Europe considers tariff hike on Chinese EVs to boost local industry

In a bold move to reshape its industrial and trade policy amidst the booming electric vehicle (EV) market, Europe is contemplating significant tariff increases on imported Chinese electric vehicles and batteries. This strategy aims not only to counter China's technological dominance but also to invigorate the local EV industry, ensuring a rapid and sustainable decarbonisation process without compromising the continent's economic, social, and security interests.
Market share of Chinese-imported BEVs in the EU title=

A recent paper by Transport & Environment (T&E) highlights the rapid growth of EV sales across Europe, with 2 million units sold in 2023 alone. However, the surge in imports from China, facilitated by the country’s advanced battery technology and aggressive subsidy strategies, poses a threat to the European automotive industry’s future. The European Commission’s ongoing anti-subsidy investigation into Chinese EVs underscores the urgency of developing a robust response to safeguard and promote the EU’s green industrial capabilities.

The T&E report suggests that raising tariffs on Chinese EV imports to at least 25%, from the current 10%, could level the playing field for European manufacturers. This measure is expected to make Chinese medium-sized cars more expensive than their European counterparts, potentially generating between €3-6 billion in additional annual revenue. Such funds could be reinvested into scaling local clean technology supply chains, offering a dual benefit of bolstering the EU’s industrial base while accelerating its transition to a greener economy.

Moreover, the paper advocates for a comprehensive strategy that extends beyond EVs to include critical components like lithium-ion batteries. With Europe trailing behind China in battery technology and production capacity, increased tariffs, stringent sustainability requirements, and strong local content mandates are proposed as mechanisms to stimulate domestic manufacturing. This approach is aimed at reducing Europe’s dependency on foreign imports and establishing a self-sufficient supply chain by as early as 2026.

The T&E report also calls for a strategic partnership between the EU and the UK, suggesting the formation of a European Battery Alliance to facilitate a seamless, tariff-free EV supply chain across the continent. Such collaboration would ensure the optimal use of resources and expertise, enhancing the competitiveness of European EV and battery production on the global stage.

While the proposed tariff adjustments could raise concerns about trade tensions and retaliation, T&E argues that a balanced and preemptive approach, coupled with constructive dialogue and cooperation, can mitigate risks and foster a mutually beneficial relationship with China. This strategy underscores the importance of moving swiftly and decisively to secure Europe’s position as a leader in the global shift towards electric mobility.

As the European Commission deliberates on the findings and recommendations of the T&E paper, the outcome could signify a pivotal moment in the continent’s industrial strategy, with far-reaching implications for the future of its automotive sector and its broader climate ambitions.

Source: To raise or not to raise | Transport & Environment

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