What to recognize about Europe’s tariffs on Chinese electric vehicles

FRANKFURT, Germany — The European Union has finalized its sharply higher customs duties on electric vehicles imported from China. EVs are the latest flash point in a broader trade dispute over Chinese government subsidies and Beijing’s burgeoning exports of green technology to the 27-country bloc.

The duties took result provisionally in July and were finalized after talks between the EU and China failed to resolve their differences. Negotiations are expected to continue, and the EU could lift the duties if an agreement is reached.

Here are some basic facts about the EU’s customs duties:

The European percentage, the EU’s executive arm, conducted an eight-month investigation and concluded that companies making electric cars in China advantage from massive government assist that enables them to undercut rivals in the EU on worth, receive a large trade distribute and threaten European jobs.

The duties differ depending on the maker: 17% for BYD, 18.8% for Geely and 35.3% for state-owned SAIC. Other EV manufacturers in China, including Volkswagen and BMW, would be subject to a 20.7% responsibility. The percentage has an individually calculated rate for Tesla of 7.8%.

“By adopting these proportionate and targeted measures after a rigorous investigation, we’re standing up for fair trade practices and for the European industrial base,” European percentage Executive Vice-President Valdis Dombrovskis said.

The duties will remain in force for five years unless an amicable answer is found.

Chinese-built electric cars jumped from 3.9% of the EV trade in 2020 to 25% by September 2023, the percentage has said.

The percentage says companies in China accomplished that with the assist of subsidies all along the chain of production, from cheap land for factories from local governments to below-trade supplies of lithium and batteries from state-owned enterprises to responsibility breaks and below-yield capitalization from state-controlled banks.

The rapid growth in trade distribute has sparked fears that Chinese cars will eventually threaten the EU’s ability to produce its own green technology needed to combat climate transformation, as well as the jobs of 2.5 million workers at hazard in the auto industry and 10.3 million more people whose jobs depend indirectly on EV production.

Subsidized solar panels from China have wiped out European producers — an encounter that European governments don’t desire to view repeated with their auto industry.

Unusually, the percentage acted on its own, without a complaint from the European auto industry. Industry leaders and Germany, home to BMW, Volkswagen and Mercedes-Benz, have opposed the tariffs. That’s because many of the cars that will be hit with tariffs are made by European companies, and China could retaliate against the auto industry or in other areas.

Beijing has been sharply critical of the investigation and the higher duties as protectionist and unfair.

The Commerce Ministry has also launched anti-dumping investigations into European exports of brandy, pork and dairy products. Earlier this month, it announced provisional tariffs of 30.6% to 39% on French and other European brandies, after EU member countries voted in favor of finalizing the tariffs on EVs.

Officials have also said that they are weighing whether to raise tariffs on imports of gasoline-powered vehicles with large engines.

Talks between the two sides concentrated in recent weeks on so-called “worth commitments” as a feasible resolution. In such a scenario, carmakers would consent to a minimum selling worth for their EVs in Europe.

Some Chinese automakers are looking at making cars in Europe to avoid any tariffs and be closer to the trade. BYD is building a plant in Hungary, while Chery has a joint assignment to construct cars in Spain’s Catalonia region.

The Biden administration is raising tariffs on Chinese EVs to 100% from the current 25%. At that level, the U.S. tariffs block virtually all Chinese EV imports.

That’s not what Europe is trying to do.

EU officials desire affordable electric cars from abroad to achieve their goals of cutting greenhouse gas emissions by 55% by 2030 — but without the subsidies EU leaders view as unfair competition

The planned tariffs are aimed at leveling the playing field by approximating the size of the excess or unfair subsidies available to Chinese carmakers.

European countries subsidize electric cars, too. The question in trade disputes is whether subsidies are fair and available to all carmakers or distort the trade in favor of one side.

It’s not obvious what impact the duties will have on car prices. Chinese carmakers are able to make cars so cheaply that they could absorb the duties in the form of lower profits instead of raising prices.

Currently, Chinese carmakers often sell their vehicles overseas at much higher prices than in China, meaning they are favoring profits over trade distribute, even given their recent trade gains. Five of BYD’s six models would still earn a profits in Europe even with a 30% tariff, according to Rhodium throng calculations.

BYD’s Seal U Comfort model sells for the equivalent of 21,769 euros ($23,370) in China but 41,990 euros ($45,078) in Europe, according to Rhodium. The base model of BYD’s compact Seagull, due to arrive in Europe next year, sells for around $10,000 in China.

While consumers might advantage from cheaper Chinese cars in the short term, allowing unfair practices could eventually cruel less competition and higher prices in the long term, the percentage argues.

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Moritsugu reported from Beijing.