So what are the details of how this will affect the industry and affect the price of cars on the dealer forecourt?
What are the rates?
The tariffs are aimed at combating alleged state support given to China’s auto industry, which has allowed exported vehicles to be sold at prices lower than those of global competitors.
It follows a nine-month investigation into alleged unfair state subsidies for China’s battery electric vehicles (BEVs), with the amount of tariffs varying by brand.
MG’s owner, SAIC, faces the highest tariff. Geely, which owns a stake in Volvo, faces a 20% tariff. BYD brands, which include the Dolphin and Seal cars launched in the EU last year, will be subject to a 17.4% tariff.
Electric car makers that cooperated with EU investigators will face a 21% tariff, while those that did not face the top level of 38.1%.
A rate of 17.1% will increase the cost of an entry-level €30,000 car by €5,250. The rate of 38.1% translates into a price increase of €11,450.
The charges are on top of the existing 10% tax on cars imported into the EU, meaning electric vehicles made in China face total tariffs of up to 48%.
When will he start?
In theory, the 4th of July. However, Chinese companies must provide evidence to challenge the EU’s findings by then. After that, the rates could be adjusted.
The European Commission is offering the prospect of resolving the dispute through talks before the tariffs take effect provisionally on July 4.
If the consumer ordered the car before this date and the price is already locked, they should avoid the price increase, but should check the contract.
The EU believes that conglomerates such as BYD can absorb the level of subsidies and still compete with European competitors by not completely passing the tariffs on to consumers.
What is the extent of Chinese state aid alleged by the EU?
The EU claims that every stage of the electric car manufacturing process, from the mine that produces the lithium used in batteries to the transportation of the cars to Rotterdam and Zeebrugge, is subsidized by the state at national, regional and local levels in China.
His investigation also found cheap or free land that was given to car factories.
It found that these were case-specific subsidies allegedly providing below-market lithium and batteries, with battery suppliers acting as public bodies implementing national industrial policy. It also found that there are tax exemptions for the battery industry.
The investigation revealed a number of financing benefits including green bonds issued at a lower rate than the rate available in international markets and preferential refinancing rates for funds dispersed to support the sector. Xi hopes to achieve global dominance in the green technology sector, which also includes solar panels, heat pumps and wind turbines.
What is the impact on European industry?
The EU claims that the state support not only allows Chinese car suppliers to directly undercut European competitors, but also slows down the EU’s transition from internal combustion engines (ICEs) to BEVs. The EU plans to end sales of new ICE cars by 2035.
According to EU data, cars made in China accounted for 25% of the EU market in 2023, up from 3.9%.
The EU claims that the brutal trade wars in China that have driven down prices at home are now being played out in Europe, with China effectively forcing EU producers to push down their own prices, hurting their profits and future potential investment.
What did the Chinese say?
Chinese Foreign Ministry spokesman Lin Jian said the EU investigation was a “typical case of protectionism” and the tariffs would harm economic cooperation between China and the EU and the stability of vehicle manufacturing and supply chains globally.
He said Beijing would take all necessary measures to “firmly protect” its rights and interests.
What did the German government say?
It’s not happy. Not only are its automakers facing domestic competition, but the looming trade war will be a blow to its exports to China.
“The European Commission’s punitive tariffs have hit German companies and their high-end products,” said German Transport Minister Volker Wissing.
China is an important market for German carmakers – especially Volkswagen, Europe’s biggest carmaker, which has a joint venture with SAIC.
Olaf Scholz, the chancellor, noted that half of the electric cars imported from China were made by Western manufacturers.
What did the German car manufacturers say?
Following the EU’s announcement, Volkswagen said it rejected the imposition of tariffs.
“The negative effects of this decision outweigh the potential benefits for the European and especially the German automotive industry,” said a Volkswagen spokesperson.
The German automotive industry association VDA said it was in favor of “free and fair trade”.
Mercedes-Benz CEO Ola Källenius added his voice to the concerns, saying “what we don’t need as an exporting country are growing trade barriers”.
What about other manufacturers?
Sweden’s Volvo said it was “analyzing” developments in the investigation, Vauxhall owner Stellantis said it “does not support measures that contribute to world fragmentation” and Chinese electric car maker Nio said “this approach hinders rather than promotes global environmental protection, emissions reduction and sustainable development”.