On October 4th, EU member states cast their votes, resulting in the approval of the European Commission’s proposal to impose tariffs on Chinese electric vehicles. Reports indicate that 10 member states were in favor, while 12 abstained, and a coalition including Germany, Hungary, Malta, Slovakia, and Slovenia voted against the proposal.
Leading up to the vote, Reuters noted that countries like France, Italy, Poland, and Greece were anticipated to support the measure. According to EU regulations, a proposal can only be set aside if at least 15 member states oppose it and they collectively represent 65% of the EU’s population. Notably, the combined populace of France, Italy, Poland, and Greece makes up 39% of the EU, suggesting that even if all other nations voted against it, the opposition would still not meet the necessary threshold.
In the wake of this decision, sources close to the matter revealed that during a recent trip to Europe, Chinese Commerce Minister Wang Wentao was informed by European officials that they remain open to ongoing negotiations. They indicated that even a final ruling would not disrupt discussions with China. While China is receptive to dialogue and optimistic about a reciprocal approach, sources stressed that meaningful negotiations would be difficult if the EU’s political commitment is only verbal.
Since the EU launched an anti-subsidy investigation into Chinese electric vehicles, the China Chamber of Commerce for Import and Export of Mechanical and Electrical Products has emerged as a vocal advocate within the industry. The Chamber has taken an active role in hearings throughout Europe and engaged with various government and industry representatives.
The Chamber’s leadership highlighted that many EU nations support the tariff decision as a means to “encourage” Chinese companies to invest in Europe. This sentiment aligns with the EU’s stance, which seeks to retain the authority to initiate what they deem “unreasonable investigations,” while simultaneously acknowledging the risk that such actions could deter investment and technology from China.
China’s position is unequivocal: supporting tariffs could lead to missed investment opportunities. The industry consensus underscores the impossibility of imposing tariffs while simultaneously attracting investment. European automakers cannot expect Chinese firms to invest in the EU while tariffs are raised on their products.
It’s been observed that the EU has previously leveraged tariff reductions as a negotiation tool, but the emphasis should be placed on the act of imposing tariffs itself. By accusing Chinese companies of unfair subsidies, the EU’s tariff decision inadvertently admits the presence of subsidies. Even minimal tariff rates evoke a recognition of subsidies, which might pave the way for the EU to implement further pressure on Chinese enterprises.
Possible responses from the EU may include the Foreign Subsidies Regulation, among other new strategies and regulations. Following the vote, China has made its position clear: supporting tariffs will indeed lead to a loss of investment.
What are the implications of this development? The transition to electric vehicles in the European auto industry is proving complex. Sales data reveals that the growth rate for new energy vehicle sales in Europe has slowed this year, with European manufacturers struggling to compete effectively in this marketplace, which is a primary reason consumers are reluctant to choose electric vehicles.
The EU aims to prohibit the sale of fuel vehicles by 2035, establishing electrification as a mandatory trajectory for European automakers. Nevertheless, these manufacturers face two significant challenges: first, the workforce needed for producing electric vehicle components is only half of that required for traditional fuel vehicles, prompting job security concerns. Second, the current state of the electric vehicle market in Europe is less than favorable, with manufacturers holding a competitive edge in fuel vehicle research and production, creating uncertainty in fully committing to electric vehicle development.
The dual investment in both electric and fuel vehicles places a financial strain on European automakers. Developing electric vehicles is costly, pushing these companies to seek salvation through two pathways: ensuring high product quality while minimizing research and development costs, or rapidly scaling the electric vehicle market to instigate a significant shift. Both scenarios heavily rely on collaboration with China, a reality that European manufacturers likely understand far better than their political leaders.
Leading figures in the automotive sector, including the chairman of BMW Group, have publicly opposed the tariffs, voicing concerns about potential harm to German manufacturers and escalating trade tensions between China and Europe, ultimately resulting in a “trade dispute that benefits no one.” Representatives from other major automakers have voiced similar objections to the tariff imposition.
Just a day before the EU vote, BMW made headlines by reportedly withdrawing from the next funding round of Northvolt, a Swedish battery manufacturer that was previously hailed as Europe’s “beacon of hope” in new energy. BMW had signed a substantial long-term contract worth 2 billion euros with Northvolt before it began production, with other European automakers, including Volkswagen, committing contracts totaling over 55 billion dollars.
Despite receiving substantial support from the German government, which has afforded Northvolt up to 900 million euros in aid this year, the company has faced serious delivery delays and quality issues. Consequently, BMW opted to withdraw its investment interest in Northvolt.
From the perspective of Europe’s electrification efforts, it’s evident that Europe finds itself in a more vulnerable position relative to China. Supporting tariffs could lead to a loss of crucial investment and jeopardize the opportunity for a successful electric transformation.
These considerations are ones that European nations must weigh seriously. Within the EU, dissenting voices are significant, particularly from Germany. Since the inception of the EU’s inquiry into alleged unfair practices concerning Chinese electric vehicles, Germany has been actively campaigning against imposing tariffs.
Reports indicate that just before the vote, the German Chancellor was engaged in discussions with other European leaders, emphasizing the grave consequences of imposing tariffs on Chinese electric vehicles. This opposition is not only governmental; industry representatives from Germany have also expressed their disapproval. On October 3rd, representatives from German unions and industry issued a joint statement opposing the tariffs on Chinese electric vehicles, labeling this “wrong approach” as ineffective in addressing the EU’s challenges.
In July, Germany chose to abstain, but this time the nation voted against the proposal. Prior to this, Malta, Hungary, Slovakia, and Cyprus also voted against it. The dissent is not confined to Germany; officials from Spain have also recently called for negotiated solutions within the EU.
Germany’s prominent opposition is largely fueled by its fruitful collaborations with China in the automotive sector. The conclusion of this vote is just the beginning of a longer process, as both China and the EU still have an opportunity to resolve their disputes through negotiation.
In this context, it’s a chance for Germany and its fellow dissenting nations to engage with other EU members, while also allowing those in favor of tariffs to recognize the fleeting opportunities presented by the energy transition. Whether they seize this moment will depend on their forthcoming choices.
Looking to the future, a new round of negotiations between China and the EU is scheduled for October 7th. As these discussions approach, the EU must exhibit genuine intention and actionable steps if they hope to pave the way for constructive dialogue.
