The European Commission confirmed this Wednesday, June 12, the implementation of specific customs duties aimed at imports of vehicles produced in China.
The conclusion of a long investigation that aimed to highlight the subsidies that can benefit from manufacturers present in China and exporting to Europe: Chinese brands, but also joint ventures of European manufacturers and Tesla, the only foreign company that produces in China without depending on a local partner. A decision that raises many questions.
• What is the reason for this increase in customs duties for cars produced in China?
Although the European Union has set a course towards sales of new exclusively electric cars in 2035, the “zero emissions” offer has been growing strongly in recent years.
Compared to the models of European manufacturers, their Chinese competitors have launched a major commercial offensive with several brands already present, such as BYD or MG.
According to Commission figures, the European industry’s market share in new car sales fell from 68.9% in 2020 to 60% in 2023. At the same time, the market share of Chinese imports increased from 3, 9% to 25%.
But Europe suspects unfair competition, with prices distorted by an important subsidy regime. This is what motivated the opening of this investigation, which consisted of the sending of a questionnaire, exchanges of information between the Commission, the affected manufacturers and the Chinese authorities, and visits to factories in China.
The survey thus made it possible to highlight these direct or indirect subsidieswith, for example, the supply of lithium and batteries at below-market prices, land for the construction of factories at an equally favorable price, local tax exemptions or a distorted financing system, in particular through green bonds.
The goal is also to move away from the idea of a Europe often considered “the idiot of the global village.” Until now, only a 10% tax was applied to vehicles imported into the Union. It is 100% in the United States, 40% in Turkey or between 70 and 100% in India, detailed an expert from the European Commission during a press conference organized on Wednesday.
• What price increase for the vehicles in question?
The Commission has set surcharges of different levels depending on the results of the investigation and which will be added to the “normal” customs duties of 10% from the beginning of July.
BYD receives the most favorable regime, with a surcharge of 17.4%. Be twenty% for Geeleywhich produces in particular the new Smarts within the framework of its joint venture with Mercedes-Benz and 38.1% for him SAIC group and the MG brand.
“We were rather expecting a surcharge of around 10 points, so these additional duties are quite aggressive: for MG, we would have to pay almost 50% customs duties,” reacts an expert in the automotive sector.
Tesla, for its part, is in a separate category, with a 21% surcharge. A price that could be reviewed in the coming weeks with conversations planned between the Commission and the American manufacturer.
As for the French brands, only Dacia produces its Spring in China and the Renault group has not yet responded to our request for comment on a possible increase in its price, while a new version will be launched in the coming weeks.
Stellantis, for its part, does not import electric cars produced in China. Its joint venture with the Chinese brand Leapmotor aims for production in Europe and will therefore only initially be affected by these customs duties. The first LeapMotor models will be launched in Europe in September.
Therefore, if price increases are expected for imported electric vehicles, it is It is difficult to anticipate the real consequences on prices. practiced by these different brands. Customs duties are applied to an undisclosed price of the car leaving the factory. By reducing their margin, for example, the affected companies may not fully transmit the consequences of this new customs regime to the end customer.
These “provisional rights” will come into force on July 5 in new imported vehicles and, therefore, not in stock. An important point, since European ports are currently full of Chinese cars, which could also make it possible to soften the evolution of prices over time, until the beginning of November and a vote by the Member States that will decide whether these measures are maintained.
• What are the expected effects in Europe?
For the European Commission, the establishment of these temporary customs duties should allow protect European industry of this competition considered unfair.
The stakes are high, with almost 2.5 million direct jobs and 10.3 million indirect jobs. European manufacturers are investing massively in the transition to electricity and regulators want to guarantee outlets for this new offer.
“These customs duties should be a temporary measure to protect themselves from this unfair competition, but European manufacturers must continue their efforts to innovate and improve productivity,” reacts our expert in the automotive sector.
In a way too encourage Chinese companies to produce in Europe and therefore support local investment and employment. BYD has already planned to build a factory in Hungary and MG is due to announce its future production site in Europe by the end of the year.
• Possible adverse effects?
Annoyed by the opening of this investigation, China already reacted by indicating this Thursday that it “reserves the right” to file a complaint with the World Trade Organization (WTO) and promised to “take all necessary measures to resolutely defend the rights and interests of Chinese companies.”
A risk of economic retaliation already mentioned and that goes beyond the automobile sector. In January, Beijing launched an investigation targeting all wine spirits imported from the European Union. In this context, cognac producers said on Wednesday that they were “deeply” concerned.
If French manufacturers have little presence in China, German brands have a lot to lose with a possible increase in customs duties for engines with a displacement greater than 2.5 liters, proposed by the Chinese authorities. However, this represents 100% of Porsche’s sales in China last year, 22% of Mercedes, 14% of BMW and 4% of Volkswagen, recalls a UBS analysis note.
Finally, the main risk remains to see an increase in the prices of electric cars, not only models from Chinese brands, at a time when a reverse movement is beginning to be observed with the launches of the new Renault R5 and Citroën C3 this year.
Chinese brands have just lost the right to benefit from the ecological bonus in France. Taking into account this loss and the increase in customs duties, MG (the manufacturer most affected by this increase in duties) could see the price of its MG4 double. However, this model has contributed to the development of electric car sales since its launch at the end of 2022. Not to mention the downward pressure on electric car prices since the arrival of Chinese brands, pushing European brands to reduce their margins and offer more affordable vehicles to consumers.
The price of electric cars manufactured in Europe could also increase: China remains the main producer of batteries and the European sector continues to depend on these suppliers while waiting for the construction of its own production centers, the famous Gigafactories. An increase in the price of batteries, in retaliation, could contribute to increasing the production cost of these cars in Europe.
Source: BFM TV
