France, Italy and Poland are understood to be among the 10 member states that voted in favour of the proposal in early October 2024. Five, including Germany, voted against and 12 abstained. It is hoped the implementation of tariffs will help counter what is seen as unfair Chinese subsidies after a year-long EC anti-subsidy investigation.  

The BEV tariffs, which are in addition to the EU’s standard 10% import duty for cars, range from 7.8% for Tesla to 35.3% for Shanghai Automobile Industry Corporation (SAIC).

China’s Commerce Ministry is reported by Reuters to have expressed ‘strong opposition’ to planned EU tariffs, calling them ‘unfair, non-compliant and unreasonable’. The Ministry is understood to have already launched a Word Trade Organisation (WTO) challenge.

The EC, meanwhile, says that talks are to continue with China in a bid to find ‘an alternative solution’ that would be ‘fully WTO-compatible’ and ‘adequate to address the injurious subsidisation established by the Commission’s investigation’ while being ‘monitorable and enforceable’.

There are fears that the decision to adopt import tariffs will harm EU-China economic relations and a ‘tit-for-tat’ trade war may ensue. Beijing earlier this year launched an investigation into imports of EU brandy, dairy and pork products in a move that some saw as a direct response to the EU anti-subsidy investigation.  

Transport & Environment (T&E) has analysed the potential impact of import tariffs on China-made BEVs, as well as the likelihood of gigafactory (EV battery factory) investments going ahead.

According to the environmental advocacy group, the share of China-made EVs imported into the EU – by both western and Chinese brands – has grown since the early 2020s. In 2023, 19.5% (290,000 units) of all EV sales in the region were imported into the EU market. Tesla accounted for 28% of all China-made EVs imported into Europe in 2023, with Dacia’s Spring accounting for a further 20%.  

However, the biggest growth in percentage terms has been seen from Chinese brands (such as SAIC MG, BYD, Geely), reports T&E, which grew from 0.4% of the EU BEV market in 2019 to 7.9% in 2023. Until recently MG was the leading Chinese carmaker in the EU, with 25% of BEVs imported from China (notably the MG 4, ZS, 5 and Marvel R models). Polestar is the second largest Chinese EV auto-manufacturer with its Polestar 2 model accounting for 7% of Chinese imports. The third largest Chinese carmaker in the EU is BYD (4% of Chinese imports), which sold 12,700 units in 2023, close to five times more than a year earlier.  

Based on the latest sales data for 1H2024, Chinese BEV imports into the EU have continued to grow, according to T&E. Overall, 190,000 China-made BEVs were sold on the EU market in the first six months of the year, 65% more than in the same period last year.

Concerned by the rapid ascent of Chinese brands into the EU market, as well as the high levels of domestic subsidies reportedly given to Chinese manufacturers, the EC imposed preliminary countervailing duties (on top of the 10% current import tariff) on 4 July 2024. The impact of which on the EU market has been ‘mixed’, reports T&E. It says MG has seen the largest drop in BEV sales in the last few months, with its market share falling from 4.1% of the EU BEV market in August 2023 to 2.4% in August 2024. In contrast, BYD’s market share rose from 1.6% to 2.9% in the same period, while Geely increased its market share to 2%.

Given these initial trends, T&E has updated its China-made BEV imports forecast to 2027. It predicts China-made imports will peak this year, and then slowly reduce to 20% in 2025 and around 18% of BEV sales by 2026. While imports of many Chinese brands will grow slower, some of it will be replaced by local production, notably for BYD, it suggests.

‘While tariffs are slowing some growth in imports, they are not stopping the ascent of Chinese EV makers, who have high quality and more affordable offerings. The problem is that European mass automakers have been slow to counter that: affordable BEVs are only coming now to coincide with the 2025 car CO₂ target,’ comments T&E.

T&E also suggests that the ‘EU should not stop at EVs’. It notes that many European battery makers ‘have experienced delays and setbacks in the last few months, driven by global market dynamics of cheap high quality Chinese batteries’. As a result, it adds: ‘Having poured dozens of billions into homegrown battery makers, it makes no sense [for Europe] to have the lowest battery tariff globally, at just above 1%.’

T&E reports that among the more advanced gigafactory plans in Europe to come under pressure is Northvolt, which has announced a ‘strategic overview’ of its business plan, hinting at delaying the current expansion plans beyond the gigafactory in Skelleftea, Sweden. Another is ACC, which has put two of its factories in Germany and Italy on hold. Meanwhile, VW has scaled back its battery plans in Europe, beyond the two facilities in Germany and Spain (out of the six previously announced), and Svolt has cancelled 12 GWh of planned capacity in Germany. ABEE Group has cancelled Romvolt in Romania, reportedly searching for alternative locations.  

‘This reduces the overall European pipeline by almost 100 GWh, to 1,630 GWh (compared to May 2024), and puts a lot more projects at high risk,’ says T&E. If action is not taken, it estimates that just 10% of the currently-announced battery gigafactory plans (apart from those operating already) are likely to go ahead. ‘An overwhelming 60% is under risk and would likely be scrapped leading to a loss of billions of investment and close to 100,000 potential jobs,’ it warns.