Commentary on Political Economy

Wednesday 8 May 2024


 VW cautions Europe against raising tariffs on Chinese EVs


Brussels should not raise tariffs on imported Chinese electric cars and doing so would risk “retaliation” against international groups in the country, the head of the Volkswagen brand has warned.

The European Commission is investigating electric car imports from China and is widely expected to raise tariffs after a surge in imports threatened domestic producers switching from combustion engine to electric vehicles.

But VW brand chief Thomas Schäfer told the FT’s Future of the Car Summit: “I don’t believe in tariffs. I want everybody to compete on the same terms. There is always some sort of retaliation.”

His comments echo concerns raised by Mercedes-Benz boss Ola Källenius, who in March called on Brussels to cut tariffs on Chinese EVs.

Carmakers such as Stellantis and Renault, which do not have large businesses in China, have been more vocal about the threat of Chinese electric vehicles. But the investigation has faced a backlash from German carmakers reliant on China for a significant portion of sales and profits.

The EU investigation has already provoked criticism of protectionism from Beijing, which claims its companies are simply more competitive. The European boss of China’s BYD previously said the company did not rely on subsidies when manufacturing its vehicles.

At present, Chinese EVs are subject to a 10 per cent tariff when imported to Europe. European carmakers pay 15 per cent when exporting to China, which is part of the reason most German models sold in China are made in the country.

Some Chinese carmakers are exploring manufacturing locally in Europe as well. BYD confirmed in January that it would build a new car plant in Hungary.

The call for higher tariffs also comes as international carmakers that had dominated the Chinese market have wrestled with declining sales amid the rise of lower-priced, tech-savvy local brands. Volkswagen, which previously accounted for almost one in five cars sold in China, has seen its market share in electric vehicles fall under 5 per cent.

Schäfer told the summit that the German carmaker remained committed to the world’s largest car market despite acknowledging that it was unlikely to recover its once dominant position.

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