The EU’s decision last week to impose tariffs ranging from 17.4% to 37.6% on imported Chinese EVs can only harm consumers as well as the transition to net zero, writes Fraser Brown of automotive consultancy MotorVise.
It’s a move that reeks of political machinations and follows an investigation into Chinese state aid for its EV manufacturers. At a time when we should be accelerating the transition to clean energy, the EU could provoke a trade war that will benefit no one.
It’s not just an economic misstep, but a strategic blunder that could derail the progress of sustainable transportation across Europe. Such tariffs will artificially inflate prices for consumers, limiting their access to more affordable EV options.
The new tariffs are on top of a 10% duty already in place for all electric cars imported from China, which could significantly raise the price of EVs across the EU, making them less affordable.
While the EU argues that Chinese EVs benefit from extensive subsidies that start with lithium mining and extend through to production and shipping, I maintain market competition should be allowed to play out without such heavy-handed intervention. Competition drives innovation and benefits consumers through lower prices and better products.
The fear that Chinese manufacturers will dominate the market without tariffs is overstated. Examining the UK market, only MG, a brand that has successfully leveraged its British heritage, has made significant inroads.
Other major players like BYD struggle to find buyers even for heavily discounted vehicles. BYD’s primary sales have come through specific agreements, such as those with Octopus EV, rather than broad consumer uptake. This indicates that, without the crutch of recognised brands or special agreements, Chinese EVs are not necessarily poised to overwhelm the European market.
We need to calm down as the actual performance and market penetration of Chinese EVs don’t support the fear that they will overwhelm the market. Escalating trade tensions benefit no one and will only disrupt a whole range of industries far beyond automotive.
It’s a strategy that risks provoking a tit-for-tat response that could harm European businesses. Beijing is threatening retaliation against European sectors such as aviation, agriculture, and the spirits industry. Retaliatory measures would create broader economic fallout, leading to a trade war with negative repercussions for all involved.
Protectionism rarely yields long-term benefits for consumers. By imposing high tariffs on Chinese EVs, the EU is essentially forcing its consumers to pay higher prices for electric vehicles. This contradicts the broader goal of encouraging the adoption of cleaner, greener vehicles to combat climate change. Affordable EV options are crucial for widespread adoption, and artificially inflating prices through tariffs will only slow down the transition.
Additionally, such protectionist measures stifle innovation and competition. Healthy competition from foreign manufacturers can drive domestic companies to improve their products and services. Instead of shielding European automakers from competition, the EU should focus on creating a level playing field where all manufacturers, regardless of their origin, can compete fairly. This approach would provide consumers with a wider range of choices and better products.
Both sides need to engage in dialogue to address concerns over subsidies and market fairness without resorting to punitive measures. Let’s work towards a solution that encourages a vibrant, competitive market for the benefit of all.