What consequences the additional tariffs will have on China’s electric cars

The EU Commission will be allowed to impose additional tariffs on electric cars from China in the future. How high are the taxes? And how do these affect manufacturers and customers? Answers to important questions.

Representatives of the EU states voted today on the introduction of sometimes high countervailing duties on electric cars from China – and paved the way. This means that the EU Commission can decide to introduce taxes of up to 35.3 percent. The background is that, from Brussels’ perspective, Beijing supports cars manufactured in the People’s Republic with high subsidies that distort competition.

What exactly was voted on?

The key question was: Will manufacturers who produce in China and export from there to the EU be punished with additional tariffs from the beginning of November? This involves tariffs of 7.8 percent for Tesla and up to 35.3 percent for companies that did not cooperate with the EU Commission in the investigation. The amount depends, among other things, on how many subsidies a manufacturer receives. They will be added to an already existing tariff of ten percent.

Specifically, an additional tariff of 17.0 percent will apply to the Chinese manufacturer BYD, Geely will have to pay 19.3 percent and SAIC will have to pay 35.3 percent, as was announced in August. Geely produces, among other things, the electric Smart models #1 and #3 as well as the Volvo EX30. SAIC builds the MG4, which is popular in Germany and came in second place among electric cars in the registration statistics from Flensburg in May, just behind the VW ID.3.

Which manufacturers are still affected?

In addition to Chinese manufacturers such as BYD and Geely, German manufacturers are also affected. The German top dogs Volkswagen, Mercedes and BMW also produce in China for export and would have to pay a corresponding surcharge. The two large European manufacturers left unanswered questions about the extent to which Renault from France or Fiat from Italy would be affected by the tariffs.

“German and European manufacturers who export from China to the EU are burdened with higher tariffs than individual competitors from China and the USA. This is simply incomprehensible and not very effective,” criticizes the President of the Association of the Automotive Industry (VDA), Hildegard Müller .

How do tariffs affect prices?

It is currently unclear whether or to what extent the tariffs would be passed on to customers. Potential buyers cannot yet predict how much the prices for electric cars imported from China will rise.

How many Chinese cars are there in Germany?

According to industry information, Chinese manufacturers currently have a market share of around one percent in Germany. However, thanks to a lead in electromobility, companies from the Far East are gaining ground and can impress with affordable electric cars that German brands simply do not have on offer. But Chinese cars have also recently performed well in ADAC car tests. The current models are “far from being outdated and unsafe cheap cars.” Quite the opposite: They can impress with a high level of safety, extensive comfort and safety features and good workmanship.

According to an ADAC survey, almost two thirds of drivers are now willing to buy a car from a Chinese manufacturer within the next three years. For electric cars it is even 80 percent. Trade figures also confirm this: the German automotive industry’s traditional export surplus in China could already be overturned this year. From January to April alone, four out of ten imported electric cars in this country came from China.

Which arguments speak for and which against tariffs?

The EU Commission is pushing for the tariffs because it sees China’s behavior as a threat to European companies. The basic idea is to put it simply: Every euro that an electric car from China becomes cheaper due to subsidies should be offset by tariffs so that these vehicles do not have an unfair competitive advantage.

However, the German automotive industry says that the tariffs do not eliminate any structural disadvantages that exist in the EU. For example, high electricity prices and bureaucracy caused by legal requirements are a thorn in the side of the auto industry. There are also fears of countermeasures, and here German manufacturers are more at risk compared to other European companies. While other European manufacturers have no relevant market share in China, German manufacturers have around 20 percent, according to the VDA. “Every car sold in China helps finance the transition to climate-friendly mobility,” says association president Müller.

What are the next steps after the vote?

Despite the sufficient majority in favor of the tariffs, they will not be automatically imposed from the beginning of November. If Brussels reaches a solution with China at the negotiating table, the tariffs can be stopped again by the EU Commission, even if a majority of EU states have previously voted in favor of the project.

If a majority speaks out against the tariffs or there is no majority in favor of the tariffs, that does not automatically mean that the EU Commission will drop the tariffs. You can then convene an appeals committee to discuss the matter a second time. Only if there is a sufficient majority in this committee against the tariffs will the Commission not be allowed to introduce the taxes.

How does she look? Federal Government the tariffs?

The federal government has spoken out against the tariffs. Green government circles said that Chancellor Olaf Scholz (SPD) had decided that the federal government would vote against the tariffs. Federal Economics Minister Robert Habeck (Greens) accepted this. In view of the differences between the coalition partners, Scholz claims the last word for himself.

How does Beijing view the tariffs?

With regard to the additional EU tariffs, Beijing speaks of protectionism. Brussels is ignoring facts, ignoring World Trade Organization rules and will only harm itself and others, according to the Chinese Foreign Ministry. Negotiations to resolve the differences were supported by Beijing. In September, Chinese Trade Minister Wang Wentao traveled to Brussels for talks. But Beijing is also threatening countermeasures.

For example, anti-subsidy investigations were carried out against imported dairy products and brandy from the EU. According to the Chinese statement, the brandy investigation found dumping prices, but no measures would be taken for the time being.

What are other countries doing?

US President Joe Biden had already announced in the spring that he would impose special tariffs of 100 percent on electric cars from China – and thus effectively remove them from the US market because the final price would be too high for the vast majority of car buyers. In September, the government officially decided to increase tariffs on Chinese imports. She accuses China of flooding global markets with artificially cheapened exports. This has further intensified the trade conflict between the USA and China.

Turkey recently imposed a tax on cars from China of 40 percent, but at least $7,000 per vehicle. In addition, according to the broadcaster TRT, there is a sales tax of ten percent. Investors are exempt from this rule. Motor vehicles are subject to a high special tax in Turkey. This applies to domestically manufactured and imported vehicles. The tax rate depends on the engine displacement and is currently between 45 and 220 percent.