EU Considers Tariffs to Stop Chinese EV Invasion and Protect Its Automakers

Western carmakers are facing a new challenge as they try to navigate the influx of cheap electric cars from China. The European Union (EU) is now considering applying tariffs to imported Chinese electric vehicles (EVs) to level the playing field with home-grown brands. The EU believes that China’s auto industry benefits from state subsidies, giving Chinese brands an unfair advantage by keeping prices artificially low. The European Commission has launched an investigation into the matter and has up to 13 months to deliver its verdict.

State Subsidies and Unfair Competition

European Commission President Ursula von der Leyen highlighted the issue of state subsidies and their impact on global markets. She stated that cheaper electric cars flooding the market are being kept artificially low in price due to huge state subsidies. This situation puts Western automakers at a disadvantage when competing with Chinese brands. Industry figures, including Stellantis CEO Carlos Tavares, have expressed concerns about the ability of Western automakers to compete head-on with Chinese brands.

Growing Concerns for Western Automakers

Chinese EVs currently account for 8 percent of the European EV market, a figure that could double by 2025. This growth poses a significant threat to Western automakers. For instance, the critically acclaimed MG4 is available for more than €10,000 ($11k) less than its VW ID.4 rival. To address this challenge, Renault announced its plans to reduce EV production costs by 40 percent earlier this year.

Potential Impact on Western Automakers

While the threat is more significant in Europe than in the U.S., where Chinese cars already face high import duties, there are concerns about potential retaliation from Chinese authorities. Western carmakers heavily rely on the Chinese market for revenue, and any tariffs imposed by China could significantly impact their earnings. Additionally, EU tariffs could inadvertently harm Western brands as automakers like Tesla, Renault, and BMW have production sites in China and export vehicles to Europe.

Lessons from the Solar Industry

The EU is also mindful of the solar industry’s fate a decade ago when cheap panels from China wiped out the European solar industry. This cautionary tale serves as a reminder that the EU needs to tread carefully to avoid any potential retaliation from Chinese authorities.

Balancing Act for the EU

The EU’s consideration of tariffs on Chinese EVs is a delicate balancing act. On one hand, it aims to protect its own automakers from unfair competition. On the other hand, it must be cautious not to disrupt trade relations with China or risk retaliation that could harm Western brands. Finding a solution that levels the playing field without triggering a trade war is crucial.

Conclusion

The EU’s decision to consider tariffs on imported Chinese EVs reflects the growing concerns of Western automakers about the influx of cheap electric cars from China. The investigation launched by the European Commission will determine whether tariffs should be applied to address the issue of state subsidies and unfair competition. However, the EU must carefully navigate this situation to avoid potential retaliation from Chinese authorities and unintended consequences for Western automakers. As the electric vehicle market continues to evolve, finding a fair and balanced approach is essential for the long-term success of both Western and Chinese automakers.