Introduction

Introduction

A pressing issue for Germany and even Europe is the slow development of its domestic automotive industry and its lack of competitiveness.

Author: North Shore

Editor in Charge: Cao Jiadong

Editor: He Zengrong

The gunpowder smell is getting stronger.

The European Commission announced this week that, after nearly 10 months of "in-depth investigations," it plans to impose tariffs on imported electric vehicles from China starting in July this year. On top of the current 10% tariff, it plans to impose temporary countervailing duties ranging from 17.4% to 38.1%.

Among them, tariffs of 17.4%, 20%, and 38.1% will be imposed on BYD, Geely, and SAIC, respectively, while other manufacturers will face a 21% tariff. Imported Tesla vehicles from China may be subject to a separate tariff rate.

A stone dropped into the water creates ripples.

Before the EU officially released the "tax increase" signal, Turkey was the first to sit uneasily. The country plans to increase tariffs on vehicles imported from China to 40%, and the relevant decision will take effect in 30 days.

The new tariffs apply to all fuel-powered vehicles, with an additional tariff of at least US$7,000 per vehicle, equivalent to approximately 50,000 yuan in Chinese currency.

In fact, as early as 2023, Turkey imposed a 40% tariff on electric vehicles imported from China. The new regulation means that all cars imported from China, including gasoline-powered vehicles, will be subject to an additional 40% tariff.

Soon after, SAIC Motor Group issued a public statement expressing "deep disappointment" with the European Commission's decision. The relevant measures not only violate market economy principles and international trade rules but may also have a significant adverse impact on the stability of the global automotive industry chain and economic and trade cooperation between China and Europe.

NIO also stated that it strongly opposes using tariff increases to block the normal trade of global electric vehicles, which hinders rather than promotes global environmental protection, emission reduction, and sustainable development. The company will continue to monitor, assess, and adjust its business plans based on progress regarding the EU's policy.

Faced with the possibility of tax increases, Tesla was the fastest manufacturer to announce price adjustment strategies. It is expected that from July 1, 2024, Tesla will increase the sales price of its Model 3 in European countries to respond to the EU's tariffs on Chinese electric vehicles.

To date, Tesla has not disclosed details of its planned price increase. Tesla's Model Y, which is currently sold in Europe, is primarily produced at Tesla's Berlin factory in Germany. If the EU imposes tariffs, the biggest impact on Tesla will be the Model 3, which is produced in China and sold to Europe.

Domestic media reported that Chinese companies have requested the government to initiate an anti-dumping investigation into pork imports from the EU and an anti-subsidy investigation into EU dairy products.

At a routine press conference of the Ministry of Commerce, He Yadong, the spokesperson of the Ministry of Commerce, also stated that according to relevant Chinese laws and regulations and WTO rules, domestic industries in China have the right to file investigation applications to maintain normal market competition order and their legitimate rights and interests.

"The investigation authorities will review the applications filed by domestic industries in accordance with the law. If the conditions for filing a case are met, the investigation authorities will initiate the filing procedure, disclose and announce it to the outside world in accordance with the law."

Experts pointed out that an investigation into EU pork is a suitable option. On the one hand, it can avoid harming Germany, which opposes the EU's tax increase; on the other hand, Spain and France are major pork suppliers, and these two countries support the EU's tariff increases.

The relationship between the European automotive industry and China is quite special, especially for established automotive powers like Germany, which has a long history of "two-way" cooperation with Chinese automakers. Many policies often affect the entire system. Therefore, even if the EU intends to restrict Chinese cars, there are significant differences among the core member states regarding tariff increases.

German Chancellor Olaf Scholz is one of the opponents of the EU's tax increase.

Scholz has repeatedly stated publicly that increasing taxes on Chinese electric vehicles is a "bad idea." In his view, after the outbreak of the Ukraine-Russia conflict, the German economy has faced unprecedented challenges. Against this backdrop, the EU should not "follow the United States" in electric vehicles and must consider the overall situation and protect the interests of overall business transactions.

Manufacturers such as Volkswagen, BMW, and Mercedes-Benz, which belong to the German camp, have also openly opposed the EU's imposition of higher import tariffs.

From a profit perspective, German automakers are most vulnerable to any countermeasures. In 2023 alone, nearly one-third of the country's sales came from the Chinese market.

Simon Schutz, the chief spokesperson of the German Association of the Automotive Industry, stated bluntly that the urgent issue facing Germany and even Europe is the slow development of its domestic automotive industry and its lack of competitiveness. Imposing tariffs will not help improve Europe's overall competitiveness.

Moreover, imposing tariffs means being unfriendly to China. Without China's help, Europe will not be able to independently address global crises and climate issues. "Trade protectionism is not the right choice. It cannot bring any real benefits to any country in Europe, nor can it fundamentally avoid trade conflicts. It is a lose-lose situation."

An informed source said that if the EU adopts a tax increase plan, BMW's electric Mini manufactured in China will be subject to a maximum tariff of 38.1%, which will be a significant blow to its sales prospects. In addition, BMW Brilliance has been producing electric BMW iX3 from China for export to Europe since 2021.

BMW Group Chairman Oliver Zipse previously stated that the EU's tariff increases on Chinese electric vehicles are wrong decisions. Imposing tariffs not only hinders the development of European automakers but also harms Europe's own interests.

In his view, protectionism is bound to trigger many subsequent negative reactions, with tariffs responding to tariffs and isolation replacing cooperation. The BMW Group will unwaveringly support free trade.