Background car news Column

Column: “Import duty on EVs from China destroys EV market”

June 13, 2024

The study

As part of an ongoing investigation into subsidies granted by the Chinese government to Chinese automakers, the European Commission has provisionally concluded that the battery-electric vehicle (BEV) value chain in China benefits from unfair subsidization. And that, according to the EU, threatens the economic position of European BEV producers. The study also examined the potential consequences and impact of measures on importers, users and consumers of BEVs in the EU.

Discuss findings

The Commission contacted the Chinese authorities as a result of this investigation to discuss all the findings and explore possible ways to resolve the identified problems in a WTO-compliant manner. The WTO is an abbreviation for the World Trade Organization. This World Trade Organization is an intergovernmental organization that enforces agreements on trade between countries. So everything has to be fair.

Import duties

The European Commission is considering imposing countervailing duties on imports of battery-electric vehicles from China. The survey mainly mentions parties such as BYD, Geely and SAIC, 100% Chinese parties in other words. The EU lists an import duty of 17.4 percent for BYD, 20 percent for Geely and 38.1 percent for SAIC.

Many brands involved

Geely includes such brands as Volvo, Polestar, Lynk & Co, Lotus, Smart and Zeekr. Pretty funny, then, because the salaries of employees of Volvo and Polestar – who develop cars in Europe – are thus paid by Geely. The SAIC banner includes MG and Maxus, among others. And BYD not only carries models under its own brand name, but also has a sub-brand in the form of YangWang. BYD is one of the biggest players in the Chinese car market. And quite successfully, too.  

“Where do we draw a line?”

What about Tesla?

Other BEV producers from China that cooperated with the investigation are subject to a weighted average charge of 21 percent. BEV producers from China that did not cooperate in the investigation are subject to a weighted average charge of 38.1 percent. Another BEV manufacturer in China – Tesla – will receive an individually calculated levy rate in the final phase of the investigation.

Import duties not yet final

Important to emphasize: these import tariffs are not yet final. They are intentions. A “solution” will first be sought with Chinese authorities in the coming weeks or even months. If no solution is found, several Chinese brands that successfully sell cars in Europe will be pretty screwed if import duties are imposed.

CEO of Mercedes-Benz thinks it’s ridiculous

Consequently, reactions from the European auto industry are not muted. Ola Källenius, CEO of Mercedes-Benz, says the following in an interview with Bloomberg: “An open trade market creates growth and creates wealth. Just keep the market open and let the different parties fight this battle among themselves. It would be a complete illusion to think that we can divide the automotive world into separate regions that have nothing to do with each other.”

How bad is it really?

In short, according to Källenius, potential EU import duties on cars from China stand in the way of healthy competition and global supply chains for the auto industry. And there Källenius has quite a point. Because where do we draw a line? We don’t bother about smartphones from China, as long as they are nice and cheap here. Household appliances then, preferably also nice and affordable. We don’t produce those devices on a large scale in Europe anyway, so who cares!

Subsidy per EV produced is not fair, true

But because Europe has a fairly large auto industry, the EU is now considering import tariffs because another country in the world has its affairs better in EVs. Yes, in China, labor is cheaper. The fact is. But China is also setting up state-of-the-art factories where, thanks to extensive automation, car production is almost entirely automatic. Is it a big deal if the Chinese government helps with financial support to create such a factory? Granted, it would not be responsible for a Chinese manufacturer to receive subsidies per EV produced in order to sell the car as cheaply as possible in Europe. If that is the case, then that has to stop. However, that does not require import duties.

Destroying EV market

Several CEOs of European automakers fear that these import duties will completely destroy the EV market in Europe. In Europe, we are all incredibly eager to go green. Electric mobility must also be cheaper. China is helping in that mission. But no, the plan now is to penalize cheaper cars from China through import taxes making them almost unaffordable. That leaves only – often – much more expensive electric cars from Europe. It puts the market at a disadvantage, as does the greening process that the EU is so keen to throttle.

