The European Commission’s tariffs on Chinese electric vehicles: implications for the EU Market

In October 2023, the European Commission launched an anti-subsidy investigation, during which it also examined the impact of government subsidies on importers and users of battery electric vehicles (BEVs).

The Commission’s investigation concluded that “battery electric vehicle production value chains in China benefit from unfair subsidies”, which poses a threat to EU manufacturers.

Therefore, the European side decided to introduce temporary tariffs in aid of fair competition.

The Commission imposed individual tariffs on three Chinese companies concerned: BYD (17.4%), Geely (20%) and SAIC (38.1%). Other Chinese automakers that cooperated with the investigation will face a 20.8% tariff.

This also applies to European entities producing in China and exporting to EU countries. “The duty on other non-cooperating companies is 37.6%,” reads the Commission’s press release.

The tax is temporary. According to the European Commission, the customs tariffs apply from July 5 for a maximum period of four months. By this date, Member States must decide on definitive duties.

“After adopting this decision, the customs tariffs will become final for a period of five years,” the EC informs.

The tax will not be adopted if a qualified majority of Member States, i.e. 55%, votes against it.

This is not the end of the talks either, as Brussels has announced a continuation of its negotiations with China and European electric vehicle manufacturers.

Consequences for the EU economy

China is the largest producer of electric cars in the world. In 2023, the import of these vehicles increased by 70%, reaching a value of USD 34.1 billion. A significant proportion of this (40%) went to the European Union.

Currently the share of Chinese electric vehicles in the European Union is 19%, half of which belongs to brands that accounted for less than 1% just 5 years ago.

This rise in sales has been boosted by the comparatively low price of Chinese cars, which are partly possible thanks to state subsidies.

Similar tariffs were recently introduced by the United States, Turkey and Brazil, which is why Brussels’ decision was considered by China as a move that could trigger a trade war.

In response to the EC’s decision, China initiated an investigation into European subsidies for companies from the dairy sector, as well as alleged price dumping in the pork industry. The investigation will last until June 2025.

According to analysts of the Polish Institute of International Affairs (PISM), the introduction of the tariffs may lead to an increase in prices and a slowdown in the expansion of Chinese electric vehicles in the EU market, which will result in increasing price competitiveness of EU-based manufacturers.

The Institute also draws attention to the possibility of a decline in producers’ margins, which in turn will translate into increased revenues to the EU budget “without consumers bearing the burden.”