EU Hits State-subsidized Chinese BEVs With Tariffs Up to 35.3%

BRUSSELS – The European auto sector is uneasy about the 35.3% countervailing duties that the European Union has imposed on China-built battery-electric vehicles on top of the standard 10% import tariff.

While they were imposed in response to what the EU executive, the European Commission, claims are unfair state subsidies throughout Chinese supply chains that undercut the bloc’s own BEVs, the European Automobile Manufacturers’ Assn. (ACEA) has declined to comment. Instead, it has released statements suggesting investment in charging infrastructure and tax breaks would do more to boost flagging European BEV sales. Germany’s Association of the Automotive Industry (VDA) outright opposes the duties, saying they could bring retaliatory tariffs on EU exports. 

EU governments also are reticent; fewer than half of the 27 member states backed the tariffs in an Oct. 4 vote. Four voted against, notably Germany, home to the EU’s largest auto industry, while France and Italy were among 10 that voted in favor. Another 12 abstained, including Sweden, which the China Chamber of Commerce to the EU claimed was promised a customized tariff for Volvo. That said, Volvo is not mentioned in the duty regulation – and its Chinese parent Geely will pay 18.8%, above BYD’s 17%, but below SAIC’s 35.3%. 

“Going forward we expect Chinese OEMs to bring an increasing amount of models to EU countries that aren’t just BEVs. In September every tenth BYD registered across Western Europe was a PHEV (plug-in hybrid-electric vehicle). These models aren’t impacted by tariffs,” auto analyst Matthias Schmidt, a Hamburg, Germany-based founder of Schmidt Automotive Research, tells WardsAuto about the impact of the duties. 

“Secondly, we expect Chinese OEMs to increasingly target non-EU (European) markets from November, be that the U.K., Norway or Switzerland. This is especially likely to be the case with BYD, (which) will wait until their Hungarian plant is operational and they can produce tariff-free vehicles from 2025,” he says. 

Tesla is an apparent winner, with its China-based production attracting just 7.8% in countervailing duty. That, says Schmidt, “won’t have an impact”, adding, “Tesla can soak that up into their margins and we don’t expect the tariff to be inflationary for Tesla or the other Chinese OEMs that aren’t in a position to push the tariff onto pricing due to the lack of current brand equity.” 

With talks aimed at finding an EU-China deal ongoing, Schmidt says a solution between the two “is still possible which could be minimum pricing or a form of quotas.” That said, he warned the EU would be “naive if they agree to quotas in a trade-off for lower tariffs,” because the global shipping market is so restricted at present, “the Chinese can’t physically ship more than they currently are and it would just be a token gesture.” 

Effective Oct. 30 for five years through 2029, the tariffs apply to passenger vehicles carrying up to nine people including the driver but not electric quads or motorcycles. In one positive move for Chinese automakers, the Commission is releasing all provisional duties collected and held since July 5, which is unusual when the EU approves definitive countervailing duties. 

The regulation’s text contends that the duties will let EU producers reach economies of scale on BEV production by creating fair market prices. It rejects studies showing EU producers do not have the capacity to produce a full BEV range or limited overlap between Chinese and European models, and so the EU needs cheap Chinese imports. The law’s preamble flags a Volkswagen model for €20,000 ($20,800), for example, and Renault’s plans to release a low-cost Twingo BEV in 2026. 

As for the impact in China, its manufacturers sold 605,000 new-energy vehicles, including BEVs and plug-in hybrids outside China during the first half of 2024, up 13.2% year-on-year, with key markets including EU member state Belgium, plus non-members the U.K. and Brazil, according to the China Association of Automobile Manufacturers (CAAM). 

The CAAM, however, says while BEVs’ sales volume dropped 2.3 % y-o-y to 478,000 units due to weakened demand, PHEVs’ sales volume soared 180% y-o-y to 127,000 units – possibly a sign of future EU export focus.  

Despite this weaker market for Chinese BEVs, manufacturers have been mentally prepared for the upcoming EU tariff, says Yichao Zhang, a Hong Kong-based partner at the American consulting firm AlixPartners: “The recent EV tariff discussions came as no surprise to Chinese EV makers,” he wrote in a report issued in July. He adds that Chinese EV makers’ strong incentives for global expansion will not be curbed by tariffs imposed by the west as they continue to set up facilities in key export markets such as southeast Asia and Europe, ensuring local China-targeted tariffs will not apply.  

For example, BYD European managing director Michael Shu stressed at the Future of the Car conference in London in May how along with its manufacturing facility under construction in Hungary, his company is considering adding an assembly plant in the country in 2025.  

China’s BYD opened electric-bus assembly plant in Hungary in early 2024.

GAC Aion New Energy Automobile, a Guangzhou-based EV maker under the state-owned GAC group, completed the construction of a manufacturing facility in Thailand in July. It is now seeking a site in Europe.  

GAC’s rival SAIC says it is also planning a European operation as the company’s MG-branded EVs are gaining more attraction in major European countries. SAIC bought the venerable British car brand in 2007.  

Aside from building facilities, Chinese makers are also looking for joint-venture or merger and acquisition deals in Europe to take advantage of local partners’ existing facilities. In May, for example, Chinese automaker Leapmotor established a 49-51 JV with Stellantis. The deal allows Leap to utilize Stellantis’ plants and sales networks worldwide. Leap’s T03, launched in Europe in September, was assembled in Stellantis’ factory in Poland.  

Alix’s Zhang wrote that the tariffs may accelerate the expansion plans: “Many Chinese automakers either have mature expansion plans or have already made significant investments to set up assembly operations in Europe.”   

– with Wang Fangqing in Shanghai