Chinese makers propose steep duties on European ICE vehicles

Amidst the escalating trade tensions between China and the European Union, Chinese electric vehicle manufacturers have proposed a 25% tariff on large European internal combustion engine vehicles. This proposal is a direct response to the EU's recent decision to impose tariffs as high as 38.1% on China-made EVs, should the goverment not discontinue what the EU says are anti-competitive practices.

The Chinese proposal was discussed at a closed-door meeting in Beijing between China's Ministry of Commerce and representatives from major European and Chinese automakers. It specifically targets European ICE vehicles with engines larger than 2.5 liters, a segment that saw approximately 250,000 imports into China in 2023.

The EU's decision to increase tariffs on Chinese EVs came after an investigation concluded that some of these vehicles were benefiting from unfair subsidies. State-owned automaker SAIC Motor, known for brands like MG, is expected to bear the brunt of these tariffs. Ironically, MG was the top-selling Chinese EV brand in Germany in May.

SAIC's response to the tariffs has been one of defiance and creativity. The company's Global Design Director, Shao Jingfeng, has created new MG logos incorporating the 38.1% tariff figure. He has also released a line of merchandise featuring these designs, including bicycles, badge covers, baseball caps, socks, coffee mugs, T-shirts, and canvas shoes. This tongue-in-cheek response has resonated with Chinese consumers, with many expressing their support for the company's playful attitude.

The Chinese government has accused the EU of using the investigation as a pretext to gain access to trade secrets from Chinese EV manufacturers. In a tit-for-tat response, they are now proposing to leverage tariffs on large European ICE vehicles as a bargaining chip.

This is not the first time such a proposal has been discussed. In May, prior to the EU's investigation, the state-controlled Global Times suggested raising tariffs on large ICE vehicles. This latest development suggests that the Chinese government is serious about retaliating against the EU's tariffs.

While the EU claims that the tariffs are necessary to ensure fair competition, the Chinese government argues that they are protectionist and will harm the global automotive industry. Chinese EV manufacturers have been steadily increasing their market share in Europe, reaching 8.2% in 2023. They have also been investing in local production facilities in Europe, with BYD, for instance, constructing a car plant in Hungary that is slated to commence production in 2025.

Despite the tariffs, some Chinese EV makers, like BYD, are confident in their ability to absorb the additional costs. BYD is subject to a lower tariff rate than other Chinese manufacturers and has been expanding its presence in Europe.

The escalating trade war between China and the EU raises concerns about the future of the global automotive industry. It remains to be seen how this dispute will be resolved, but at this point neither side seems willing to make any concessions.

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