EU States Approve China EV Tariffs In Split Vote

EU nations have approved steep tariffs on electric vehicles (EVs) manufactured in China, in spite of opposition from Germany and four other countries that expressed concern the move could spark retaliations and a trade war.

The European Commission provisionally approved the tariffs in June after a year-long investigation found China’s state aid for the auto industry was unfair.

Approval by EU member states means the Commission can impose the tariffs for at least five years from the beginning of November.

But the Commission said it would continue talks with China’s government, in a sign that a negotiated solution was still possible.

Negotiations

As part of those talks the Commission could renew efforts to achieve a price agreement, which would typically involve a minimum price agreement and a volume cap.

Volvo Cars, which is majority owned by China’s Geely, is an example of a company that is hoping to avoid heavy tariffs on its China-made vehicles by reaching a pricing agreement.

In the vote 10 EU states backed the tariffs, five including Germany and Hungary voted against and 12 abstained, according to multiple reports.

Germany has the EU’s biggest auto industry, while Hungary has significant investment promises from China.

BMW said the vote was “a fatal signal for the European automotive industry”, while Geely expressed “deep disappointment” over the Commission’s decision and Hungarian Prime Minister Viktor Orban said the EU was headed for an “economic cold war” with China.

France’s PFA auto association said it was glad EU member states had backed the tariffs, adding it was in favour of free trade that was fair.

‘Unreasonable’

To oppose the measure 15 EU members representing 65 percent of the EU population would have had to vote against.

France, Italy and Poland reportedly favoured the measure while Spain, which had initially backed the tariffs, abstained after Spanish prime minister Pedro Sanchez last month asked the Commission to “reconsider”.

The tariffs range from 7.8 percent for Tesla to 35.3 percent for SAIC, the owner of MG, on top of the standard 10 percent import duty for cars.

The Commission said China’s spare production capacity of three million EVs per year is twice the size of the EU market, meaning the market is at risk of being flooded with cheap foreign-made vehicles.

The EU is a prime choice for exporting such vehicles given 100 percent tariffs recently introduced in the US and Canada, the Commission has argued.

China has rejected accusations that it has developed overcapacity in EVs and called the tariffs “unfair, non-compliant and unreasonable”.

The country has launched a challenge in the World Trade Organisation.

Some EU member states that backed the tariffs were mindful of a failure to impose duties on Chinese solar panels a decade ago, leading to the country controlling more than 90 percent of the EU photovoltaic market.