Europe's Tax on Chinese EVs Comes into Force

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Punitive tariffs on Chinese electric vehicle (EV) imports of up to 40% have come into force in Europe.

The European Commission (EC) has confirmed that the levy announced in June has come into force despite an intensification of talks in recent weeks between EC and Chinese representatives seeking a compromise. The tariffs are the result of a nine-month EC investigation which found that Chinese EV makers had benefited greatly from government subsidies that allowed them to undercut European car rivals. The levies came into force in the same week that news broke about a $1 billion plan by Chinese EV maker BYD (Xi'An, China) to build a manufacturing plant in Turkey that will produce up to 150,000 vehicles per year. BYD has not officially commented on the project, but Turkey's Minister for Industry and Technology Mehmet Fatih Kacir confirmed the deal: "We envisage that BYD will establish an electric and rechargeable hybrid car production facility with an annual capacity of 150,000 vehicles and an R&D center for mobility technologies in our country, with an investment of approximately 1 billion dollars. The facility, which is planned to start production at the end of 2026, will directly employ up to 5,000 people."

"Our investigation... concluded that the battery electric vehicles produced in China benefit from unfair subsidization, which is causing a threat of economic injury to the EU's own electric car makers," said Valdis Dombrovskis, executive vice president of the European Commission. "We are continuing to engage intensively with China on a mutually acceptable solution. Any negotiated outcome to our investigation must clearly and fully address European Union (EU) concerns and be in respect of World Trade Organization (WTO) rules."

The duties, which come on top of the standard 10% import tax, will remain in place initially until November and, assuming a successful vote by a majority of the EU's 27 Member States, for five years. European countries are divided on the need for tariffs. France and Italy support the tariffs but Germany and Hungary oppose them. The share of Chinese-made vehicles in the EU EV sector has risen quickly from just under 3% to more than 20% in the past three years according to the European Automobile Manufacturers' Association. Reports estimate that the share could be one in four by the end of this year. Chinese brands account for around 8% of that share. For additional information, see April 15, 2024, article - Chinese-Made EVs Dominating European Market .

The severity of the tariffs will be based on whether or not Chinese carmakers and some European carmakers that manufacture EVs in China cooperated with the investigation. The EC singled out some sample BEV producers including BYD, Geely (Hangzhou, China) and SAIC Motor Group Company Ltd (Shanghai, China):

• BYD: 17.4%
• Geely: 19.9%
• SAIC: 37.6%

BMW (Munich, Germany) and Tesla Incorporated (NASDAQ:TSLA) (Austin, Texas) are looking at tariffs of just over 20% while other Chinese EV makers that did not cooperate are facing the top rate of 37.6%.

China has threatened to retaliate, starting with launching an anti-dumping probe last month into pork imports that would hit Spanish exports. The country is a major investor in EU projects, despite a fall in recent years.

While mergers and acquisitions fell sharply, the strongest sectors propping up Chinese investment in Europe was in greenfield investments, in particular from private firms Contemporary Amperex Technology Company Limited (CATL) (Ningde, China), Envision AESC and Huayou Cobalt Company, which have invested in battery plants in Hungary, Germany and France. Over two-thirds of Chinese foreign direct investment (FDI) in Europe was made in the EV sector in 2023, up from 41% in 2022. EV-driven investments made Hungary the top destination, and last year it received 44% of all Chinese FDI in Europe. Industrial Info is tracking four CATL battery projects in Hungary valued at almost US$8 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can click here for the reports.

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