EU and China discuss price floors instead of taxes

The European Union and China are exploring a dramatic alternative to how electric cars are traded between the regions. Instead of the current system of tariffs, they are looking at setting minimum prices for Chinese-made EVs sold in Europe. Negotiations between the two economic powers are supposed to start immediately, according to China's Ministry of Commerce.

This potential change comes after the EU increased import taxes on EVs built in China in October 2024. These tariffs included a 17% levy on cars from companies like BYD and a hefty 35.3% tax on vehicles from SAIC, all added on top of the standard import duty for cars. The idea is that minimum prices could replace these taxes if both sides agree.

The German auto association VDA has voiced concerns about tariffs, stating that they disrupt the established rules of global trade and negatively impact international supply chains and economic growth. Data shows that over 50,000 battery-powered EVs were shipped from China to the EU in just the first two months of 2025. Meanwhile, plug-in hybrid vehicles, which are currently not subject to EU tariffs, saw a massive 892% jump in sales, with 25,900 units entering the EU during the same period.

Chinese EV brands like BYD held about 8% of the EU's battery-powered EV market in 2023. Their growth has slowed since the EU implemented the tariffs last year. In contrast, the number of battery-powered EVs exported from the EU to China was much lower, at only 11,499 in 2023, and this number is not expected to grow anytime soon.

To navigate the tariff situation, some Chinese companies are looking to build cars within the EU. For example, BYD plans to start construction on a factory in Hungary later this year. Introducing minimum prices for Chinese EVs could help level the playing field by preventing these vehicles from being sold at significantly lower prices than those made by European manufacturers.

There are worries that setting minimum prices could lead to higher costs for people wanting to buy electric cars, potentially slowing down EV adoption. European car companies, including major players like Volkswagen and Stellantis, are already struggling to compete with the cheaper Chinese EVs. German automakers are particularly concerned about tariffs because they fear China might respond with its own taxes on high-end European cars.

Transportation is a significant source of pollution in the EU, accounting for about a quarter of all CO2 emissions in 2019, with most of that coming from road vehicles. Raising the prices of Chinese EVs might make it harder for the EU to reach its goals for cleaner transportation and could mean that cars with gasoline engines stay on the road longer. If Chinese companies build EVs within the EU, it could reduce the pollution caused by shipping vehicles. However, the overall environmental benefit will depend on how clean the energy used in those European factories is.

The EU is also keen to protect its own developing green technology industries from a flood of cheaper imports from China. While this might encourage innovation within Europe, it also carries the risk of damaging international trade relationships.

Via