Buckle up, folks! The electric vehicle market is about to get turbocharged with tension. A high-stakes trade war is brewing between the West and China, and this time, it's all about EVs. Get ready for a shocking ride through tariffs, trade disputes, and the future of the automotive industry!
The European Commission, which steers the EU's trade policy, has dropped a bombshell. They're proposing to slap import duties of up to 36 percent on electric vehicles imported from China. This comes on top of the existing 10% duty and is expected to last for five years once the EU's 27 member states vote on it by the end of October.
Unsurprisingly, China isn't taking this lying down. They're calling the move "politically-motivated" and "protectionist."
Even as China pins its hopes on working things out through talks, it's not putting all its eggs in one basket. They've filed an appeal with the World Trade Organization or WTO over the EU's new EV tariffs. But that's not all—they've also launched an anti-subsidy investigation into the EU's dairy imports, signalling they're not backing down anytime soon.
But why are the two sides fighting over electric vehicles? The genesis of this battle lies in China's rapid growth in the EV space, which has policymakers from the EU bloc worried. China's surge in EV manufacturing is the result of a targeted strategy, pumping huge amounts of state money into domestic companies and R&D.
Between 2014 and the end of 2022, China spent over 28 billion dollars on EV subsidies and tax breaks. That gave Chinese companies a major edge in producing cheaper, more efficient EVs, unlike European automakers, who haven't always had that level of support.
As a result, Chinese-made EVs now hold over 20% of the EU market. That's a massive jump from around 3% just three years ago. Of these rising sales, around 8% comes from Chinese brands directly.
The key Chinese players driving this surge include BYD, which had a record-breaking year in 2023 and is setting its sights on being one of the top five car companies in Europe.
Other major Chinese EV makers going big in Europe include SAIC, MG Motor, and Polestar, which is backed by Volvo and Chinese parent company Geely.
With Chinese EV giants like BYD making waves in Europe, European policymakers are stuck in a tough spot. On one hand, they need to protect homegrown automakers from the wave of cheaper Chinese EVs. On the other hand, they don't want to pick a fight with China, especially with the goal of banning fossil fuel cars by 2035.
In fact, many stakeholders in Germany, which has some of the world's biggest car manufacturers, aren't happy about the new tariffs and have warned they could backfire. Big names like Volkswagen have called the move "detrimental" and BMW's CEO has said it's a "dead end."
According to Germany's Kiel Institute and Austrian researchers, these tariffs could cut vehicle imports from China by 42%. This could potentially lead to electric car prices in the EU going up by 0.3% to 0.9%.
On the other hand, France and Italy are pushing for the tariffs, while Sweden and Hungary are more cautious.
In the end, Europe's got a balancing act on its hands—either meet climate goals or protect their industry and risk getting caught in a damaging trade war with China.
What do you think? Could this be a bold move by Europe to protect its auto industry, or are they risking a costly misstep?