The European Union’s trade commissioner, Valdis Dombrovskis, predicts that the bloc’s 27 members are likely to favour the proposed tariffs against Chinese electric vehicles in the upcoming November decision. Despite their usual discordance on issues relating to China, Dombrovskis suggests these states will unite to bolster their homegrown automobile industry against subsidised imports from China.
He attributes the need for this protective measure to the rapid expansion of China’s share in the battery electric vehicle market, fuelled by Beijing’s substantial support. These actions present a pronounced risk to the EU’s automotive industry, deserving of attention.
This projection surfaces during a time of increasing worry for German car manufacturers following a disappointing profit reporting period. Notably, this downturn has been linked to declining electric vehicle sales and the Chinese market’s underperformance, affecting major players like Volkswagen and Mercedes-Benz.
With business expectations slipping to -18.3 points in July from -9.5 in the previous month, as noted by the Munich-based Ifo Institute, a bleak picture of the German auto industry’s future emerges. Moreover, the industry’s resource utilisation plunged to 78%, nine percentage points below the standard average. This figure points to the weakness in demand after investing heavily in electric vehicle technology.
On the other hand, prominent German auto manufacturers with substantial operations in China have cautioned against these tariffs, fearing retaliation from Beijing. Earlier, China reacted vehemently to Brussels’ announcement to impose tariffs up to 37.6% on Chinese exports. In response, Wang Wentao, China’s commerce minister, offered discussions with the European Commission to resolve the conflict.
The voting on this proposal, which is intended to come into effect in November, is set for late October. Despite criticising the tariffs publicly, Germany held back in the July advisory poll, with only four member states dissenting, and nine, including Germany, abstaining. To block the tariffs, it would require votes from 15 countries, representing 65% of the EU population.
Sales of electric vehicles have seen a slump of 25% this year, which returns to the figures we witnessed back in 2022. Mr. Dombrovskis has expressed his willingness for a mutual resolution, however insisted that this necessitates China to alter its industry policy. This policy presently offers subsidies to enterprises and gives prominence to local commodities over imported ones.
Mr. Dombrovskis emphasised the greater accessibility of the EU market to Chinese products and corporations in comparison to the Chinese market’s accessibility for the EU. Thus, the main concern in discussions with Chinese officials is addressing these notable barriers to market entry to facilitate more equitable trade.
He attributed the €293 billion trade surplus enjoyed by China in 2023 to its non-market policies and procedures. While China is acknowledged as the EU’s penultimate trading partner, Mr Dombrovskis voiced concern over the imbalance present in their trading relationship.
A data provider, Dataforce, revealed that the presence of Chinese brands within the European electric vehicle market, encompassing the UK and Norway, escalated to 11% in June 2024 from its previous 9% a year earlier.
Despite certain opinions suggesting that the EU might need to rely on low-cost electric vehicles to achieve its environmental objectives, the trade commissioner disputed this view. He warned of the potential danger to the substantial EU car industry if such trade-skewing subsidies were allowed to perpetuate.
Mr Dombrovskis reassured that the proposed tariffs, anticipated to average around 20.8% in addition to an existing 10%, were not aimed at barring Chinese imports but rather to establish a more equal commercial field. He refuted claims that these levies were exceedingly high.
While some Chinese firms have initiated the establishment of factories within the EU to evade these tariffs, Mr Dombrovskis noted that such strategies would only prove effective if they comply with origin rules necessitating a minimum amount of value to be generated within the EU. The content of this article is under copyright law of the Financial Times Limited 2024.