Chinese car makers dismayed by massive increase in EU import levies

Chinese car makers dismayed by massive increase in EU import levies

Up to 38.1% import duty added to Chinese EVs

Leading Chinese car makers, including Volvo-owning Geely and MG’s owner SAIC Motor, have said they are “deeply disappointed” with stringent new tariffs being imposed by the EU on cars imported to Europe.

From July 4, Chinese auto firms will have to pay up to an additional 38.1 per cent tax on top of the existing 10 per cent car duty.

The EU move follows Washington’s announcement that it plans to quadruple tariffs on Chinese cars being imported to America, from 25 to 100 per cent.

‘Artificially low prices’

The EU tariffs are being introduced following a nine-month investigation by the European Commission into the subsidies various Chinese car makers receive from their own government.

Following its conclusion, the main findings were that the Chinese subsidies gave domestic manufacturers an advantage over European car makers, particularly in terms of keen pricing of electric vehicles.

An official EU statement said: “The provisional findings of the EU anti-subsidy investigation indicate that the entire battery electric vehicle (EV) value chain benefits heavily from unfair subsidies in China, and that the influx of subsidised Chinese imports at artificially low prices therefore presents a threat of clearly foreseeable and imminent injury to EU industry.”

To that end, the EU is proposing a series of additional levies on top of the existing 10 per cent import duty that all non-European manufacturers pay.

Chinese state-owned SAIC hit hardest

The Commission plans to levy higher taxers on Chinese manufacturers that receive larger subsidies from the government.

So while Build Your Dreams (BYD) will be subjected to an additional 17.1 per cent (27.1 per cent total), Geely will see another 20 per cent lumped on top of its existing tariffs (30 per cent total).

But SAIC Motor, the company behind ostensibly British marque MG, receives the biggest subsidy from the Chinese government, so its products will be hit with another 38.1 per cent — bringing the total EU import duty to almost 50 per cent.

The obvious knock-on of this to consumers is a huge hike in the price of Chinese vehicles and EVs sold in Europe — and likely the UK.

Currently, the advantage of the many “new” carmakers arriving from China to sell EVs in Europe is that they can price their vehicles at a much lower level than European manufacturers and still make big margins.

‘Great disappointment’

Naturally, the EU decision to hike up taxes and protect the European industry in the short-term provoked dismay among the Chinese manufacturers in question.

Geely, in an official statement, expressed “great disappointment in the Commission’s decision”.

It added: “The decision to impose countervailing duties is not constructive and may potentially hinder EU-China economic and trade relations, thus harming European companies and consumer interests.

“Geely Holding always supports free trade, advocates for fair competition, and strictly abides by all laws and regulations in the markets where it operates.

“Geely Holding is fully committed to providing exceptional products and services to global users.

“Over the past twenty years, Geely Holding has made extensive investments into Europe, enhancing the innovative capabilities of the regional industrial value chain and creating tens of thousands of high-value career opportunities in Europe.

“We call on the European Commission to carefully consider its decision, listen to the concerns of all parties, and work together to find a solution that promotes fair competition, whilst creating a constructive environment for long-term sustainable development.”

The company added it will take “all necessary measures” to safeguard its legitimate rights and the interests of consumers globally.

SAIC echoed Geely, stating: “We are deeply disappointed by the European Commission’s decision.

“The relevant measures not only violate the principles of market economy and international trade rules, but may even have a greater negative impact on the stability of the global automotive industry chain and China-EU economic and trade co-operation.”

Both Geely and SAIC called on the Commission to negotiate with them on the levies, although for its part the EU did say the taxes would only be imposed “should discussions with Chinese authorities not lead to an effective solution”.

European car makers will be hit

Interestingly, European car makers who have opened factories in China, as a result of its lower labour rates, and then import their vehicles built there back to their own region for sale will also be impacted.

And, indeed, the very European manufacturers the EU’s decision is aiming to protect have criticised the move.

Mercedes-Benz, BMW and Volkswagen responded to the EU’s announcement by saying they supported free trade and that the proposed tariffs on the Chinese firms were a “wrong decision”.

VW added that anti-subsidy duties would harm Europe’s automotive competitiveness in the longer term, with the fear being that the Chinese authorities might impose “tit for tat” taxes on European cars sold in its country in response to the EU’s proposal — thus defeating the objective of the tariffs in the first place.

Will the UK follow suit?

Due to Brexit the UK is in a different position and has no need to impose the increased import duty tariffs on Chinese EVs, although there is the belief that the government here (whoever that might be after the General Election on July 4) might follow the EU’s lead.

But caution was sounded by Ian Plummer, the commercial director of Auto Trader — the UK’s largest and most popular site for selling and buying cars — who said any increase in taxes would inevitably be passed on to the end consumer, in a period when EV prices are already comparatively high as it is: “The EU’s decision to impose tariffs on Chinese EVs is disappointing, and we hope the UK isn’t tempted to take similar action.

“UK drivers already face a lack of affordable choices when it comes to electric cars, so it doesn’t make sense for us to limit those options even further for consumers.

“We need to bring more buyers into the market by cutting down the ‘green premium’, which means EVs are usually 35 per cent more expensive than diesel or petrol cars.

“We’ll only do that with open competition to foster innovation, not by reducing choice for consumers.

“Chinese entrants are already partnering with UK retailers to deliver a quality, affordable product and they will have an important role to play in the UK’s ongoing transition to EVs.”

‘Brutal, dictatorial’ regime

However, a number of British politicians, including the prime minister Rishi Sunak, are concerned about China’s influence on the West. In May, Sunak warned that Britain faces a dangerous future and said a strong strategy was needed to deal with rogue states such as China. He went as far as naming an “axis of authoritarian states,” which lumped China in with Russian, Iran and North Korea.

Former Conservative leader Iain Duncan-Smith has repeatedly described China as a “threat” and “brutal, dictatorial” regime that breaks WTO rules, and says the country poses the single biggest threat to Britain. Last year he told that the car market had been “fixed” by China, adding:

“They [the Chinese government] see this all massively strategically; that they need to dominate global markets … President Xi has been very clear: he said from the word go he thinks that Western democracy is an ‘aberration 200 years old’, and that the only way to govern is their way to govern. He also has made it clear that he believes that the West is decadent, and that China’s role is about to be restored after years of chaos. They’re now restoring China’s rightful place in the world, as he sees it – one of dominance.

“They’ve learnt the lesson of the Soviet Union, which didn’t dominate economically and was destroyed by the economic power of the West. China now are destroying our economic power. And the West is scared stiff of doing anything about it because China can pull the plug.”

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