Europe braces for possible Chinese retaliation on auto tariffs

European automakers and business leaders are bracing for possible turmoil following the decision. European Union responsibility definition Temporary countervailing duty on Chinese electric vehicles.

Tariffs as high as 48% raise concerns about retaliation ChinaAccording to Forbes magazine, this could affect different industries across Europe.

According to Reuters, the EU tariffs approved last Friday include a 37.6% tariff on SAIC Motor, on top of the current 10%, while Geely and BYD face tariff increases of 19.9% ​​and 17.4%, respectively.

Reuters noted that manufacturers who cooperate with the EU investigation face an average tariff of 20.8%, while those who do not cooperate face an additional tariff of 37.6%. The tariffs will be finalized in November, pending negotiations that could change the decision.

The China Association of Automobile Manufacturers expressed strong dissatisfaction with the EU's decision, noting that the investigation ignored pre-selected facts and findings. “We deeply regret this matter and believe it is totally unacceptable,” the association said in a statement.

Multiple influences

The EU move comes amid a wider backdrop of geopolitical and economic tensions, with Forbes reporting that the bloc requires automakers to sell only new electric vehicles by 2035, with an additional quota of just over 20% this year that will rise to about 80% by 2030.

However, data seen by Reuters showed that European electric car sales have stabilized at around 2 million this year. Their number is expected to reach only 7 to 8 million by 2030, far below the 80% requirement.

“The German auto industry has made a last desperate plea to the EU not to impose these tariffs,” Manmohan Sodhi, a professor at the UK’s Bayesian Business School, told Forbes.

Germany is particularly vulnerable to Chinese retaliation because it exports three times as many cars to China as it imports and four times as many parts.

Possible retaliation from China

Forbes described China's initial response as relatively mild, suggesting it was targeting high-value German gasoline-powered sedans and SUVs. However, experts warned that a stronger response was likely, Reuters reported.

China hopes the EU will take the hint and not get drawn into a tariff war. “As with any tariff war, China will now be forced to respond forcefully, even if it is not in their economic interest,” Sodhi told Forbes.

The BYD SEAL model of Chinese automaker BYD is displayed during an event a day before the official opening of the 2023 Munich Motor Show IAA Mobility in Munich, Germany, September 4, 2023. REUTERS/Leonhard Simon
Even with tariffs, analysts believe sales of cheaper electric vehicles will continue to grow in China due to cost advantages (Reuters)

Tom Grote, chief executive of the electric vehicle initiative, told Reuters in an interview that he expected China to respond quickly, possibly with strong rhetoric and concrete actions, if the behind-the-scenes talks fail.

“I expect China to respond quickly, first with tough rhetoric and perhaps then with action if discussions don't resolve the issue,” Grote said.

Long-term forecast

Even if imposed Customs TariffAnalysts such as Sammy Chan of Global Data told Forbes that sales of cheap electric vehicles in China will continue to grow due to cost advantages.

“Despite the tariffs, we expect Chinese brands to grow further in the industry,” Chen said, noting that European brands currently lack the efficiency and lower cost structure enjoyed by Chinese electric vehicle makers.

The EU anti-subsidy investigation will last about four months, and the two sides are expected to hold intensive talks during this period.

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