“BMW iX3? Coming from China! Citroën C5-X, ditto! Electric Mini Cooper, also Made in China”

European ‘Chinese’ cars

Besides, what doesn’t come from China? A Dacia Spring Electric is built in China. A Citroën ë-C3 – a car designed to make electric mobility accessible to Europeans – uses a battery pack sourced from China. So will there be an import tax on that car? And on the Dacia? There are simply an awful lot of battery packs used in European EVs coming from China. And then there is Volvo, which produces a particularly large number of cars in China. All Lotus models also come from China. An electric BMW iX3 comes from Shengyang, the Citroen C5-X also comes from China and even the Cupra Tavascan rolls off the assembly line in China. Oh well, the latest generation electric Mini Cooper is being built by Spotlight Automotive Ltd. a joint venture between BMW and China’s Great Wall. Also in China!

Joint venture

For that matter, to produce cars in China as a European player, an automaker must enter into a joint venture with a Chinese party. That way, the Chinese economy can also benefit from the investment. From BMW we just mentioned an example. But Beijing Benz Automotive Co., Ltd (BBAC) is another joint venture between Mercedes-Benz and BAIC Motor.

In Europe, we can do something about it too

Of course, there may well be a financial push from the Chinese government to make all ambitious plans a reality. As if Europe has never supported European car factories before. China doesn’t bother with that either, does it? In France, for example, the government is very generous with subsidies for its own auto industry. In turn, Renault Group is reaping the benefits. An example from the Netherlands: Helmond-based Lightyear received 25 million euros from the Dutch government. That company didn’t make it. Gone investment.

“Scoring T-shirts from China for 0.50 cents with no shipping costs. Good job! Or new shoes for 4 euros. Fine! But cheaper electric cars from China are not welcome.”

Smart investing

By 2021, the Dutch government has further pumped 150 million euros into eight partnerships of entrepreneurs and researchers to work on innovations that will make our transportation cleaner and smarter. Fine to invest, but let China invest (smartly). If such an investment results in a Chinese car being sold cheaper, so be it. This is only good for market forces. Again: subsidy only on the production facility. Not on the product. In Europe, manufacturers must then work to come up with a better and cheaper alternative. This ultimately benefits the consumer. And the greening process.

Pretty childish

I kind of get the feeling that Europe is lagging behind EVs from China in terms of the EV market and now we want to punish China for that. Pretty childish actually. As if we have been producing candy in Europe for years, but now the candy from China is not only tastier but cheaper. So what do we do: impose import tariffs on candy from China, preventing Europeans from benefiting from a good (if not better) product, or making it more difficult.

Pretty crooked

And no, I do not depend on any Chinese car manufacturer. I simply felt the need to record all this information to get a picture of what was going on. Because those import taxes are pretty hefty and are pretty much destroying the EV market – which is already having a pretty hard time. Moreover, it’s also pretty crooked that we Europeans – with websites like Alibaba, Wish and Temu – are only too happy to shop spot-on in China. Scoring T-shirts for 0.50 cents, with no shipping costs. Doing well! Or new shoes for 4 euros. Fine! But cheaper electric cars from China are not welcome.

Response from BYD

BYD – one of the brands mentioned extensively in the survey – is not sending any official statements out into the world for now. Fons Nijkrake, spokesman for BYD Netherlands, said the following in conversation with “We are closely following the developments surrounding this news, but it is still too early to issue an official statement. Some media are already writing that these import duties are final, but that is absolutely not the case yet. We will get more clarity on this in the coming weeks or months. When the time comes, a statement will only follow from BYD.”

What about that Dacia Spring?

Max Veldhuis, spokesman for Renault Netherlands and others, commented that all proposed import duties will not affect the group’s products for the time being, but that the brand is following all developments closely. That’s because, among other things, the Dacia Spring – the cheapest electric passenger car in the Netherlands – is built in China and also uses a Chinese battery pack. The main question is: which car doesn’t? And that is exactly where this study falters. It is quite short-sighted in that sense.

“Punishing China with import tariffs is not the solution. Engaging with each other is.”

Doing it together

It feels like an act of desperation with the idea of protecting the European auto industry, when in fact the EU is destroying that auto market with these import tariffs. Because count on China to come up with a counter-reaction. European manufacturers often have parts – however small – produced in China to drive down the price of their European vehicles. So in that way we would like to take advantage of China, but if China itself comes to the market with a low-cost EV, then we will hold back. Europe cannot do without China. And China cannot do without Europe. In short: stay kind to each other. In the end, we have to do it together. After all, there is only one Earth and we must all share it together. Punishing China with import tariffs is not the solution. Engaging with each other does.