German auto giants caution against EU tariffs on Chinese electric vehicles

On May 8, 2024, Reuters reported that top executives from BMW and Volkswagen cautioned against implementing EU import tariffs on Chinese manufacturers' electric vehicles. They argued that such measures could disrupt the European Union's Green Deal agenda and negatively impact automakers reliant on importing cars from China. The European Commission, responsible for trade policy across the EU's 27 member states, initiated an inquiry in October to assess whether fully electric vehicles produced in China were benefiting from unfair subsidies, potentially justifying additional tariffs.

After the company reported its quarterly results, BMW's CEO, Oliver Zipse, warned, "You could very quickly shoot yourself in the foot."

BMW is bringing Mini EVs and the iX3 from China to Europe, joining the likes of Volkswagen and Mercedes-Benz in leveraging their Chinese operations. China stands as BMW's second-largest market, trailing only Europe, with nearly a third of its sales in the first quarter coming from there.

Zipse claimed that automakers have an industrial advantage by operating globally, "We don't think that our industry needs protection. You can easily endanger that advantage by introducing import tariffs."

Conversely, implementing the EU's Carbon Border Adjustment Mechanism (CBAM) has resulted in a notable decrease in China's aluminium exports to EU nations, with reported declines of up to 30 per cent in volume. Aluminium is a favoured material for electric vehicle (EV) manufacturers globally. China is the world's foremost aluminium producer, contributing approximately 60 per cent of the world's total production.

Volkswagen, the largest car manufacturer in Europe with significant dependence on the Chinese market, cautioned that potential tariffs posed a certain level of risk.

Thomas Schaefer, the CEO of the Volkswagen brand, said, "There's always some sort of retaliation."

In March, the Commission initiated customs registration for imported Chinese electric vehicles (EVs), potentially subjecting them to tariffs pending the outcome of a trade investigation into unfair subsidies.

The investigation is slated to conclude by November, with the possibility of provisional duties being imposed by the EU as early as July. By June 5, Brussels is expected to release a summary of proposed provisional duties, which would then be enforced by July 4.

Addressing concerns in Berlin on May 8, European Commission President Ursula von der Leyen emphasised the importance of Europe taking measures to prevent the influx of subsidised electric vehicles from China into the bloc's market.

Zipse said that BMW and other automakers have "Bilateral dependencies not only on the final product but on the component side and raw material side."

The potential imposition of duties could have adverse effects, mainly as new EU CO₂  emission standards, necessitating an increase in EV production reliant on Chinese battery materials, are set to take effect next year.

"There will be no single car in the EU without components from China," Zipse said.

"Imposing tariffs would undo the EU's industrial plan to ensure the bloc is a frontrunner in cutting carbon emissions and developing the technology required. There is no green deal in Europe without resources from China."