China’s electric vehicle makers are fighting for a tariff deal with the EU, with minimum prices on the table

China’s auto industry was scrambling to hammer out a last-minute deal with the European Commission last week, with representatives offering to set a minimum price for imported electric vehicles (EVs).

The companies would instead be granted some amnesty from high import tariffs to be imposed by the commission on Chinese-made electric vehicles by October. The EU has complained that cheap, exported Chinese vehicles threaten the future of Europe’s auto industry.

The companies would also be willing to limit the volume of electric vehicle exports to the European Union if Brussels reduced the punitive tariff, according to people familiar with the meetings. Above that volume, imports would face tariffs of up to 36.3% proposed by the commission earlier this month.

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The online hearings were held on Wednesday with auto companies including BYD, Geely and SAIC, and on Friday with the China Chamber of Commerce for Import and Export of Automobiles and Electronic Products (CCCME). Details of the proposals were first reported by Politico.

Such a deal would closely mirror the one struck 11 years ago during a trade war over cheap solar panel imports from China. Under this agreement, Chinese manufacturers agreed to set a minimum price at which their panels would be sold.

Panels sold at a higher rate or above a certain sales volume were subject to punitive import duties intended to bring the products in line with local market rates.

The commission is considering the proposals, but insiders thought they were unlikely to fly at this stage, given that they were pitched as “a gentleman’s agreement” that would not be watertight.

Nor does the commission have fond memories of the solar panel resolution, which ultimately collapsed when powerful member states including France and Germany withdrew their support for EU measures.

China imposed trade tariffs on French wine and threatened the German auto industry in response, and a decade later the EU solar industry was decimated by Chinese competition.

However, it gave Brussels pause for thought. Even last week, a negotiated deal was thought to be nearly impossible to reach, with car companies and the Chinese government denying there were undisclosed subsidies in their supply chains.

Beijing has already filed a complaint with the World Trade Organization (WTO) and launched retaliatory investigations into EU cognac, pork and dairy products.

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Last week, China closed its investigation into the brandy and is expected to impose anti-dumping duties of up to 39% on French cognac brands at a later date after refusing to introduce provisional measures.

“Our sector appears to be a collateral casualty of a wider trade conflict that will limit Chinese consumers’ access to the products they value and value highly unless it is addressed as a matter of priority,” said Adam Ulrich, Managing Director at Spirits Europe. , a lobby group.

Brussels has always been open to striking a deal on electric vehicles, but it must have the same equalizing effect as the tariffs, which are designed to protect European-based companies from the market-distorting impact of subsidized Chinese competitors.

While a formal consultation period expired on Friday, the bid will be reviewed this week as officials continue to wind down from the extended summer holidays.

Since the deal would involve commitments from individual car companies rather than the Chinese government, it is unlikely to violate WTO rules that prohibit preferential treatment based on corporate nationality.

The willingness of Chinese companies to make such a bid comes as its industry faces lockdowns in other major markets. Last week, Canada joined the United States in imposing a 100 percent import tax on electric vehicles made in China.

EU tariffs, even after punitive tariffs, would be relatively low. BYD electric vehicles, for example, would be hit with a total tariff of 27% at EU ports, while Geely would face a 31.3% rate.

Even the top EU rate of 46.3% for companies like SAIC – including the 10% base rate – is less than half the North American import tax.

The deadline for entering long-term charges is October 30. In an early vote in the coming weeks, 15 of the 27 EU member states that make up 65% of the bloc’s population must vote against the tariffs to prevent them from being imposed.

Xpeng founder and CEO He Xiaopeng says his electric vehicle company is looking for a production site in Europe. Photo: Bloomberg alt=Xpeng founder and CEO He Xiaopeng says his electric vehicle company is looking for a production site in Europe. Photo: Bloomberg>

Chinese companies are already planning for life under tariffs. This week, executives from BYD and Xpeng said they would increase their European manufacturing footprint as they seek to avoid paying punitive taxes.

Xpeng CEO He Xiaopeng told Bloomberg that the company is scouting Europe for factory and data center sites. BYD boss Stella Li told the same publication that the company wants 50 percent of its revenue to come from overseas markets and will set up its own data centers in individual European countries to avoid sending data back to China.

The scramble for data centers comes amid growing security concerns about the levels of data collected by electric and connected vehicles.

Earlier this week, Uber was fined 290 million euros ($322 million) by Dutch authorities for transferring the data of European drivers to the US. The ride-sharing app recently partnered with BYD in a deal that will see the Chinese automaker supply 100,000 electric vehicles for its fleet in Europe and Latin America.

Regardless of whether a tariff amnesty is reached, industry analysts expect Chinese electric vehicles to remain competitive in Europe

“Europeans are in denial. They don’t want to admit that European carmakers have been overtaken and outdone,” said Tu Le, managing director of Sino Auto Insights, a consulting firm.

He added that EU countries would struggle to meet their zero-emissions targets without Chinese electric vehicles and that governments faced difficult choices.

“Chinese carmakers are fighting the long game. They see Western governments as changing hands, changing philosophies, changing policies every four to six years, and so these are just the ebbs and flows that they deal with on a regular basis,” Tu said.

“There’s this tension between, are we going to achieve our zero-emissions goals, and if so, how do we do that without Chinese electric vehicles?”

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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