The recent move by the European Commission to impose countervailing duties (CVDs) of up to 35.3 percent on electric vehicles (EVs) from China, in addition to the European Union’s 10 percent tariff on imported cars, has exposed the vulnerabilities of European automakers, who have been slow to adapt in these unprecedented times of global warming.
For years, EU automakers have dominated the global vehicle market, aided by supportive government policies. This success, however, has led to complacency in embracing new technological advancements. Meanwhile, China’s rapid economic growth and proactive leadership have enabled Chinese vehicle manufacturers to capitalize on this inertia, taking the lead in the global vehicle market, particularly in the EV sector.
The CVDs are being imposed because Chinese EVs are priced lower, partly due to government subsidies that make competition challenging for EU automakers. However, this reasoning seems more like an excuse, as some EU countries and the U.S. (which has promised a total ban on these vehicles) are concerned that Beijing is taking the lead in this sector, especially as demand for EVs rises in response to efforts to reduce emissions.
It is not a crime for any country to subsidize production for its industries, and this is standard practice globally. When others do it better, the solution is not to impose unfair tariffs but to invest in and support local manufacturers to ensure they remain competitive.
Despite being under a strict lockdown for three years, with some countries celebrating Beijing’s supposed economic decline, China has bounced back. Its economy is now thriving, and the production of EVs has sent some EU countries into panic mode, as they have lagged behind in adapting to changes in the automotive industry after dominating the market for years.
The imposition of these tariffs highlights the challenges facing the European car industry. Many European manufacturers are now reliant on the Chinese auto market, which is why a country like Germany voted against the tariff, fearing retaliatory measures. In global trade, no country can monopolize the right to impose punitive tariffs without consequences.
Facing stiff competition from Chinese EVs, Volkswagen announced last month that it is considering closing some of its factories in Germany for the first time in its 87-year history. The company stated that this move is necessary to meet cost-cutting goals and remain competitive.
In the era of multilateralism, imposing tariffs does not help countries that have failed to support their production chains. Instead, honest negotiations that lead to consensus and mutually beneficial solutions are more effective.
China has already demonstrated its willingness to offer competitive prices for its EVs in the EU market, so punitive tariffs are unnecessary. Instead, collaboration between Chinese EV manufacturers and the European automotive industry could prevent a damaging trade war, which would likely hurt EU member states more than China. Trade negotiations should be about compromise, not rigid posturing.
Globally, the demand for EVs is rising, and many countries lack the capacity to meet this demand, except for China. If Beijing halts its EV exports to the EU, it will be the EU that suffers, especially if China retaliates by targeting key EU exports such as pork, brandy, and dairy.
Concerns have also been raised about the security of European systems due to the technology used in Chinese EVs. This is an issue that could be resolved through trade negotiations rather than tariffs, which could have far-reaching consequences for the bloc.
According to the Atlantic Council, approximately 25 percent of all EVs sold in the EU this year will be Chinese, reflecting Europe’s growing dependence on international trade. If Beijing suspends EV exports to the EU, the member states will bear the brunt of the impact.
Government policies and stricter emissions standards have accelerated the adoption of electric cars globally. According to the International Energy Agency (IEA), 14 million electric vehicles were sold in 2023, and the figure is projected to reach 17 million by the end of this year—a 20 percent increase. China now leads the world in EV production, accounting for 58 percent of all new electric cars sold globally, despite opposition from those who consider themselves global leaders.
The writer is a Journalist and Communications consultant.
