The EU is expected to hit Chinese electric cars with tariffs

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The EU is expected to hit ******** electric cars with tariffs

5 hours ago

By Theo Leggett, BBC international business correspondent

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******** firms are said to be able to make electric cars for 25% less than their ********* and US rivals

With China accused of selling electric cars at artificially low prices, the ********* Union is widely expected to hit them with tariffs this week.

The BYD Seagull is a tiny, cheap, neatly styled electric vehicle (EV). An urban runabout that won’t break any speed records, but nor will it break the bank.

In China, it has a starting price of 69,800 yuan ($9,600; £7,500). If it comes to Europe, it is expected to cost at least double that figure due to safety regulations. But that would still be, by electric car standards, very cheap.

For ********* manufacturers that is a worrying prospect. They ***** the little Seagull will become an invasive species, one of a number of ********-built models poised to colonise their own markets at the expense of indigenous vehicles.

China’s domestic auto industry has grown rapidly over the past two decades. Its development, along with that of the battery sector, was a major component of the “Made In China 2025” strategy, a 10-year industrial policy launched by the ********** Party in Beijing in 2015.

The result has been the breakneck development of companies like BYD, now vying with Tesla for the title of the world’s biggest manufacturer of electric vehicles. Established giants such as SAIC, the owner of the MG brand, and Volvo’s owner Geely, have also become big players in the EV market.

Last year,

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were sold in China – about 60% of the global total, according to the International Energy Agency’s annual Global EV

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.

For policymakers in Europe and the US, however, this is a cause for concern. With ******** brands having plenty of surplus capacity and moving into international markets, they ***** their own companies will be unable to compete. They claim hefty subsidies for domestic production allow ******** firms to keep prices at a level other firms will struggle to match.

According to a report by the Swiss bank UBS, published in September, the ******** advantage is real. It suggested that BYD could produce cars at

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than the best of the legacy global carmakers.

It said BYD and other ******** firms were “set to conquer the world market with high-tech, low-cost EVs for the masses”.

Meanwhile, earlier this year, the Alliance for ********* Manufacturing warned that the introduction of cheap ******** cars could be an

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for the US auto industry. It called for a “dedicated and concerted effort to turn those imports back”, concluding that there was “no time to lose”.

Last month, the US took decisive action. The Biden administration raised its tariff on imports of ******** battery-powered cars

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Sales of ********-made EVs in the US are currently negligible; with the new tariffs, they are likely to stay that way.

The move was part art of a wider package of measures targeting imports from China that has been condemned by Beijing as “****** protectionism”.

At the same time, the US is subsidising its own car industry, through tax incentives that make domestically-produced vehicles cheaper to buy.

The EU appears to be taking a more moderate approach, despite tough rhetoric.

In her state of the Union address in September last year, the ********* Commission president Ursula von der Leyen announced an investigation into ******** imports.

“Global markets are now flooded with cheaper ******** electric cars,” she said.

“Their price is kept artificially low by huge state subsidies. This is distorting our market.”

The initial results of that investigation are now imminent.

It is widely expected that the Commission will provisionally raise duties on EVs imported from China, from the standard level of 10% for third country imports to between 20 and 25%.

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Ursula von der Leyen has accused China of selling EVs for artificially low prices

According to Matthias Schmidt of Schmidt Automotive Research, this would be a rather more proportionate response than the US move.

“The 100% tariff is just pure protectionism, regressive and stifles innovation, and prevents a competitive landscape for the consumer,” he says.

“If the EU imposes tariffs of no more than 25%, it will be more about levelling the playing field, and evening out the 30% cost advantage ******** manufacturers have.”

Nevertheless, tariffs could hurt ********* companies as well as helping them.

Firstly, they would not just affect ******** brands. For example, BMW’s iX3 electric SUV is built at a factory in Dadong and exported to Europe. The company also intends to import large quantities of ********-made electric Minis.

Both models would be subject to the tariffs, leaving the manufacturer to absorb the extra cost, or raise prices. The US manufacturer Tesla would also be affected, as it builds cars in Shanghai for export to Europe.

Secondly, although ********* makes have invested heavily in production in China in recent years, in partnership with local manufacturers, a number of them still export high-value models to ******** markets.

If China wanted to retaliate by imposing its own hefty tariffs, these shipments could be targeted.

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********* carmakers are worried about retaliatory moves by the ******** government

Small wonder then, that executives at ********* carmakers have been distinctly lukewarm about the EU’s initiative.

Earlier this year, Volkswagen Group’s chief executive Oliver Blume warned that the introduction of tariffs was “potentially dangerous”, because of the risk of retaliation.

Last month BMW boss Oliver Zipse told investors “you could very quickly ****** yourself in the foot” by engaging in trade battles, adding “we don’t think that our industry needs protection”.

Ola Källenius, chief executive of Mercedes-Benz has gone a step further, publicly calling for tariffs on ******** EV imports to be lowered rather than raised, to encourage ********* companies to do a better job.

Support for the EU investigation has largely come from France. Yet even among French manufacturers, there is doubt as to whether tariffs are the correct approach.

Carlos Tavares, head of the Stellantis group which includes Peugeot, Citroen, Vauxhall/Opel and DS, has described them as “a major trap for countries that go down that path”.

He has warned that ********* carmakers are in a “Darwinian” struggle with their ******** rivals, something that is likely to have social consequences as they pare back costs in an effort to compete.

Renault’s chief executive Luca de Meo, meanwhile, says “we are not in favour of protectionism, but competition must be fair”.

He has called for the adoption of a strong ********* industrial policy to promote the sector, taking inspiration from policies launched by the US and China – in an effort to compete with both.

Meanwhile, the *** is looking on with interest. The head of the country’s trade watchdog, the Trade Remedies Authority, has previously made it clear he would be ready to set up an investigation into ******** EVs, if ministers or the industry wanted it.

So far it is understood no such request has been made. Ultimately, as a deeply political issue, it will be something for the next government to address, after the election.

What higher tariffs may give Europe is more time for both car manufacturers and policymakers to adapt to the challenge from China.

But many within the industry acknowledge that if Europe is to remain a major player in the global automotive sector, it will have to do much more than simply set up barricades at home.

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