7/7/2024–|Last update: 7/7/202411:17 AM (Makkah Time)
European automakers and business leaders are bracing for potential turmoil following the European Union’s decision to impose temporary anti-subsidy tariffs on Chinese electric vehicles.
The tariffs, which amount to 48%, have raised fears of Chinese retaliation, which could affect various sectors across Europe, according to Forbes magazine.
The EU tariffs, approved on Friday, include a 37.6% tariff on SAIC on top of the existing 10%, with Geely and BYD facing increased duties of 19.9% and 17.4% respectively, Reuters reported.
Reuters reports that manufacturers cooperating with the EU investigation face an average tariff of 20.8%, while those who do not face an additional 37.6%. The tariffs will be final in November, pending negotiations that could change the decision.
The China Association of Automobile Manufacturers (CAAM) expressed strong dissatisfaction with the EU’s decision, saying the investigation ignored pre-selected facts and findings. “We deeply regret this and consider it absolutely unacceptable,” the association said in a statement.
Multiple implications
The EU move comes amid a broader context of geopolitical and economic tensions, with the EU requiring automakers to sell only new electric cars by 2035, with additional quotas starting at just over 20% this year and rising to around 80% by 2030, according to Forbes.
However, sales of electric cars in Europe have stagnated at around 2 million units this year, according to data seen by Reuters, and are forecast to reach only 7-8 million by 2030, far short of the 80% target.
“The German auto industry has made a desperate last-ditch appeal to the EU not to impose these tariffs,” Professor Manmohan Sodhi, of Bayes Business School in Britain, told Forbes.
Germany, in particular, is vulnerable to Chinese retaliation, as it exports to China three times as many cars as it imports and four times as many parts.
Possible retaliation from China
Forbes described China’s initial response as relatively mild, with hints of targeting high-value German gasoline-powered sedans and SUVs. However, experts warn that a more forceful response is possible, according to Reuters.
China was hoping the EU would get the hint and not get into a tariff war. “As with any tariff war, the Chinese will now have to respond forcefully even though it is not in their economic interest,” Sodhi told Forbes.
Tom Grote, CEO of Electric Car Scheme, told Reuters he expects a swift response from China that could include strong rhetoric and concrete action if behind-the-scenes negotiations fail.
“I expect China to respond quickly, first with strong words, and perhaps later with actions if discussions do not resolve the situation,” Grote said.
Long term forecast
Even with the tariffs, analysts like GlobalData’s Sammy Chan, speaking to Forbes, believe that sales of cheaper electric cars in China will continue to grow due to cost advantages.
“Despite the tariffs, we expect to see further growth from Chinese brands in the sector,” Chan said, noting that European brands currently lack the efficiencies and low cost structures of Chinese EV manufacturers.
The EU anti-subsidy investigation has about 4 months to go, and intensive talks between the two sides are expected during this period.
