After having spent about a year on investigating into whether or not the Chinese electric vehicles received subsidies from the government, a tariff measure with adding up to 35.3% tariffs based on the original 10% rate imposed by the European Union on China-made electric vehicles came into effect on 30 October 2024. The EU members were widely disagreed on the adoption of this tariff measure, as a senior EU official spoke anonymously, “we disagreed on each and every fact that we established in the investigation”, and “it was a broad disagreement.”

A BYD Ocean-M electric car displayed at the 2024 auto show in Beijing, China. 25 April 2024. Photo/VCG/Chinadaily.

European countries having closer business contacts with China like Germany and Hungary etc. were particularly opposed using tariffs against China-made electric vehicles. The European Commission finally exercised its power to push the tariff measure into effect, against the scenario that the EU member countries were unable to secure a majority either in favour or against the measure.

The adoption of the tariff measure was claimed to help protect the European carmakers and the workers working in the automotive industry, though some viewed it more politically motivated, just as the Brussels-based China Chamber of Commerce to the EU pointed, “these tariffs on Chinese, European, and US EV producers operating in China neither enhance the EU's resilience in EV manufacturing nor promote innovation or job creation. Instead, they represent a politically motivated approach.”

Meanwhile, some observers indicated that this may risk affecting the broad trade relations between China and the EU bloc, and triggering a rise in trade protectionism within the automotive industry on the global level, to a larger extent.

According to the media reporting in early December, China and the EU are still consulting on finding an appropriate solution for addressing the recently adopted tariff measure on China-made electric cars. In the meantime, some car manufacturing companies have been seeking alternative means such as shifting to the production of hybrid cars to help offset the costs caused by the tariffs targeting electric vehicles.

The tariffs on imported electric vehicles from China would likely counteract the interests of European countries in many ways. This article will mainly tend to see how likely the EU tariff measure could affect European consumers, European automotive sector, and Europe’s green transition process.

Consumers Would Benefit from Having More Alternatives of the Car Brands

Some analysts already pointed that the duties would hurt the interests of European consumers, as driven by the Russia-Ukraine war and refugee crisis, the consumers of many European countries have already been facing a pressure of rising inflation in various areas. Against this backdrop, European consumers would definitely benefit from having more alternatives of the car brands.

For improving Europe’s overall economic capacity, apart from valuing the contribution of the automotive manufacturing industry to the European economy, the purchasing capacity of the consumers is also one of the most important contributing factors, which should be paid attention to as well. Therefore, the interest of the European automotive industry is important, so is that of the European consumers. European policy-makers will have to see whether the price for protecting the car manufacturing industry by imposing high tariffs on non-Europe manufactured car brands is way too higher than the benefits that Europe can get by taking this measure.

In addition, whether imposing high tariffs on China-made electric car brands can help protect the interests of European carmakers will be uncertain. Most likely, it would be counterproductive to the objective of the high tariff measure originally set by the EU.

The Tariff Measure Would Counteract the Interests of the European Automotive Industry

Given that the European automotive industry and the European economy created by this sector heavily rely on exports and foreign markets; and that the industrial and supply chains of the automotive industry from across various countries of the globe are closely connected, imposing tariffs on foreign-made car brands and the counter measures in the meantime taken by Europe’s counterparts could generate a disruptive impact on the European home-made car brands and the overall European economy.

A Volkswagen’s ID.CODE displayed at the 2024 auto show in Beijing, China. 25 April 2024. Photo/VCG/Chinadaily.

In 2023, about 55% of the $1.1 trillion in Gross Value Added (GVA) generated in the upstream of Europe’s automotive industry came from exports and overseas production of European cars, components, and technology, compared to 35% out of the the $1.1 trillion generated by the European manufactures developing and selling car brands in the European market.

Besides that , there is a need to be aware that the China-made electric vehicles consist of U.S., European, Chinese, and other foreign brands. In 2023, the share of China-made electric car brands accounted for 21.7% of the electric cars totally sold in the European market; and out of this figure, Chinese car brands only occupied 7.6%.

The comparison of these numbers can tell that most of the China-made electric cars sold in the European market in 2023 were foreign brands including European and U.S. car brands. It can also prove that the European, U.S., and other brands manufactured in China would be more widely affected by the recently adopted high tariff measure by the EU.

Therefore, applying protectionism wouldn’t be able to rightly protect the interests of the European automotive industry. To help improve and maintain the competitive edge of the European automotive industry in the medium- and long-term, it is important for the EU policy-makers to facilitate a friendly business environment for both European and foreign car brands. A friendly business environment would be conductive to European car manufactures’ attempt in attracting foreign investments, improving productivity, and enhancing the resilience of industrial and supply chains.

Apart from that, in order to better protect the interests of the European automotive industry, instead of applying the measure of protectionism, the European electric carmakers may seek to expand and deepen collaboration with foreign automotive companies to help overcome the possible bottlenecks such as battery raw materials and technology etc. facing them at the current stage.

In addition, at the policy level, simplifying and optimizing relevant regulations related to the automotive industry and working out proper means to help lower the costs of European carmakers such as energy costs would also serve the interests of the European automotive industry.

Protectionism Would Affect Europe’s Pace in Promoting Green Transition

With regard to the impact of the recently adopted tariff measure on Europe’s green transition process, tariffs on China-made electric vehicles would be counterproductive to Europe’s effort in processing green transition. Europe has long been the leader in promoting green and low-carbon development. As led by the Russia-Ukraine conflict, European countries have allocated a very significant mount of sources in both material and non-material terms to address the Ukraine crisis; and in the meantime, they have slowed down Europe’s pace in investing in green transition.

On the contrary, over the past years, China has been staying on the track in promoting green transition, as reflected by the fact that China has been increasing investments in developing clean and renewable energy and clean technology. According to the White Paper on China’s Energy Transition released by China’s State Council Information Office in August 2024, China’s investment in energy transition in 2023 had reached $676 billion, making China the world’s largest investor in this field; and also in 2023, the newly installed capacity of renewable energy in China corresponded over half of the global total. Besides that, according to the data cited by the White Paper from the International Energy Agency, from 2014 to 2023, the global share of non-fossil fuels in energy consumption was up from 13.6% to 18.5%, with China contributing 45.2% to this increase.

The development of electric vehicles can be one of the good examples demonstrating China’s endeavour in seeking green and clean development, which is conductive to the global efforts in promoting green transition more widely and from a long-term perspective. Exporting electric vehicles made in China to Europe from a significant sense can help European countries keep their pace on green transition. Thus, the efforts taken by the electric vehicle makers including both Chinese and foreign brands operating in China for exporting their products to foreign markets including Europe should be encouraged rather than curbed.