EU Imposes New Sliding Scale Tariffs On Imported Chinese EVs

The European Commission (EC) will impose a new sliding scale tariffs scheme on imported Chinese EVs entering Europe Union markets starting next month from July 4.

The European Commission (EC) have reportedly elected to levy a new sliding scale tariff system for Chinese EVs imported into the Old Continent.

This scheme sees Chinese automakers facing additional new tariffs ranging between 17% and 38.1%. Said new sliding scale tariffs is set to take affect starting next month from July 4 onwards, and would be in addition to the existing 10% tariff already levied by the EC on imported EVs.

Prior to this, industry analysts had predicted tariffs between 10% and 25%. However, brands like SAIC, which owns MG, bears the brunt of the pain as it gets hit with the maximum 38.1%  levy. Other like Geely face lower 20% rate, where as Chinese NEV-making giant BYD is hit with 17.4% levy instead.

Notably, the EC didn’t outline a specific rate for Tesla. Instead, the commission only said the automaker “may receive an individually calculated duty rate at the definitive stage.” 

The sliding scale tariffs affects Chinese brands differently. For instance, SAIC-owned MG is hit with a maximum levy of 38.1%, but rivals BYD are levied much lower at 17.4% instead.

As for automakers not being scrutinised by the EC’s investigation efforts to determine unfair practices and Chinese government subsidies, these brands are instead levied with a 21% tariff. However, these brands still have the option to submit their businesses to the EC’s investigators in the hopes of lobbying for a better deal.

As for brands that refuse this option, they will instead face the full levy of 38.1%. For now, it also remains unclear if this new sliding scale tariffs will apple to western brands that build cars in China and export them back into the European Union (EU) – i.e. Dacia.

These new tariffs levied by the EU won’t necessarily result in the raised retail prices of Chinese EVs by the same amount. Instead, automakers will do their best in absorbing the costs of these added tariffs. In fact, some experts predict that tariffs would have to be at least 50% or higher to have an impact as this would affect the profit margins of these Chinese automakers.

Chinese automakers can bargain for lower tariffs should they submit their businesses to EV investigators to determine unfair advantages fuelled by Chinese government subsidies.

Though various western automakers have shown concern to the threat of aggressively-priced Chinese cars entering marketspaces in the EU, many of which have expressed disapproval for the EU to apply stiff tariffs. This is largely driven by fear of retaliation by the Chinese government against their exports to said republic – the single-largest export market for many of which.

For context, the EU imported roughly 440,000 EVs from China in the 12 months ending in April, altogether worth €9 billion (approx. RM45.78 billion), which also equates to roughly 4% of household expenditure on vehicles.