Mercedes-boss urges EU to lower not raise tariffs on Chinese EVs

In an interview with the Financial Times on Tuesday, Mercedes-Benz CEO Ola Källenius made a remarkable statement, rubbing up his French competitors by urging the European Commission to lower tariffs on Chinese EV imports instead of raising them. This would force European carmakers to make better cars, he added.

“I’m a contrarian,” he said in the interview. “I think we should do the opposite: reduce our tariffs. That is the market economy. Let competition play out. If we believe protectionism is the thing that gives us long-term success, I believe history tells us that is not the case,” he added.

‘No’ to European plans

That’s a clear ‘no’ to the EU Commission, which said last week it has sufficient evidence ‘tending’ to show Chinese EVs were being subsidized and starting ‘customs registrations’ to prepare for possible retroactive tariffs.

That means that import tariffs could be imposed retrospectively if the EU Commission’s investigation, which started in September 2023, provides tangible evidence of unfair state support. The probe is intended to be concluded by November 2024, but the EU could already impose provisional duties in July.

The Commission argued that “EU producers could suffer harm, which would be difficult to repair if Chinese imports continued at this accelerated rate before the conclusion of the investigation.”

According to the EU, the import of Chinese cars has increased by 14% year-on-year since October 2023. China’s biggest EV maker, BYD, outselling Tesla worldwide for the first time in 2023, is only starting its European campaign and is fueling a price war against cars that use fossil fuels in China itself.

Initially, the French carmakers were the ones who pushed EU Commission president Ursula von der Leyen to start an investigation into how China is (still?) subsidizing its car industry, to find a staff to beat the dog and be able to raise import taxes on Chinese EVs.

Starting investigation ‘ex officio’

The investigation on cars ‘made in China’ was not the result of a formal complaint by the European car industry but was launched by the Commission on its own initiative (ex officio). Already then, it was clear that the automotive field in Europe was divided.

While Renault (with Luca de Meo) and Stellantis (with Carlos Tavares) screamed blue murder last year that the EU should do something about the ‘unfair’ competition, the Germans, with Mercedes-Benz and Volkswagen on the frontline, had a much more unperturbed view. Both have considerable interests in China themselves and fear countermeasures.

Ola Källenus counters the EU Commission’s arguments in the Financial Times by saying that the Chinese – like all other non-European car manufacturers – are paying a 10% import tax. In comparison, EU carmakers pay 15% to import their products into China.

He doesn’t believe in protectionism and points out that lowering import tariffs has opened up markets that have led to wealth growth, especially in China’s economic wonder, which has lifted hundreds of millions of people out of poverty.

Many links to Chinese companies

And he knows what he’s talking about, as Mercedes-Benz worldwide sales depend for one-third on the Chinese market. As all European carmakers have made alliances in China in the years before to be able to sell over there, Mercedes-Benz is linked in several ways to China.

Chinese BAIC Group holds 9.98 % of the company’s voting rights, making it Mercedes-Benz Group AG’s largest individual shareholder. It is followed by Chinese investor Li Shufu, the founder and chairman of Geely Group, holding 9.7%.

Mercedes still has joint ventures with both groups, like the electric Smart, which is made in China in a 50-50 joint venture with Geely. And even with China’s ‘biggest threat’, BYD, Mercedes signed a deal last year to use the Chinese company’s cheaper LFP Blade batteries in its own EVs.

French blowing hot and cold

Meanwhile, Renault’s CEO Luca de Meo and Stellantis CEO Tavares are blowing hot and cold about the Chinese ‘unfair’ competition. De Meo ventilated some doubts just two weeks ago. “It is my honest opinion that we don’t have to fight the Chinese; we can also make deals with them,” he argued.

“We did it already with Geely and Envision, and we have to think of how China can help us to decarbonize Europe quicker. And where cost is concerned, with our new R5 Electric, we master them and can be competitive, also with the Chinese.”

Tavares said last month that while the Chinese offensive is possibly the most significant risk companies like Stellantis are facing right now, the solution is “to work very, very hard to make sure that we make our consumers better offerings than the Chinese”.

The first step is to reach cost competitiveness by producing the most expensive part of an electric car, the battery, in Europe and making EVs affordable to mass-market buyers.