The updated tariffs, announced in Brussels on Tuesday, would represent a significant increase for major companies making electric vehicles in China and are meant to level the playing field with Chinese EV manufacturers, many of which enjoy subsidies from Beijing. Final tariffs will come on top of the existing 10% already charged for electric vehicles produced in China.
The European Union began investigating Chinese automakers in October. Officials said they lowered the rate for Tesla, down from a proposed 21%, because the company did not benefit from the same level of subsidies from the Chinese government as leading Chinese automakers. Tesla did not immediately respond to a request for comment.
The tariffs for Chinese automakers, which would go into effect for five years, all dropped slightly from an original proposal in June, ranging from 17% for China's largest producer of electric vehicles, BYD, to 36.3% for SAIC Motor, the state-owned maker of MG Motor. Geely Auto, the parent company of Volvo Car, faces a rate of 19.3%.
Companies that cooperated with the investigation, including German automakers BMW, Mercedes and Volkswagen, face tariffs of 21.3% for cars they produce in China. Unlike Tesla, which has its own independent production site in Shanghai, the German car companies are all involved in joint ventures with Chinese automakers. Because Volkswagen also has an entity with SAIC, some of its cars will be subject to the highest tariffs.
Compared with the 100% tariffs the Biden administration imposed on Chinese EVs in May, the European proposals reflect what experts say is a desire to maintain trade with China, while protecting domestic production. Since the initial tariffs were announced several Chinese automakers have announced plans to shift production to Europe.
Imported EVs from China have grown to more than 20% of the market share in Europe over the past three years, according to the European Automobile Manufacturers' Association. But EV sales slowed in the first half of 2024, growing by just 1% compared with the same time the previous year, according to Rho Motion, a research firm focused on batteries.
Negotiations between Beijing and Brussels over the tariffs are ongoing, and China could propose measures to avoid the tariffs, such as reducing state subsidies to Chinese automakers, though this move is unlikely.
Nevertheless, China claims the EU measures are protectionist. This month, Beijing lodged a complaint with the World Trade Organization over the proposed tariffs. In response to the European Union's announcement Tuesday, China said it firmly opposed the approach that Brussels had taken, arguing that the competitiveness of Chinese-made electric vehicles came not from subsidies, but from scale and supply chain advantages.
The tariffs would "exacerbate trade tensions between China and the EU, sending a profoundly negative signal to global cooperation and green development," the Chinese Chamber of Commerce said in a statement.
The initial tariffs announced reached as high as 38% for those automakers that had not cooperated with the investigation, including Tesla. But at the time, the commission noted that the American automaker, which produces its Model 3 in Shanghai for sale to Europe, may be eligible for an "individually calculated" rate. The lowered rate for Tesla came after the company had requested an investigation into the subsidies it received from the Chinese government.
Member states must vote on the new tariffs, which would take effect Oct. 31.
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