European Commission’s anti-subsidy investigation

Anti-subsidy tariffs are not in the EU’s interest

On June 12, 2024, the European Commission announced provisional anti-subsidy tariffs on battery-electric vehicles from China. The stated goal of ensuring fair competition conditions and protecting the domestic industry from unfair practices will not be achieved by this. The planned tariffs will make it more difficult to successfully ramp up electromobility and thus decarbonize and achieve the Paris CO2 climate targets, to which the German automotive industry has also committed itself as part of the Green Deal. In addition, they harm both European consumers and European companies. They are therefore not in the interest of the European Union.

Constructive dialogue between the EU and China is needed

The European Commission should refrain from imposing the announced anti-subsidy tariffs and find a negotiated solution with China. We expressly welcome the joint dialogue that has already taken place between Brussels and Beijing. It is crucial that this dialogue is also conducted seriously. Decision-makers on both the European and Chinese sides must live up to their responsibilities and create fair competitive conditions for all economic actors that serve the goals of the transformation. It is also important to secure access to critical raw materials in the long term, to reduce barriers to market access across sectors on both sides and to create transparency about the respective trade and subsidy policies. The exchange on these topics could, for example, be institutionalized in a European-Chinese trade council in order to work constructively on the framework conditions of economic relations in the interests of both sides.

Negative impacts on companies and Europe as a production location

The European anti-subsidy tariffs would not only affect Chinese manufacturers, but also European companies and their joint ventures in particular. This is because a large proportion of vehicle imports from China into the EU come from European and American manufacturers. The announced anti-subsidy tariffs are sometimes even higher for European companies than for Chinese companies. The cooperation and production of European manufacturers in China are an important building block for the transformation and competitiveness in Europe. The EU has always benefited from its openness in international trade. Germany in particular has a significant surplus in automotive trade with China: in 2023, passenger cars worth €15.1bn were exported from Germany to China. Imports of passenger cars were worth €4.0bn. In 2023, automotive suppliers exported parts worth €11.2bn to China, while parts worth €2.8bn were imported from China. China is therefore the largest export market for exports from suppliers producing in Germany.

The risk of an escalation of the trade conflict is real

The introduction of anti-subsidy tariffs will lead to countermeasures and retaliatory measures and carries a real risk of escalating the trade conflict with China. Shortly after the announcement of the EU investigation, the Chinese government initiated anti-dumping proceedings against French brandy. An investigation into European pork has also recently been launched. These examples show how quickly the conflict can spread to other sectors and cause incalculable damage. A negative spiral of trade conflicts would result in a "lose-lose" situation in which both sides suffer economic damage without a constructive solution being reached. Even without introducing additional tariffs, the EU can protect its legitimate interests and address upcoming challenges in discussions. This is provided for in the rules of the anti-subsidy regulation and is WTO-compliant.

Potential Chinese countermeasures could cause enormous damage

Chinese countermeasures could hit the European economy hard, especially export-oriented sectors. The proposed increase in import duties on vehicles with engines with a displacement of over 2.5 liters would hit European automobile production hard. In 2023, German manufacturers exported 216,299 cars to China, around a third of which were vehicles with a displacement of over 2.5 liters. In addition, German manufacturers alone exported around 48,000 cars with a displacement of over 2.5 liters from EU production facilities outside Germany (Slovakia, Austria, Italy) in 2023. Overall, in 2023, China was the third largest export market for cars from Germany in terms of units after the USA and the UK. Every euro spent on additional tariffs is missing from the immense investment costs for the necessary transformation in Europe. In addition, the conflict would certainly also affect German and European suppliers. China is currently the largest buyer of exports from German suppliers.

The transformation is being slowed down

The ramp-up of electromobility to achieve climate neutrality in the transport sector in the EU means that the European automotive industry is dependent on raw materials and (battery) technologies from third countries, especially China. Open markets and constructive trade relations are essential for this. The anti-subsidy tariffs would make electric vehicles more expensive on the European market or prevent them from being offered on the market at all. This would limit the availability of cheap electric vehicles for customers and further complicate the already stalled ramp-up of electromobility. This is neither in the interests of European consumers nor does it correspond to the goals of the Green Deal.

No flooding of the market by Chinese BEVs to be expected

Forecasts indicate that no excessive market penetration of Chinese battery-electric vehicles is to be expected in the medium to long term. Analyses by S&P (AutoInsight) for 2030 currently assume that the market share of Chinese manufacturers in the overall passenger car market in Europe will settle in the range of 5 to 10%. Unlike with solar panels, for example, brand loyalty is much more pronounced in automobiles. Another figure underlines the market conditions: in 2023, German manufacturers sold around 10 times as many electric cars in China as Chinese brands in Germany and around 100 times as many cars in total. The market share of German manufacturers in the electric market in China is roughly as high as the market share of Chinese OEMs in the electric car market in Europe, but the latter is not even half the size of the Chinese market.

Tariffs do not strengthen the competitiveness of European industry

Competitiveness is created by competition. Anti-subsidy tariffs are not an adequate measure to strengthen European competitiveness and resilience in the long term. Instead, other strategies should be pursued to promote the innovative strength and competitiveness of the European automotive industry - for example, by concluding free trade agreements, promoting research and innovation in a targeted and unbureaucratic manner, and by pursuing a policy that is open to all technologies and coherent. Trade restrictions also do not meet the EU's claim to market access in third markets.