German automakers such as BMW, Mercedes-Benz and Volkswagen could be hit hard by the retaliatory tariffs, as they all have massive manufacturing facilities in China.
Germany could try to stop the European Union from imposing increased tariffs on Chinese electric vehicles (EVs) that are due to take effect on July 4, or at least reduce them.
The European Union recently revealed that it could impose tariffs of up to 38.1% on Chinese electric car manufacturers. This comes after the EU launched investigations into several manufacturers following claims that they were heavily subsidized by the Chinese government. This allowed manufacturers to sell their vehicles at significantly reduced prices in the EU.
Chinese electric vehicle makers such as BYD, Geely and SAIC Motor are expected to be hit by the EU measures.
China has already hinted at imposing tariffs on EU-made vehicles with large engines, which could be potentially disastrous for companies such as BMW, Mercedes-Benz and Porsche.
German Chancellor Olaf Scholz has already stressed that EU tariffs could have far-reaching consequences, especially in terms of job creation in Germany.
In a recent statement reported by the Associated Press, Scholz said: “Isolation and illegal tariff barriers end up making everything more expensive and everyone poorer. We don’t close our markets to foreign companies because we don’t want that for our companies either.”
German manufacturers such as BMW, Volkswagen and Mercedes-Benz could also be affected in several other ways as they have set up massive car manufacturing plants in China and benefit from Chinese subsidies and grants such as cheaper land and relatively relaxed taxes and other regulations.
In the event of any retaliatory tariffs, German automakers could potentially see these benefits taken away. Additionally, most German automakers see the majority of their current sales from the Chinese market, so in the event of an escalating trade war, those sales may also be affected.
Europe could struggle to reach net zero targets without Chinese EVs
European consumers are increasingly choosing Chinese electric vehicles over European ones due to their affordability and incentives such as free charging for two years, on-board cameras and more.
With the cost of living rising over the last few years, European electric vehicles are out of reach for most consumers due to their price. So Chinese electric vehicles could be one of the few ways Europe can still be on track to meet its net zero goals.
Thom Groot, chief executive officer (CEO) of The Electric Car Scheme, said in an emailed note: “Consumers should welcome Germany’s last-minute attempt to stop or ease new tariffs on electric vehicles from China. The latest figures from the International Energy Agency (IEA) make it clear that we cannot reach our electric car targets without the help of Chinese manufacturers.
“57% of all new battery electric vehicle registrations come from China, yet there has been a significant crackdown on the entry of these vehicles into the UK and European markets. If we are serious about meeting our 100% target by 2035 and overall net zero ambitions, we should be embracing this technological input, not avoiding it.
“While there have been discussions about national security and cyber-attacks with Chinese electric cars, tariffs, which penalize less well-off consumers the most, are clearly not the answer. Our research shows that for 68% of people, the biggest barrier to getting an electric car is cost.
Jochen Stanzl, chief market analyst at CMC Markets, said: “The European Union may have shot itself in the foot with tariffs on Chinese carmakers. At 38%, these tariffs are much lower than the 100% imposed by the US government.
“They are not high enough to protect Volkswagen, BMW and Mercedes from low-cost competition from the Far East as they move from internal combustion engines to electric cars. It is understandable that Germany is trying to block these tariffs, as they could do more harm than good.
“With such low tariffs, it would be even more difficult for German carmakers to compete with Chinese competitors. While auto stocks dragged Germany’s DAX index sharply lower yesterday, there was a rebound among shares of Chinese EV makers. It could get worse: the Chinese government may now retaliate. Germany is trying to break this potentially harmful feedback loop.”
Russ Mould, chief investment officer at AJ Bell, said: “It is possible that the EU could better focus on how to boost demand for EVs at a time when it appears to be flattening, as suggested by Umicore’s profit warning from this weekly.
“Consumers seem to be wary about the price of electric cars, range options, availability of charging infrastructure and also the question of what to do with the battery when the electric car is no longer needed.
ADVERTISEMENT“Proactively addressing all of these issues might be a better course of action than starting another trade war, especially as the EU seeks to push the adoption of electric cars and phase out internal combustion engines (ICEs) by 2035. Making cheap electric cars more expensive through tariffs is a particular way to do this.” .”