The European Union is on the brink of imposing tariffs on Chinese-made electric vehicles, a move that could significantly reshape the global automotive landscape. France, Greece, Italy, and Poland are poised to vote in favor of the measure today, marking a major step forward in the EU’s anti-subsidy investigation into China’s EV industry.
This decision carries significant weight. The four supporting countries represent 39% of the EU population, a substantial majority that will likely push through the EU’s highest-profile trade measure. However, Germany, the region’s economic powerhouse and a major car producer, has chosen to oppose the tariffs.
The proposed tariffs are intended to counter what the EU considers unfair Chinese subsidies. They range from 7.8% for Tesla to 35.3% for companies like SAIC, which are deemed not to have cooperated with the EU investigation. This move has sparked concerns about potential retaliation from Beijing, with some EU members expressing nervousness about the consequences.
The EU’s decision stems from a growing concern over the influx of cheap Chinese EVs into the European market. The European Commission, which initiated the investigation a year ago, argues that Chinese manufacturers are benefiting from state subsidies, giving them an unfair advantage in the market. The Commission points to the rapid rise in Chinese EV registrations, from 3.5% of the EU market in 2020 to 27.2% in the second quarter of 2024.
The EU auto industry, particularly German carmakers, has generally opposed the tariffs. These companies rely heavily on the Chinese market, with almost a third of their sales coming from China. In response to Brussels’ investigation, Beijing has launched its own probes into imports of EU brandy, dairy, and pork products, suggesting a potential trade war is brewing.
The implementation of tariffs would force Chinese EV makers to make a difficult choice: absorb the costs or raise prices to cover the billions of dollars in new costs at European borders. This comes at a time when demand for EVs is falling in China.
The prospect of tariffs has spurred some Chinese automakers to explore investment in European factories, despite the higher labor and manufacturing costs. It remains to be seen how this move will ultimately impact the global EV market and the complex relationship between the EU and China.
