EU imposes new slightly adjusted car import tariffs provisionally

The EU Commission has imposed the announced special tariffs on imported electric vehicles from China, effective 5 July, but these are still provisional. Talks with the Chinese government are still ongoing. There have also been slight changes to the tariff rates for individual manufacturers.

With the provisional special duties that have now been imposed, the actual duty rates differ slightly from those announced by the EU Commission in mid-June.

According to Brussels’ latest announcement, a 19.9% special duty will be imposed on imports of electric Geely models, whereas 20.0% had been announced. SAIC’s rate remains the highest but has been reduced by 0.5 % to 37.6%. There is no change at BYD, with 17.4%.

Electric cars from other Chinese manufacturers cooperating with the EU in the investigation will be subject to a special duty of 20.8%. For companies that have not cooperated, the rate will be corrected to 37.6%, similar to SAIC.

The special duties, whether manufacturer-specific or in one of the two groups are calculated in addition to the 10% import duty that applies anyway. Thus, the final customs duty is ten percentage points higher and amounts to a maximum of 47.6%.

Provisional

‘Provisional’ in the context of the special duties means that the duties are calculated but not yet collected for the time being. The provisional special duties will apply from 5 July for a maximum of four months until 5 November. At the latest, the EU member states must have decided on the definitive duties by then.

If this decision is adopted, the special duties will apply for five years. And the amounts calculated since 5 July will then be collected retroactively. However, security deposits for the provisional duties must be lodged immediately.

Negotiations continue

It remains to be seen whether this will happen. On the one hand, German Chancellor Olaf Scholz recently intervened in the proceedings with his own proposal, while on the other, negotiations between Brussels and Beijing are once again underway.

“Consultations with the Chinese government have intensified in recent weeks, following an exchange of views between Executive Vice-President Valdis Dombrovskis and Chinese Trade Minister Wang Wentao. Contacts continue at technical level to reach a WTO-compatible solution, which adequately addresses the concerns raised by the European Union,” the Commission announced.

It also reiterates its own position: “Any negotiated outcome to the investigation must be effective in addressing the injurious forms of subsidization identified.”

“We hope the European and Chinese sides will move in the same direction, show sincerity, and push forward with the consultation process as soon as possible,” said He Yadong, a Chinese Ministry of Commerce spokesperson. According to the ministry, both sides have so far held several rounds of technical talks over tariffs.

Investigation

The EU Commission presented the plans for the special tariffs in Spring following a month-long anti-subsidy investigation. The investigation is said to have revealed that Chinese electric car manufacturers have unacceptable competitive advantages thanks to high subsidies from the government in Beijing and can, therefore, offer their electric cars in Europe more cheaply than domestic manufacturers.

For this reason, the special duties were not levied across the board but rather on a manufacturer-specific basis, according to the subsidies identified in the investigation and the willingness to cooperate.

This includes not only Chinese brands but all electric cars built in China. This means that non-Chinese manufacturers who produce electric cars there and sell them in Europe must also bear the special tariffs.

These include, among others, Tesla with the Model 3 from Shanghai, BMW with the iX3 from Shenyang, and Cupra with the Tavascan from Anhui. If the companies have cooperated, they will have to pay 20.8% special duty.

German manufacturers are not happy

Meanwhile, some German car manufacturers already reacted to the EU decision. Europe’s biggest car group, Volkswagen, rejects the “damaging” additional import tariffs on Chinese electric cars and claims that “the negative consequences will have a far more negative impact than the eventual advantages for the European car industry.”

The BMW Group points out that the additional tariffs “will lead to a deadlock” and are “a serious violation of the free trade principle.”

Germany’s Car Manufacturers Association VDA says: “Every protectionist measure, like those additional import taxes, limits free trade and is a risk of possible trade wars. In the end, all parties suffer from it.” The association calls upon China and the EU “to do everything they can to find a solution in an open and constructive dialogue. A possible worldwide trade war must be avoided at any rate.”

‘Chinese’ reactions

The reaction of Chinese or Chinese-owned car manufacturers is careful for the moment. Most Chinese brands indicate that the EU decision will not change their plans to come to Europe. The ones already present take/took preventive measures.

Volvo, for example, a Geely daughter (19.9% additional taxes), foresees provisions on every car imported from China. This is particularly painful for the new compact EX30, the brand’s new best-seller. For the moment, clients don’t have to fear higher prices. Volvo hopes to produce the EX30 also in Ghent as soon as possible.

Newspaper De Tijd asked SAIC importer Astara (37.6% additional taxes on MG and Maxus)  and BYD (17.4% additional taxes) for a reaction. MG anticipated additional duties by importing as many cars as possible before the 4th of July. It is hoped that negotiations will still lead to an agreement before the November deadline.

BYD also offers certain stocks but hasn’t foreseen any specific measures yet. It’s unclear whether the Chinese brands trying to get a foothold in Europe will nibble on their margins to pay higher taxes or raise prices for European customers.

It seems odd that the EU Commission has started its provisional scheme with higher tariffs for all cars imported from China, including those of European brands. However, the tariff for the ‘American’ Teslas imported from Shanghai still hasn’t been defined. A calculator breakdown, perhaps…?