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China Fund News reporter Feng Yao

After the European Commission (hereinafter referred to as the European Commission) planned to impose the highest anti-subsidy tax, SAIC Motor Group filed a defense.

On July 22, SAIC Motor’s official Weibo account stated that at the request of SAIC Motor, the European Commission held a special hearing on anti-subsidy investigations at the EU headquarters in Brussels, and SAIC Motor submitted a rebuttal to the European Commission’s preliminary anti-subsidy ruling.

In its defense, SAIC Group mentioned a number of unreasonable actions taken by the European Commission, including "requiring cooperation in providing battery-related chemical formulas, etc."

'Beyond the normal scope of investigation'

According to SAIC Motor, on July 19, the European Commission held a special hearing on anti-subsidy investigations at the EU headquarters in Brussels. SAIC Motor submitted a rebuttal to the preliminary anti-subsidy ruling to the European Commission to safeguard its legitimate rights and interests.

At the hearing, SAIC stated that the European Commission's anti-subsidy investigation involves commercially sensitive information, such as the investigation requiring cooperation in providing battery-related chemical formulas, which is beyond the normal scope of the investigation.

At the same time, SAIC also stated that the European Commission made mistakes in its determination of subsidies, such as confusing the auto finance company wholly owned by a foreign joint venture partner with an affiliated company of SAIC and including it in the calculation of the subsidy rate.

In addition, during the investigation, SAIC submitted thousands of written materials, but the European Commission ignored some key information and defense opinions submitted by SAIC and inflated the subsidy rates of multiple projects.

On July 18, under the organization of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, SAIC also participated in the post-preliminary ruling hearing of the EU's anti-subsidy investigation on Chinese electric vehicles.

The representative of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products clearly pointed out that the European Commission violated many WTO rules and EU anti-subsidy regulations in its preliminary ruling on this case. The subsidy range calculated in the preliminary ruling cannot reflect the actual situation of the sampled Chinese enterprises.

On June 12 this year, the European Commission released preliminary disclosure information, imposing 17.4%, 20% and 38.1% countervailing duties on three sampled Chinese automakers, BYD, Geely Auto and SAIC Group. An average 21% countervailing duty will be imposed on electric vehicle manufacturers that participated in the investigation but were not sampled; electric vehicle manufacturers that did not cooperate with the investigation will be subject to a 38.1% countervailing duty, and a separate tax rate may apply to Tesla cars imported from China.

However, on July 4, the European Commission further announced the adjusted tax rates: BYD 17.4%, Geely 19.9%, SAIC 37.6%. Other electric vehicle manufacturers that cooperated in the investigation but were not sampled will be subject to a temporary anti-subsidy tax of 20.8%, while the tax rate for non-cooperative manufacturers is 37.6%.

Obviously, among all Chinese automakers, SAIC Group has always been subject to the highest tax rate.

According to data released by the China Association of Automobile Manufacturers, in the first half of this year, Chery exported 532,000 complete vehicles overseas, ranking first in my country's complete vehicle exports. SAIC followed closely with 439,000 overseas exports. However, in 2023, SAIC Group exported a total of 483,000 complete vehicles, ranking first among all domestic brands. During the same period, Chery's complete vehicle exports were 394,000 vehicles, ranking second among all domestic brand automakers.

SAIC Motor also recently revealed that in the first six months of this year, new energy vehicles accounted for about 20% of the cars exported by SAIC to Europe. SAIC Motor also said that according to the relevant announcement issued by the European Commission, fuel vehicles are not within the scope of the tax increase.

There is still room for adjustment in tax rates and scope

In fact, there have been many changes recently regarding the European Commission's intention to impose anti-subsidy duties on Chinese automakers.

Recently, it was reported that the European Commission has imposed a temporary tariff of up to 37.6% on electric vehicles imported from China, and has sought the opinions of EU member states through a so-called "consultative" vote. Among them, 12 EU member states voted in favor of the tariff increase, 4 voted against, and 11 abstained.

Separately, the European Commission has signaled to Volkswagen and BMW that it may consider significantly reducing the high tariffs on two car models produced in China and imported into Europe.

The two models are BMW's new electric MINI COOPER and Volkswagen SEAT's Cupra Tavascan. If calculated according to the new regulations in early July, these two models will face a tariff of up to 37.6%.

It is reported that the European Commission is willing to classify the two automakers as so-called "cooperative companies" and reduce their tariffs to 20.8%. If the European Commission finally reaches an agreement with Volkswagen and BMW, it will mark the first time it has compromised on tariff policy.

In addition, Chinese electric vehicles produced by US automakers such as Tesla may also enjoy separate tax rate calculation treatment in the final stage.

It is reported that the final measures on anti-subsidy duties will be announced on November 4 and will be valid for 5 years. This means that from July 4, when the EU began to impose temporary tariffs, to the finalization of formal tariffs, there are still about 4 months to conduct negotiations or consultations with the EU and relevant member states.

Therefore, in the industry's view, there is still room for adjustment in the final report results of the anti-subsidy investigation, especially the tax rate and scope of the additional tariffs.

It is generally believed in the industry that, affected by this, Chinese new energy vehicle companies are expected to re-evaluate supply chain risks and opportunities and consider various mitigation strategies to maintain the competitiveness of their new energy vehicles in the European market.

In the view of industry insiders, feasible measures include: establishing new vehicle assembly plants in Europe or through mergers and acquisitions, adjusting pricing in various links of the supply chain to reduce additional tariff costs, and even passing on unabsorbed tariff costs to customers or suppliers.

Editor: Joey

Reviewer: Chen Siyang

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