The European Union on Wednesday said it would slap higher tariffs on Chinese electric vehicle imports, which it found benefit “heavily from unfair subsidies” and pose a “threat of economic injury” to EV producers in Europe.
On a preliminary basis, the EU Commission, the executive arm of the E.U., concluded that the battery electric vehicles value chain in China “benefits from unfair subsidisation” and pronounced that it is in the E.U.’s interest to impose “provisional countervailing duties” on BEV imports from China.
The additional tariffs are the result of an E.U. probe that began in October. The duties are currently provisional, but will be introduced from July 4 in the event of unfruitful talks with Chinese authorities to reach a resolution, the E.U. Commission said in a statement. Definitive measures will be placed within four months of the imposition of provisional duties.
“The influx of subsidised Chinese imports at artificially low prices therefore presents a threat of clearly foreseeable and imminent injury to E.U. industry,” the Commission noted.
Valdis Dombrovskis, the E.U. commissioner for trade, told CNBC on Wednesday that the investigation was based on “facts and evidence” and added that engagement with Chinese authorities and stakeholders about potential solutions was ongoing.
A spokesperson for China’s Ministry of Commerce on Tuesday said that the E.U. decision lacked factual and legal basis and was a “protectionist act,” according to Google-translated comments.
“The findings disclosed in the E.U. ruling lack factual and legal basis,” the ministry said. The E.U. had ignored that China’s advantage in the EV space is based on open competition and disregarded rules set out by the World Trade Organization, it added.
“This is a naked protectionist act, creating and escalating trade frictions, and “destroying fair competition” in the name of “maintaining fair competition,” the spokesperson said. “This move by the E.U. not only damages the legitimate rights and interests of China’s electric vehicle industry, but will also disrupt and distort the global automotive industry chain supply chain, including the E.U.”
The bloc is imposing a 38.1% tariff on battery electric vehicle (BEV) producers who did not cooperate with its investigation, and a lower 21% duty on carmakers in the Asian country who complied but have not been “sampled.”
The Commission also disclosed a set of individual tariffs, which Dombrovskis said are linked to their cooperation with the probe and with the amount of information they supplied. Rates are lower for those companies who shared details, he added.
Main Chinese BEV producer BYD was struck with a 17.4% tariff, with Geely slapped with a 20% duty. The E.U. has also imposed its 38.1% tariff on autos firm SAIC. All three producers were sampled in the E.U. probe, which is ongoing.
Elon Musk’s Tesla, which has a giga factory in Shanghai, may “receive an individually calculated duty rate at the definitive stage,” following a “substantiated request,” the Commission said. Dombrovskis elaborated to CNBC that Tesla was making the case for lower tariff rates, which the Commission was examining.
“We can also look more in depth in a specific situation of Tesla and subsidies [that] Tesla has specifically received in China, and that may lead indeed to different level of countervailing duties,” he said.
Nio, in response to the E.U. announcement, said it was pledging an “unwavering” ongoing commitment to the EV market. “We strongly oppose the use of increased tariffs as a strategy to obstruct the normal global trade of electric vehicles. This approach hinders rather than promotes global environmental protection, emission reduction, and sustainable development,” it said.
The announcement comes after months of debate among E.U. countries on whether to increase tariffs.
France was among the advocates for higher duties, arguing that Europe needs to defend itself against Chinese production practices and heavy subsidies. Germany has been more critical of the move, which it says could stoke a wider trade war.
German auto executives have also said that there are risks for European carmakers especially if China were to retaliate.
Trade tensions between the E.U. and China have been growing for months, especially over EVs. This includes the E.U.’s investigation into subsidies given to EV makers by the Chinese government and accusations that Beijing is dumping excess cars into the global market.
The E.U. says these practices could threaten Europe’s own EV industry and crowd out local carmakers based there. China has denied any wrongdoing.
The U.S. is closely aligned with the E.U. on the matter and raised tariffs on products including EVs imported from China in May. U.S. duties on imported EV’s specifically are set to quadruple from 25% to 100%, starting this year.
China’s EV market has swollen, with leading carmakers including BYD competing with EV heavyweights like Tesla in the race for market share. Chinese companies have also been expanding in the West, positioning themselves as a cheaper alternative to regional carmakers.