The European Commission just recently imposed hefty tariff figures on electric cars (EVs) imported from China. Following an eight-month investigation, the EU executive arm charged China on June 12th with unlawfully subsidizing its industry through things like tax benefits and low-interest loans. It worries that cheap imports will harm European automakers in a “clearly foreseeable and imminent” way. From July, Chinese electric vehicles will be subject to provisional tariffs ranging from 26% to 48%, while other imported cars will only face duties of 10%. The specific tariff rate for each Chinese car maker will be determined by each company’s desire to cooperate with the legal inquiry.
Finding a winner in the short term is difficult. If imported automobile prices rise and European manufacturers see less competition. However, the automakers in Europe are also not celebrating this tariff. The investigation was started as a result of pressure from the French government; they did not request it. German automakers Volkswagen and BMW, who produce and sell large numbers of automobiles to China, have been among the most vociferous opponents. They now worry that Beijing will inevitably retaliate.
China has alluded to increasing its tariffs from 15% to 25% on large-engine cars, or German automobiles. Additionally, it might expand the tariff net to include agricultural products and aviation, making life more difficult for foreign automakers operating in China with burdensome regulations. It launched an anti-dumping inquiry into cognac and other European brandies in January as a warning to France.
Higher tariffs would momentarily impede Chinese automakers’ advancement and allow European automakers to overtake them with the introduction of a new generation of more competitive cars. However, it is improbable that the tariff barrier will halt all Chinese activity. They can make cuts because they have set pricing in Europe that are somewhat less than those of rival European models. For example, BYD sells its Seal EV for about $24,000 in China and double that in Europe, indicating that it could absorb the additional charges and still turn a profit.
Source: Economist
