Why European automakers are opposed to European tariffs on Chinese EVs

The Eurpean Union (EU) is all set to announce new set of tariffs on electric vehicles imported into the continent from China this week. China-made EVs are mostly more affordable than comparable models manufactured anywhere else, making many of these options sell like hotcakes. New import tariff is likely to drive up costs of Chinese EVs, allowing non-Chinese makers to play in a level field. Great, right? Not quite.

Chinese EV companies like BYD, Xpend and Great Wall Motor have all taken big strides in various European markets, piling the pressure on European automakers. What's working is that their options are almost always more affordable than what the Europeans offer while also assuring robust build and a feature-rich cabin. But these Chinese companies are also often accused of benefiting from subsidies offered by Beijing which then allows them to keep sticker price of their models in Europe in check. There is fear that China will flood Europe with its EVs, leading many local brands to press the panic button.

So why are many European brands against tariffs on Chinese EVs?

Fear of retaliation

Among those who have expressed concerns over a possible tariff-related announcement on Chinese EVs are Mercedes, Volkswgen and BMW. All of these brands are also present in China and because China is the world's largest automotive market, fear any retaliation could deeply impact their respective businesses.

A warning has already been issued by China's Chamber of Commerce that if EU hikes import duty on China-made cars, Beijing too will increase tariff on cars imported into China. And this will almost certainly hit sales of global brands in the country and therefore, globally. Afterall, it is estimated that German car manufacturers in particular secure anywhere between 20 per cent to 30 per cent of their respective global profits from the Chinese market alone. “The anti-subsidy probe against China is the opposite of what we expect. Over half of Chinese car sales in Europe are from non-Chinese companies. Tariffs are protective measures that essentially harm us," BMW CEO Oliver Zipse had told investors just last month. Volkswagen Group CEO Oliver Blume has also termed tariffs specifically directed at Chinese EVs as ‘potentially dangerous’ due to the fear of retaliation.

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