After much discussion, the European Union has confirmed that it will dramatically increase tariffs on electric cars made in China.
European concerns
For some time now the EU has been showing concern over the acceleration of Chinese electric car sales, which had been expected - pre-tariff - to make up as much as 25 per cent of the European electric car market next year.
With European legislators saying that massive subsidies given to Chinese electric car makers by their government - a claim that most Chinese car makers deny - new taxes were proposed in an effort to level what the EU sees as an unfair advantage.
Sliding scale of tariffs
The tariffs are now confirmed and will be applied differently to different manufacturers according to how the EU judges their willingness or otherwise to co-operate with the Commission’s investigation into subsidies given by the Chinese government.
So, BYD will be hit with a 17.4 per cent tariff, on top of the existing ten per cent tariff. Geely - which includes Chinese-built models for Volvo, Polestar, and Lotus - will have to pay a 20 per cent tariff, while SAIC - which owns MG - will have to pay 38.1 per cent.
Other brands, depending on whether they are adjudged to have co-operates with the EU or not, will have to pay either a 21 per cent or 38 per cent tariff.
World Trade Organisation
“This is based on clear evidence of our extensive investigation and in full respect of WTO [World Trade Organisation] rules. We will now engage with Chinese authorities and all parties with a view to finalising this investigation," said Valdis Dombrovskis, the Commission's executive vice-president in charge of trade. “Our goal is to restore the level-playing field and ensure that the European market remains open to electric vehicles producers from China, provided that they play by globally agreed trade rules.”
The Chinese government will, under WTO rule, now have four weeks to challenge the tariffs and it’s expected that China will now hit European-made products - from cars to clothes to wine and beyond - with higher import taxes.
Ways around the taxes
Already, electric car makers are preparing to find ways around the tariffs. Geely-owned Volvo announced before the tariffs were finalised that it will move some EX30 and EX90 production out of China and into Belgium. Polestar, meanwhile, already builds the new Polestar 3 in the USA and is about to open a new production facility in South Korea. BYD is already about to open its first European factory in Hungary and has plans for another.
There is also some debate as to whether or not extra tariffs will make any difference. Some analysts have predicted that even tariffs of above 30 per cent would have almost no effect on the big Chinese brands, so profitable are they.
Problems for European brands
The tariffs also pose a major issue for European car makers, which will likely now see increased taxes on their products in the Chinese market and EU tariffs applied to their vehicles which are made in China and imported into Europe. Many senior European industry figures had, in recent weeks, called on the EU not to levy higher taxes on Chinese-made electric cars.
No announcements have yet been made by the Irish importers for brands such as MG, BYD, and Polestar as to how extra tariffs might affect prices here.