On October 4, EU member states voted to impose an additional tax of up to 35% on electric vehicles (EVs) manufactured in China, building on the existing 10% tariff, with the new rates expected to take effect by the end of October. Analysts warn that the approval of this proposal could have profound negative impacts on the European market and its own EV development.
Under the new tariff regime, Tesla faces an extra tax of 7.8%, while BYD and Geely will incur 17% and 18.8% respectively, and SAIC will be subject to a staggering 35.3% additional tax. This means Chinese EV manufacturers now confront tariff barriers of up to 45% when entering the European market. The EU's actions are driven by concerns over the rapid growth of China's EV sector, particularly amid a global economic slowdown, as the bloc seeks to protect its domestic industries.
The proposal's passage has sparked widespread backlash. The Chinese Ministry of Commerce swiftly condemned the move, labeling it “unfair and non-compliant” protectionism. Several automakers have also expressed dissatisfaction, with Geely Holdings stating that this decision will harm China-Europe trade relations. Meanwhile, Mercedes-Benz and BMW have warned that it will weaken industry competitiveness and may result in higher costs for European consumers.
Although the EU aims to safeguard its domestic EV industry with high tariffs, the direct impact on Chinese EV companies may be limited. Experts suggest that these manufacturers might respond by adjusting their market strategies and increasing research and development investments. Additionally, as the EV supply chain diversifies, this could encourage Chinese automakers to accelerate their expansion into other markets, reducing their reliance on Europe.
In contrast, the EU stands to pay a higher price. The steep tariffs will directly raise the market price of EVs, slowing the adoption of electric vehicles and hindering Europe’s energy transition and emission reduction goals. Particularly as global attention to emissions reduction and sustainability increases, the EU's actions could be at odds with its own green development objectives.
This tariff measure may also escalate trade tensions between China and the EU. While there are indications that both sides remain willing to resolve disputes through negotiations, the EU's unilateral action undoubtedly exacerbates the trust deficit. Analysts caution that without effective dialogue and coordination mechanisms, the economic relations between China and the EU could plunge into deeper turmoil.
In the context of a highly interconnected global automotive supply chain, the EU's initiative may not only intensify competition between China and Europe but also have far-reaching effects on the global EV industry. While Chinese EV manufacturers may face diminished competitive advantages in the short term, the long-term self-adjustment of the market and innovation will likely drive further development in China’s EV sector.