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[Text/Observer Network Xiong Chaoran] After the European Union has announced a temporary tariff of up to 37.6% on electric vehicles imported from China, sources said that the EU may lower import tariffs on Chinese electric vehicles from Volkswagen and BMW.

According to Reuters, citing two sources on July 16, the European Commission has signaled to Volkswagen and BMW that it may consider reducing tariffs on the two German automakers' imports of electric vehicles made in China. It is reported that the European Commission is now willing to classify the two automakers as so-called "cooperative companies", making them eligible for a 20.8% tariff on their models made in China, lower than the currently planned 37.6% tariff.

Originally, since electric vehicles produced by Volkswagen and BMW in China were not included in the sampling range, it meant that they were automatically subject to the highest tariff rate. The report said that if an agreement is reached, it would be the "first preliminary compromise" by the EU on the issue of tariffs on Chinese electric vehicles. Two sources said that the decision has not yet been finalized, and Volkswagen and BMW have not commented at this time.

Volkswagen and BMW car data map

On July 4, local time, the European Commission released a 208-page document, announcing that it had decided to impose temporary anti-subsidy duties on electric vehicles imported from China for a maximum period of four months starting from July 5. During this period, EU member states will vote to decide on the final anti-subsidy measures. If passed, the EU will formally impose anti-subsidy duties on Chinese electric vehicles for a period of five years.

The latest announcement from the European Commission shows that the three Chinese automakers sampled for investigation, BYD, Geely Auto and SAIC, will be subject to provisional anti-subsidy duties of 17.4%, 19.9% ​​and 37.6% respectively, which is almost the same as the tax rates disclosed by the EU in its preliminary ruling on June 12. Geely Auto and SAIC only slightly decreased (20% and 38.1%), while BYD remained unchanged. The EU said that this was an adjustment made after referring to the opinions submitted by relevant parties on the accuracy of the calculations.

In addition, according to the announcement of the European Commission, other Chinese automakers that cooperated but were not sampled will be subject to a weighted average tariff of 20.8%, and the tax rate for non-cooperative automakers will be 37.6%. The initial tax rates for these two items were 21% and 38.1% respectively.

Reuters said the EU's move may hurt the interests of some of Europe's top automakers as they produce cars in China and import them into Europe.

In recent times, some automakers and EU member states, including Germany, have been pushing for negotiations between China and Europe. Last year, one-third of German automakers' sales came from China. They opposed the EU's tariffs on China and worried that China would launch countermeasures, leading to a trade conflict with China. At the same time, Tesla, an American electric car manufacturer, demanded that it obtain a separately calculated tax rate.

In September 2023, Chinese electric vehicles will be unveiled at the 2023 Munich Motor Show. The booth is crowded with people. Photo from Visual China

On July 15, local time, 27 EU member states expressed their views on the plan to impose tariffs on Chinese electric vehicles. Reuters reported that Germany has not yet made a decision, which means it "actually abstained from the vote", and Sweden plans to abstain; while sources revealed that day that Italy voted in favor and Spain is expected to express its approval in a written opinion.

The vote is not binding, and countries can change their positions when the formal vote is held this fall, but the current position statements of member states may affect the final conclusion of the European Commission. Reuters previously analyzed that Germany's choice to abstain in the first stage of voting actually means that Germany supports the European Commission to continue negotiations with China on the EU's largest trade case to date.

Meanwhile, some other EU countries are still hesitant. The Polish Ministry of Development said that the government ministries are still in consultation to discuss what position to take. As of July 13, Greece has not expressed its position. According to previous reports, France is one of the staunch supporters of the EU's decision, while Hungary condemned it.

According to reports, this is the first formal test of the support for the European Commission's tariff measures. The EU has launched an investigation into Chinese electric vehicles without industry complaints, which is the first trade case of its kind. According to EU regulations, at least 15 of the 27 member states, accounting for 65% of the total population of the EU, are needed to vote against the decision in order to block it.

A spokesperson for the European Commission said that during the investigation, the European side is analyzing some of the requests made by companies that have not yet produced electric vehicles in China, and will make a final assessment later in the process. The person added: "The parties involved will be informed of the European Commission's proposals and will have the opportunity to comment before any final measures are announced."

SAIC Motor's cars exported to Europe. Image from SAIC Motor

On the evening of June 22, China's Ministry of Commerce announced that China and the EU have agreed to launch consultations on the EU's anti-subsidy investigation into Chinese electric vehicles. Reuters quoted Chinese media reports as saying that after the launch of the consultations, China hopes that the EU will cancel its tariffs on Chinese electric vehicles. The report pointed out that the EU's growing protectionist measures will trigger China's countermeasures, and the escalation of trade frictions will only lead to a "lose-lose" situation for both sides.

Regarding the EU's announcement of additional tariffs, Chinese Foreign Ministry spokesman Lin Jian said earlier that this anti-subsidy investigation is a typical protectionism. The EU's imposition of tariffs on electric vehicles imported from China on this ground violates the principles of market economy and international trade rules, damages China-EU economic and trade cooperation and the stability of the global automobile production and supply chain, and will ultimately damage Europe's own interests.

Lin Jian said, "We have noticed that recently, politicians and industry representatives from many European countries have expressed opposition to the European Commission's investigation, believing that it is a wrong approach to try to protect European industries by imposing tariffs on Chinese electric vehicles. Protectionism has no future, and open cooperation is the right way. We urge the EU to abide by its commitment to support free trade and oppose protectionism, and work with China to safeguard the overall situation of China-EU economic and trade cooperation. China will take all necessary measures to firmly safeguard its legitimate rights and interests."

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