EU’s tariffs on Chinese EVs ‘fatal sign’ say German carmakers (update)

“Today’s vote is a fatal signal for the European automotive industry. What is needed now is a quick settlement between the EU Commission and China to prevent a trade conflict from which no one gains,” BMW CEO Oliver Zipse said, according to Reuters.

In an attempt to avoid a ‘damaging’ trade war with China, BMW CEO Oliver Zipse had called on the EU member states to vote against punitive tariffs on Chinese EVs. Ultimately, Germany voted against it with four others and 12 countries, among which Belgium abstained, but this couldn’t block the proposal.

Still room for negotiation?

The 27 member states were to vote on October 4th. To block the intended tariff wall, a majority of 15 EU countries representing 65 percent of the EU’s population is needed. France, Greece, Italy, and Poland said earlier that they planned to vote in favor, already representing 39% of the population. The Baltic states would eventually join them.

In the absence of a qualified majority either way, the EU Commission could still pass its intentions to impose tariffs on Chinese EVs for five years to come, with 7.8% for Tesla, 17% for BYD, 18.8% for Geely, and 35,3% for SAIC (MG) and all others that didn’t cooperate with the EU’s investigation.

However, a negotiated solution is still possible even after implementation at the end of October. “The fact that Germany voted against the tariffs is an important signal and increases the chances for a negotiated settlement,” Zipse said.

Car industry disappointed

Mercedes joined BMW in a company statement saying the decision was a ‘mistake.’ “We are convinced that punitive tariffs worsen an industry’s competitiveness in the long term,” the company said. The carmaker urges the European Commission “to delay their implementation to allow further talks.”

Volkswagen joined in, calling both sides to find a “political solution”; adding tariffs would not make Europe’s car sector more competitive. “Until the decision is implemented at the end of October, a negotiated solution that avoids countervailing duties on (battery electric vehicles) imports from China is still possible,” Reuters quotes.

The European Automobile Manufacturers’ Association (ACEA), representing the 15 major European-based car, van, truck, and bus makers, also reacted promptly after the vote. It states that it “expects the regulation imposing the anti-subsidy measures to be published by the end of October. We also acknowledge the ongoing parallel efforts of Brussels and Beijing to negotiate a possible alternative to countervailing duties.”

Dispute from which no one gains

Zipse repeated earlier that Germany’s prosperity depends on open markets and free trade. “Additional tariffs harm globally active companies in this country and could provoke a trade dispute from which no one gains,” he said.

Germany’s major carmakers are all opposed to the intended tariffs on Chinese EVs, as they fear it will harm their own business in what today is the world’s biggest car market. BMW, Mercedes, and Volkswagen sell almost a third of their cars in China.

Mercedes-boss suggests lowering tariffs

In a March interview with the Financial Times, Mercedes-Benz CEO Ola Källenius made a remarkable statement: He urged 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.”

Kallenius later stated: “The EU should seek a negotiated solution with China instead of imposing tariffs. “Volkswagen Group CEO Oliver Blume also repeatedly voiced concerns about a potential trade war with China.

French carmakers’ U-turn

Eventually, French automakers Renault and Peugeot-Citroën, who initially pushed President Macron to vote for the high tariffs for Chinese cars, made a U-turn and jumped on the bandwagon later.

Luca di Meo, who heads Renault, is now opposed to EU interference. Carlos Tavares, the big boss of car giant Stellantis, with 14 French, Italian, and American car brands under his wing, showed earlier that he’s crushingly opposed to Joe Biden’s move to increase import taxes for Chinese cars in the US by 100% and the EU’s plans to do something similar.

“When you put a bubble around a market, which can be the American or the European market, the first thing you create is a huge inflation within the bubble,” Tavares said on French television.

“And if you create huge inflation inside the bubble, you’ll undermine the purchasing power of the middle classes (…), and you’ll accentuate the technological backwardness of the manufacturers inside the bubble compared to those conquering the world,” he added.

Tavares is even bringing the Chinese into Europe himself after closing a deal with start-up Leapmotor to be distributed by Stellantis as the 15th brand.

Europe is torn

Europe is clearly torn on the matter. While Sweden and Hungary, which both have car plants on their territory, spoke against tariffs, Spain (with Seat) tends to join the opposition’s camp, too.

Spanish Prime Minister Pedro Sanchez said in September that the EU should reconsider the proposed import tariffs and urged Brussels and Beijing to find a compromise that avoids a trade war.

France was and still is the driving force behind the EU anti-subsidy investigation and the proposed tariffs. French President Emmanuel Macron reaffirmed his support for EU tariffs on Chinese electric vehicles during a visit to Berlin’s Global Dialogue event on Wednesday, October 2.

He warned that if a level playing field was not reestablished with Chinese manufacturers in this area, this could endanger Europe’s industrial footprint.

German Chancellor Olaf Schultz spoke earlier that day and pleaded to keep an open dialogue with China. Although he also sees the need for a level playing field, the EU’s response “must not lead to us harming ourselves,” he said.