German automakers protested the EU decision to go ahead with tariffs on Chinese electric vehicles, green groups reckoned new European EVs would now be able to compete, while some fear this might ignite wider trade tensions.
EU member states agreed Friday to formalize tentative tariffs ranging up to 35%, on top of the current 10%, but the European Commission said in a statement negotiations would continue.
The EU found China had unfairly subsidized its industry. China denies this and has threatened tariffs on European dairy, brandy, pork and automobiles,
According to a report by Automotive News Europe, BMW, Volkswagen, Mercedes and Stellantis protested the increased tariffs.
The European Automobile Manufacturers Association hoped the continuing negotiations might generate an alternative to increased tariffs.
Reuters Breaking Views, in a column headed “EV tariffs are only the first step in EU-China war” pointed out that the deal excluded gasoline-electric hybrids, in which Chinese automakers also have a competitive advantage. The Chinese are said to be able to make EVs with a 30% cost advantage. Breaking Views also said trade tensions between the EU and China might spread to other areas.
“(the tariffs) will reduce (China’s) ability to undercut European players like Volkswagen or Renault and incentivize them to build factories on the continent (Europe). Yet tariffs won’t freeze China out. And they leave European incumbents exposed on other fronts, just as auto sales on the continent stutter,” Breaking Views said.
Chinese giant BYD is already building an EV factory in Hungary. Other big Chinese players are currently examining similar plans.
“It may risk a trade war, incentivizing China to hit back on sensitive exports like battery materials, or indeed spread hostilities to sectors like European luxury goods. Yet given how far Europe is behind China, such frictions may be inevitable,” Breaking Views said.
German premium manufacturers BMW, Mercedes, VW’s Audi and Porsche, fear China may retaliate by imposing tariffs on their high-end gasoline vehicle imports.
Brussels-based green lobby group Transport & Environment said because of the tariffs European carmakers can regain a significant part of the EV market lost to China-made EVs, but only if the EU maintains its CO2 targets. European carmakers are set to launch more affordable EVs this year and next in order meet these targets, which ramp up CO2 emission savings to ensure 100% of new cars sold in 2025 are all-electric.
German automakers have said these targets are too harsh and are lobbying for some dilution. This is because the growth in EV sales has slowed markedly, hit by the saturation of so-called early adopter buyers, while corporate purchases have also reached a plateau. The next stage of EV development requires much cheaper vehicles to create a mass-market.
T&E said diluting the CO2 targets would be a mistake.
“Some European carmakers have called on the EU to postpone or soften its standards next year. (Stellantis has dissented). This would cause EV sales by EU manufacturers to stagnate as they would continue to focus on more profitable combustion engines and delay the roll-out of affordable electric cars,” T&E said in a report.
“Higher EV tariffs are right but only in tandem with the car CO₂ targets. They are part of a coherent industrial policy to boost electric car production in Europe. However, the EU risks having the worst of both worlds if it delays the 2025 CO2 targets while limiting the affordable models imported from China,” said Julia Poliscanova, senior director at T&E.