Germany might be trying to prevent the European Union (EU) from imposing increased tariffs on Chinese electric vehicles (EVs) set to take effect on July 4.
At a minimum, it aims to soften the impact of these tariffs—something that the US is oppositely doing now through quadruple tariffs.
EU Tariffs on Chinese EVs
The EU recently announced potential tariffs of up to 38.1% on Chinese EV manufacturers following an investigation into claims that Chinese companies received significant government subsidies. These subsidies allegedly allowed manufacturers like BYD, Geely, and SAIC Motor to sell their vehicles at lower prices in the EU market.
Related Article: EU's Import Tariffs on Chinese EVs, Expected as Early as This Week
China's Potential Retaliatory Tariffs
In response, China hinted at imposing tariffs on EU-made vehicles with large engines, a move that could severely impact European automakers such as BMW, Mercedes-Benz, and Porsche.
German Chancellor Olaf Scholz emphasized that these tariffs could have far-reaching consequences for job creation in Germany.
Scholz stated that "isolation and illegal customs barriers" contribute to the rising prices of goods, thus making everyone poorer.
As per Automotive News Europe, an anonymous spokesperson said that Germany remains optimistic that the EU can have a direct talk with China to resolve the problem. Because of this, the government should soften the tariffs, but everyone should compromise.
Impact on German Automakers
According to Electrek, German car manufacturers, including BMW, Volkswagen, and Mercedes-Benz, have production facilities in China, benefiting from local subsidies, cheaper land, and relaxed regulations.
Retaliatory tariffs could jeopardize these benefits, and a trade war could negatively affect their sales in the Chinese market, where they currently achieve a substantial portion of their revenue.
Importance of Chinese EVs for Europe's Net Zero Goals
European consumers increasingly prefer Chinese EVs due to their affordability and incentives like free charging and dash cameras.
With rising living costs, European EVs have become less accessible, making Chinese EVs crucial for Europe to meet its net-zero targets.
The Electric Car Scheme CEO Thom Groot noted that they cannot hit their EV targets without the help they receive from Chinese manufacturers.
How Analysts View EV Tariffs
Jochen Stanzl, Chief Market Analyst at CMC Markets, criticized the EU tariffs, suggesting they might harm European automakers more than protect them.
"At up to 38%, these tariffs are much lower than the 100% imposed by the US government. They are not high enough to shield Volkswagen, BMW, and Mercedes from low-cost competition from the Far East," Stanzl said.
Russ Mould, Investment Director at AJ Bell, argued that the EU should focus on boosting EV demand rather than engaging in a trade war. He pointed out that consumers are wary of the cost of EVs, their range capabilities, charging infrastructure, and battery disposal issues.
Mould suggested that addressing these concerns could be more effective in promoting EV adoption than making affordable EVs more expensive through tariffs.
