European Union member states are likely to support the imposition of proposed tariffs on Chinese electric vehicles in November, according to the bloc’s trade chief.
Valdis Dombrovskis, the European commissioner for trade, said the 27 countries – who are often divided on China-related matters – would back measures to help the domestic motor industry compete with imports that he said received big subsidies from Beijing.
“It’s clear that member states realise the need to protect the EU’s car industry because this risk of injury is there. Chinese battery electric vehicle market share is growing very rapidly. That subsidisation is there,” he said. “So it’s certainly an issue that needs to be addressed.”
His comments come as Germany’s carmakers are growing gloomier about their prospects after a disappointing earnings season marked by waning electric-vehicle sales and weakness in China for companies including Volkswagen and Mercedes-Benz.
Business expectations by the German auto industry deteriorated to minus 18.3 points in July, from minus 9.5 points the month before, according to a survey by the Munich-based Ifo Institute published on Monday. Several manufacturers have reported poor financial results in the past weeks.
The German auto industry is struggling with waning demand for EVs after spending billions to ramp up the technology. The industry’s capacity utilisation has fallen to about 78 per cent, Ifo said, nine percentage points below the long-term average, as carmakers including VW reduce output at high-cost factories.
But leading German carmakers with a significant presence in China have recently warned against imposing tariffs for fear of retaliation by Beijing.
China earlier this year reacted angrily to the announcement that Brussels would impose tariffs of up to 37.6 per cent on its exports.
Wang Wentao, Chinese commerce minister, then offered talks with the European Commission, which sets EU trade policy. However, officials from both sides say several rounds of negotiations have been technical, discussing methodology rather than ways to resolve the dispute.
Member states are likely to vote in late October on the proposal, which is set to enter into force in November. Germany has publicly criticised the tariffs but abstained in July in an advisory poll in which only four member states voted against the tariffs. Nine others abstained – which counts as support for the commission – and 11 were in favour. Votes from 15 countries representing 65 per cent of the bloc’s population are required to block the tariffs.
[ EV sales are down 25% so far this year, back to levels last seen in 2022Opens in new window ]
Mr Dombrovskis said he was open “to a mutually acceptable solution” but it had to involve China changing its industrial policy, which funnels subsidies to businesses and prioritises domestic goods over imports.
“The EU market remains more open for Chinese goods and companies than the Chinese market is for the EU,” said Mr Dombrovskis. “So therefore we put a lot of focus on our discussions with our Chinese counterparts to address those various market access barriers, to ensure more reciprocal trade.”
He said its “non-market policies and practices” contributed to a €293 billion trade surplus in goods with the EU in 2023.
“China is the EU’s second-biggest trading partner. And clearly we are interested in trade and investment in China. At the same time, it must be noted that our trade relationship is very unbalanced,” he said.
The share of Chinese brands in the European EV market, including the UK and Norway, increased to 11 per cent in June 2024, up from 9 per cent the year before, according to Dataforce, a data provider.
The trade commissioner took issue with those who contend that the EU should refrain from tariffs since it needs cheap electric vehicles to hit its climate goals.
“That argument can be made on any trade-distorting subsidies. But the point is that we have a major EU car industry, and this car industry is at risk if we allow this kind of distortion of the level playing field.”
He said the tariffs, which vary by brand but will average 20.8 per cent, on top of an existing 10 per cent, would not close the market to Chinese imports, just level the playing field. He denied they were “prohibitive”.
Chinese companies have begun opening plants in the EU to avoid the duties. But Mr Dombrovskis warned that such moves would only work if they met rules-of-origin requirements that dictate a minimum level of value must be created in the EU. – Copyright the Financial Times Limited 2024
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