Update Jun 12 22:53 (GMT+8): Comment from EC and list of cooperating EV makers was added.
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On Wednesday, the European Commission (EC) concluded that battery electric vehicles (BEVs) and their supply chains in China benefit from unfair subsidies. As a result, EC announced provisional import duties on China-made EVs ranging from 17.4% to 38.1%, depending on the automaker. Those duties are on top of existing 10% tariffs.
The Commission has contacted Chinese authorities to discuss these findings and explore possible ways to resolve the issues. If ongoing discussions with Chinese authorities do not lead to a resolution, these duties will take effect on July 4. The duties will initially be guaranteed by a method determined by customs in each Member State and will only be collected if definitive duties are later imposed.
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The individual duties the Commission would apply to the three sampled Chinese producers would be:
- BYD: 17.4%
- Geely: 20%
- SAIC: 38.1%
Other BEV producers in China that cooperated in the investigation but have not been sampled would be subject to the following weighted average duty: 21%. All other BEV producers in China that did not cooperate in the investigation would be subject to the following residual duty: 38.1%.
All mentioned duties are on top of existing 10% tariffs, EC confirms.
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The Chinese automakers that cooperated with the European Commission’s investigation but didn’t sample are (alphabetically) Aiways, BMW Brilliance, Changan, Chery, Dongfeng, FAW, Great Wall Motor (GWM), JAC, Leapmotor, Nio, and Xpeng. Those will receive an additional 21% duty, combined with the current 10% import duty; the new import tariff will be 31% starting from July.
Import tariffs on China-made Teslas imported into the EU will also face an additional 21% hike, the weighted average applied to all companies that cooperated in the investigation but have not been sampled.
However it might change as Tesla applied for individual examination. EC responded to CarNewsChina’s request for comment as follows:
“One BEV producer in China, Tesla, has made a substantiated request for a so-called individual examination in order to receive its duty level depending on the subsidies it received individually. This request is currently under examination, and a final assessment may be reflected in duty levels at the definitive stage (starting in November).”
The only EU-made Tesla car is Model Y, which was assembled in Giga Berlin. Tesla Model 3s sold in the EU are China-made.
The Chinese EV builders who import their vehicles into the EU and will be affected include the following brands:
- MG (SAIC)
- Smart (Geely)
- Polestar (Geely)
- Ora (GWM)
- BYD
- Nio
- Lotus (Geely)
- LEVC (Geely)
- Maxus (SAIC)
- Aiways
- Lynk&Co (Geely)
- Dongfeng
- Voyah (Dongfeng)
- Changan
- Xpeng (backed by Volkswagen)
- Zeekr (Geely)
For context, here are the China EV brand sales in Germany in May.
On October 4, 2023, the European Commission started an anti-subsidy investigation into Chinese battery electric vehicle (BEV) imports. Any investigation shall be concluded within a maximum of 13 months of initiation. Provisional tariffs may be published by the Commission within nine months after initiation, meaning by July 4 at the latest. The definitive measures would be decided four months later.
Tesla could receive a unique duty rate, while other Chinese producers can request a review, according to EC report. The proposed duties will be shared with all stakeholders and publicized on the Commission’s website.
Editor’s comment
The EC investigation implies that BYD and its supply chain received the fewest subsidies from the Chinese government; thus, the provisional tariffs are the lowest – 17.4%. BYD is a privately owned company known for its extreme vertical integration, as it tries to handle as much as possible in-house. For example, it owns lithium mines, builds its own batteries, develops its own e-motors, owns large ocean carriers, and even owns a vehicle insurance company.
Geely Group is another privately owned company. Think of it as China’s Volkswagen, with a dozen brands such as Lotus, Zeekr, Volvo, Polestar, Lynk&Co, or London Electric Vehicle Company (LEVC). EC concluded their use of unfair subsidies was similar to the BYD case, however bit higher, resulting in 20% additional tariffs.
Shanghai Automotive Industry (SAIC) is the largest of the “Big Four,” the four largest Chinese state-owned automakers, established in 1955. It owns several brands, such as MG, IM, Maxus, and Rising Auto, and with American GM, it operates the Wuling brand in the SGMW joint venture. SAIC participated in the investigation, even providing samples; however, despite its effort, it received the highest tariff, 38.1%, suggesting that the investigation concluded that it used many unfair state subsidies.
At today’s regular press conference, Chinese Foreign Ministry spokesman Lin Jian criticized the EU’s investigation as a typical example of protectionism. However, despite many harsh words and strong statements that will come in China today and in the following days, tariffs are much milder than expected.
Many EU automakers have lobbied against the EC investigation, and it is no wonder their stakes are high. For Volkswagen, China is the biggest market, and Mercedes-Benz is 20% controlled by Chinese companies (10% belongs to state-owned Beijing Auto, and 10% belongs to Geely founder Li Shufu). Volvo, for example, is wholly owned by Geely.
Moreover, EU automakers have growing ties to Chinese EV makers as Audi will use SAIC’s IM electric vehicle platform for its new Audi EVs as its PPE takes too long to develop. Volkswagen established joint ventures with Chinese firms for lithium production and will build a couple of EVs based on Xpeng platform and Stellantis acquire a stake in Leapmotor to produce their EVs globally.
Thus, it is not surprising Germany, Sweden, and Hungary have said they disapprove of the new tariffs, fearing Chinese retaliation.
Moreover, tariffs might soon not be enough to protect the EU’s Chinese EV competition. Many have already built or prepared vehicle factories in the EU. BYD plans a plant in Hungary, Chery chose Barcelona for its first EU EV plant, Great Wall Motor is choosing between Poland, Germany, Czechia, and Hungary, and Leapmotor vehicles will be assembled in Stellantis Polish plant.
When the Chinese build cars in the EU, how will the EU protect itself from potential Chinese government subsidies? We will keep an eye on this.