Tariffs for electric vehicles to start in October – Commerzbank

The European Union (EU) voted last Friday to impose an additional 35% on Chinese electric vehicle (EV) imports, note Commerzbank FX analysts Charlie Lay and Xuan Hui Lorraine Seah.

The Chinese market remains closed today

“It is added to the existing 10% tax, bringing the total to 45%. It will take effect at the end of this month and will last for five years. It follows a year-long European Commission investigation into the electric vehicle market. It was concluded that Chinese electric vehicle manufacturers received large subsidies from the state, including their suppliers.”

“Chinese carmakers in the European market face a difficult decision, either to absorb the tariffs, which will reduce profit margins, or to raise prices and risk a drop in demand. Some manufacturers are considering moving production to Europe to avoid the tariffs. China has already threatened to impose tariffs on European imports of brandy, dairy, pork and cars. However, both sides have expressed their willingness to continue negotiations for an alternative solution that adequately addresses concerns about China’s huge state subsidies.”

“It appears that 10 member states have voted in favor of the additional tariffs, including France, Italy and Poland. 5 members, including Germany, Hungary, Slovakia, Slovenia and Malta, voted against them. China is a major export market for Germany and Hungary, which pushed for a more muted response. The other 12 members abstained. The Chinese market remains closed today and will reopen tomorrow.”