chinese market adds another layer of complexity. Declining profits from the East could hamper their ability to transition effectively to EV production. Data from Rho Motion reveals that nearly half a million EVs sold in the EU in 2023 were imported from China, accounting for almost one-third of the total EVs bought in the region.

Subsidies and competition

Of the imported vehicles last year, 79% were from Western brands, with Tesla accounting for over half of these Battery Electric Vehicles (BEVs).

Significant volumes further came from manufacturers such as Volvo (Geely-owned) and Dacia. MG, a fully Chinese-owned company with a European market heritage, accounted for 15% of imports, with the remainder comprising other Chinese brands.

Rho Motion's analysis indicates that Chinese brands like BYD, MG, and Great Wall Motors have significantly reduced production costs through scaled manufacturing in China. These efficiencies enable them to achieve profit margins between 25% and 45% over what is already achieved in China, even when operating in Europe.

Consequently, the lower tariff levels will align these manufacturers' profits more closely with European brands, though higher tariffs near 40% will be more challenging to absorb.

Julia Poliscanova, senior director for vehicles and e-mobility supply chains at Transport and Environment

EU and US tariffs

Recent US tariffs of 100% on Chinese EVs influenced the EU's decision. However, the EU opted for a more measured approach to avoid drastic measures that could provoke retaliatory solid actions from Beijing.

Julia Poliscanova, Senior Director for Vehicles and E-mobility Supply Chains at Transport and Environment, said: "The EU Green Deal came with the promise of growth and jobs, and that's impossible if our EVs are all imported. The tariffs are welcome, but Europe needs a firm industrial policy to speed up electrification and localise manufacturing. Introducing tariffs while scrapping the 2035 deadline for polluting cars would slow the transition and be self-defeating."

Lin Jian, the Chinese foreign spokesperson

Potential Trade War

The EU has notified Beijing of its intention to impose tariffs, potentially leading to duties exceeding US$2.1bn (€2 bn) annually. The move could spark a trade war with China, a crucial European trading partner. 

The tariffs, applied provisionally from next month, adhere to World Trade Organization rules, giving China four weeks to challenge the evidence provided by the EU.

Lin Jian, the Chinese foreign spokesperson, noted that politicians and industry representatives from several European countries have opposed the tariffs, likely including Germany, which fears countermeasures affecting its car exports to China. 

"Protectionism has no future, and openness and cooperation are the right way," Lin said.

As the EU and China navigate this complex trade landscape, the outcome will significantly impact the global EV market and the future of electric mobility in Europe.


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