The European Commission has confirmed the imposition of steep tariffs on Chinese-made battery electric vehicles (BEVs) starting July 5. This significant decision, resulting from a nine-month investigation, aims to address the alleged massive subsidies provided by Beijing to its car-makers, which have resulted in artificially low prices and unfair competition.
The investigation revealed subsidies spanning the entire supply chain of Chinese-produced BEVs, involving both domestic and foreign companies. From mining raw materials for batteries to the shipping of finished products to Europe, public money has been extensively utilized. These subsidies have enabled Chinese manufacturers to offer their BEVs at much lower prices than those produced within the EU, where energy and labor costs are significantly higher.
The price disparity has led to a surge in imports of Chinese BEVs, with market share climbing from 3.9% in 2020 to 25% by the end of 2023. This influx of low-cost imports poses a "threat of economic injury" to the EU industry, potentially causing devastating losses and risking over 12 million jobs, both directly and indirectly linked to the sector.
The newly introduced tariffs are designed to neutralize this unfair advantage. The duties vary based on the parent company, annual turnover, and the suspected amount of subsidies received.
The breakdown of tariffs is as follows:
BYD: 17.4%
Geely: 19.9%
SAIC: 37.6%
Other BEV producers in China (including Tesla and BMW): 20.8%
Non-cooperative BEV producers in China: 37.6%
For now, these tariffs will be provisional, with customs authorities requiring bank guarantees from Chinese exporters instead of immediate cash payments. This approach means that end customers may not notice an immediate impact on prices.
Member states are scheduled to hold a preliminary vote in two weeks, which, while non-binding, will gauge political support for the measures. The tariffs will remain in place until a final decision is reached in four months. This decision could be blocked if a qualified majority of member states, representing 65% of the EU population, oppose it.
Germany, a major car exporter with substantial economic ties to China, and Hungary, a growing hub for Chinese investment, are among the countries likely to resist the tariffs.
The German Association of the Automotive Industry (VDA) has criticized the tariffs, arguing they are not an effective means to enhance competitiveness and could result in a "lose-lose situation." There is particular concern over the impact on joint ventures, such as those involving Volkswagen and General Motors with SAIC.
In contrast, France and Italy have expressed support for the additional levies, indicating that the November vote will likely be preceded by intense political debates.
While Brussels and Beijing engage in discussions to find a resolution that could prevent the permanent implementation of these tariffs, the prospects for a breakthrough are uncertain. Beijing has denounced the investigation as a "naked protectionist act" and has threatened to take "all necessary measures" to defend its domestic companies.
China's Ministry of Commerce has already launched an anti-dumping investigation into EU pork imports, a move seen as a potential precursor to retaliatory actions.
Agriculture and aviation are viewed as particularly vulnerable to Chinese retaliation.
On Thursday, a ministry spokesperson expressed a desire for resolution, stating, "There is still a four-month window before arbitration, and we hope that the European and Chinese sides will move in the same direction, show sincerity, and push forward with the consultation process as soon as possible."
The China Chamber of Commerce to the EU expressed its disappointment, labeling the Commission's decision as "driven by political factors" and detrimental to consumer interests.
This anti-subsidy investigation is one of the most consequential in recent memory, coming at a low point in EU-China relations. Historical grievances, such as the decimation of the EU's solar industry due to subsidized Chinese competitors, have influenced the Commission's stance.
Ursula von der Leyen, President of the European Commission, highlighted these concerns, stating, "We have not forgotten how China's unfair trade practices affected our solar industry. Many young businesses were pushed out by heavily subsidized Chinese competitors. This is why fairness in the global economy is so important – because it affects lives and livelihoods. Entire industries and communities depend on it. So, we have to be clear-eyed about the risks we face."
As the EU moves forward with these measures, the outcome of this complex situation will significantly shape the future of EU-China trade relations and the global electric vehicle market.
Source: Euronews
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