Power & Politics Hub

Friday, 4 October 2024, the EU is expected to vote on imposing further duties on imported Chinese Electric Vehicles (EVs), in order to counter alleged unregulated state aid. The vote was initially supposed to be held on 25 September, however, it was delayed in order to allow more time for talks between the European Commission and China. Even now, talks may continue further even after the vote on Friday, including in case the EU decides to increase tariffs.

The problem so far explained

In September 2023, EC President Ursula Von der Leyen announced the Commission is launching an anti-subsidy probe, as a result of which duties were recommended on Chinese-made EVs. The proposed duties differed depending on the automaker, ranging between 8% and 37%. As an example, subsidies on electric vehicles by BYD, according to the proposal, are to remain at 17%, whereas SAIC Motors EVs are to face a 35.3% duty, which is still down from 36.6% previously. The reason for the variations is because companies like SAIC outright refused to co-operate, whereas others did not. An informal vote was already held on the issue on 15 July, whereby 12 EU member states including France, Poland, Italy and Spain voted in favour of the duties, 11 member states (most notably Germany) abstained and 4 (Hungary, Slovakia, Malta and Cyprus) voted against.

For such voted, a qualified majority (QMV) of 15 member states or of states representing 60% of the EU population is needed. However, problems for the European Commission in pursuing its agenda on the issue have allegedly arisen, as the EU’s largest economy and most populated state Germany has been giving signals of a change in their position, with Spain also turning against.

The German government has been lobbied by some of the largest car manufacturers including BMW and VW to take a stand against the proposed tariffs, due to fears of retaliatory measures on China’s behalf, i.e that China may in response impose tariffs on German cars and electric vehicles. Spain, while not being a major car exporter, is a big foodstuffs exporter to China, hence Madrid may have fears of the vast amount of pork it exports to China falling under the scope of retaliatory measures.

Sweden and Czechia are two other countries that may since have had a shift in their positions. Sweden had originally abstained, whereas Czechia was initially viewed as favouring the tariffs.

Should the EU go ahead with the proposed duties, in order to ensure a self-sufficient green transition?

The view of this blog is that it would be the correct thing for the EU to do to go ahead with the tariffs. While a trade war between Brussels and Beijing is not a desirable development, a few factors have to be considered.

There can be no doubt that transitioning to electric vehicles would help Europe significantly reduce its carbon footprint. The claim that EVs are the way to go and that the internal combustion engine ban must be kept in place despite pressures from some EU governments such as Italy’s right-wing government led by Giorgia Meloni has been backed including by car makers such as Swedish Volvo. Even VW, despite their refusal to sign the letter which Volvo signed were initially in favour of the ban. Putting this into consideration, the EU must look for ways to make its share in the global EVs market bigger, instead of losing ground to China, especially if Beijing is using unregulated subsidies. The EU cannot afford to fall into another dependency, as it did with fossil fuels, especially as it relates to Europe’s economy becoming greener and more competitive.

This blog recognises the concerns of car makers such as VW of retaliatory Chinese measures. Nonetheless, as the graph below shows the amount of VW vehicles being sold in China is anyway dropping fast. If VW has been losing ground in China, it is reasonable to ask is it worth it to jeopardise the EU’s EV making industry, even in case VW and such companies get to temporarily slow down their decline on the Chinese market?