Electric cars: EU hits China with tariffs in sales battle

Electric vehicle imports from China to the EU will be heavily taxed after a majority of member states backed the plan.

The move to introduce tariffs is aimed at protecting the European car industry from being undermined by what EU politicians believe are unfair Chinese-state subsidies on its own cars.

Tariffs on electric vehicles made in China will rise from 10% to 45% for the next five years, but there are concerns that such a move could raise electric vehicle (EV) prices for buyers.

The decision, which has divided EU member states such as France and Germany, risks a trade war between Brussels and Beijing, which has denounced the tariffs as protectionist.

China is relying on high-tech products to help revive its flagging economy, and the EU is the largest overseas market for the country's electric car industry.

Its domestic car industry has grown rapidly over the past two decades and its brands, such as BYD, have begun shifting to international markets, fearing from the likes of the EU that its own companies will be unable to compete with cheaper prices.

The EU imposed varying levels of import tariffs on various Chinese manufacturers over the summer, but Friday's vote was to decide whether they would apply for the next five years.

The charges were calculated based on estimates of how much Chinese state aid each manufacturer received following the EU investigation. The European Commission has imposed separate tariffs on three major Chinese EV brands – SAIC, BYD and Geely.

EU members were divided over tariffs. Germany, whose car manufacturing industry is heavily dependent on exports to China, was against them. Many EU members abstained from the vote.

German automakers have spoken out against it. Volkswagen says the tariffs are “the wrong approach”.

However, France, Italy, the Netherlands and Poland are said to support the import tax. A tariff proposal can only be blocked if a qualified majority of 15 members vote against it.

Germany's top industry association, the BDI, called on the European Union and China to continue trade talks on tariffs to avoid “escalating trade conflicts”.

The European Commission, which held the vote, said the EU and China would “work hard to explore an alternative solution” to import taxes for what it called “harmful subsidies” to Chinese electric cars.

China's Ministry of Commerce called the decision to impose tariffs “unfair” and “unreasonable”, but added that the issue could be resolved through negotiations.

The dispute has raised fears among industry groups outside the car sector that they could face retaliatory tariffs from China.

A trade body for the French cognac industry said French authorities had “abandoned us”.

We do not understand why our sector is being sacrificed like this.

It said a negotiated solution needed to be found that would “prevent our products from facing a surtax that could exclude them from the Chinese market”.

Statistics show that in August this year, EU registrations of battery-electric cars fell by 43.9% compared to a year earlier.

In the UK, demand for new electric cars hit a new record in September, but orders were mostly driven by commercial contracts and discounts from major manufacturers, according to the industry trade body.

The Society of Motor Manufacturers and Traders (SMMT) said firms had “serious concerns that the market is not growing fast enough to meet the mandated targets”.

The industry has warned that better incentives are needed for drivers to buy electrics to help manufacturers ahead of planned bans on sales of new petrol and diesel cars. The deadline for the ban was pushed back from 2030 to 2035 under the Conservative government, but Labor has pledged to bring it back to 2030.

Carmakers need to meet sales targets for electric vehicles. Under the Zero Emission Vehicle (ZEV) mandate, at least 22% of vehicles sold this year must be zero-emission, with targets expected to be 80% by 2030 and 100% by 2035.

Manufacturers who fail to hit the quotas can be fined £15,000 per vehicle.

Bosses from several car companies, including BMW, Ford and Nissan, wrote to chancellor Rachel Reeves on Friday that the industry could miss those targets.

They said economic factors such as higher energy and material costs and interest rates meant electric cars were “stubbornly more expensive and consumers wary of investing”. Average cost to buy an electric car Around £48,000 in the UK.

They said a “lack of confidence” in the UK's charging infrastructure was another barrier to encouraging people to switch to electric.