European Union's Anti-Subsidy Duties on Chinese Electric Vehicles

On the afternoon of October 29th (local time, late night of October 29th Beijing time), the European Commission released the final ruling on the anti-subsidy investigation against Chinese electric vehicles, announcing an additional 17%-35.3% anti-subsidy tax on top of the existing 10% tariff for imported electric vehicles from China, effective for five years.

The final ruling was originally scheduled to be uploaded to the Official Journal of the European Union on October 30th and to take effect the following day. However, just a few hours after its release, on the evening of the 29th, the ruling was "prematurely" uploaded. This means that the anti-subsidy tax came into effect at midnight on October 30th, a day earlier than planned.

Among the sampled companies, BYD, Geely, and SAIC Motor Corporation, the European Union has imposed tariffs of 17%, 18.8%, and 35.3% respectively. Other cooperating companies are subject to a 20.7% tariff, while other non-cooperating companies face a 35.3% tariff. Only Tesla enjoys a preferential tariff rate of 7.8%. This ratio is consistent with the data leaked by foreign media in September this year. In addition to the 10% base tariff, Chinese electric vehicles exported to the EU will have to pay up to 45.3% in tariffs.

On the early morning of October 30th at 8:47, the official website of the Ministry of Commerce released a statement from the spokesperson of the Ministry of Commerce in response to the European Union's announcement of the final ruling on the anti-subsidy investigation against Chinese electric vehicles. The statement pointed out that China has taken note of the announcement by the European side. China has repeatedly pointed out that the EU's anti-subsidy investigation against Chinese electric vehicles is fraught with unreasonable and non-compliant issues, essentially a protectionist practice under the guise of "fair competition." China does not recognize or accept the ruling result and has filed a lawsuit in the WTO dispute settlement mechanism. China will continue to take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises.

At the same time, we have also noted that the European side has expressed its willingness to continue consultations with the Chinese side on price undertakings. China has always advocated resolving trade disputes through dialogue and consultation and has been making the utmost efforts to this end. The technical teams of both sides are currently in a new phase of consultation, and China hopes that the European side will work with China in a constructive manner, according to the principles of "pragmatism and balance," to take into account each other's core concerns and reach a solution acceptable to both sides as soon as possible to avoid an escalation of trade friction.

It is known that since the European Commission initiated the anti-subsidy investigation against Chinese electric vehicles last October, the game has never stopped. On June 12th this year, the European Commission first disclosed a proposed tariff rate of 17.4%-38.1%, which was slightly adjusted to 17.4%-37.6% in July, and then to 17%-36.3% in August. Now, the final decision is 17%-35.3%.

It can be seen that after more than four months of negotiations, even with the efforts of both Chinese and European parties, the European Commission's final concession is still very small. Only Tesla, through lobbying, was able to pay additional tariffs at a separately calculated rate, which was reduced from the earliest 20.8% to 9%, and now further reduced to 7.8%, becoming the biggest winner.

Additionally, the document shows that the car companies subject to a 20.7% tariff rate include: Aiways, Jianghuai Automobile (including Volkswagen Anhui), Brilliance Auto (including Brilliance New Energy, Light Automotive), Chery Automobile, FAW Group (including Audi FAW New Energy, Changan Mazda, FAW Toyota, FAW-Volkswagen, Jiangsu Guoxin New Energy Passenger Car), Changan Automobile (including Chongqing Lingyao Automobile, Hefei Changan Automobile, Nanjing Changan Automobile), Dongfeng (including Seres, Dongfeng Honda, Dongfeng Liuqi, Dongfeng-PSA, EasyTech New Energy, LanTu), Great Wall Motors (including Hebei Changcheng Automobile, Rizhao Weipai Automobile), Zero Run, Xiaopeng, NIO, Nanjing Golden Dragon. It can be seen that most car companies, including independent and joint ventures, are subject to a 20.7% tariff rate.

Of course, the industry had anticipated the result of the tax increase. On October 4th this year, the European Union voted in favor of imposing tariffs on Chinese electric vehicles. In this voting process, among the 27 EU member states, Germany, Hungary, and 3 other countries voted against, France, Italy, and 8 other countries supported the tax increase, while another 12 countries, including Spain, abstained. Ultimately, since the number of opposition votes did not reach 65% of the total number of EU members, the decision to impose tariffs became a foregone conclusion.

From the final ruling document released on October 29th, the EU has decided to impose a 17%-35.3% tariff on Chinese electric vehicles for five years. However, it is worth noting that, based on the significant internal divisions within the EU, the European Commission had previously stated that even if the decision to impose tariffs was passed, the EU would still be willing to continue negotiations with China to seek alternative solutions.

On October 25th, Minister of Commerce Wang Wentao had a video conversation with European Commission Executive Vice-President and Trade Commissioner Dombrovskis, and both sides clarified that they would continue to use price undertakings as a solution to this case. On October 28th, the spokesperson for the Ministry of Commerce stated that China and the EU have started a new phase of consultations, and China hopes that both sides will accelerate the process to achieve a substantial breakthrough as soon as possible. This means that even if the final ruling measures take effect, negotiations between China and the EU will continue.

In addition, the final ruling document also shows that the China Machinery and Electronics Chamber of Commerce, on behalf of SAIC Motor Corporation, Zhejiang Geely Holding Group, BYD Auto Industry, Brilliance Auto, Great Wall Motors, NIO, Chery Automobile, China FAW Group, Dongfeng Motor Group, Xiaopeng Motors, Seres Auto, and Anhui Jianghuai Automobile Group (excluding Volkswagen Anhui), a total of 12 companies, submitted a "price undertaking" proposal to the European Commission, but no consensus has been reached so far.

It is worth mentioning that Germany has always been opposed to the tax increase. On October 29th (local time), Hildegard Müller, President of the German Automobile Industry Association, issued a statement saying that the EU's imposition of tariffs on imported electric vehicles from China is a setback for global free trade and will have a negative impact on Europe's prosperity, employment, and economic growth. Müller said that trade disputes should be resolved through dialogue, and she called on all parties to maintain the openness of negotiations and strive to find solutions to eliminate additional tariffs.