After the European Parliament elections, Macron is already a political corpse, so this fight is his last.
"One satisfaction of buying a new car is the distinctive aroma within. The smell that emanates from the Chinese electric vehicles (evs) that are increasingly common on Europe’s roads is, for the European Commission, that of a rat.
On June 12th, after an eight-month probe, the EU’s executive arm accused China of unfairly subsidising its industry with tax breaks, cheap loans and the like. It fears that cut-price imports pose a “clearly foreseeable and imminent injury” to European carmakers. Provisional tariffs of between 26% and 48%, compared with 10% for other imported cars, will be imposed from July on Chinese evs. The precise duty will depend on each firm’s willingness to assist the investigation.
In the short term, it is hard to sniff out a winner. Car buyers hoping to inhale the intoxicating new-car odour will certainly suffer if the prices of imported cars rise and competitive pressures on European firms ease. But Europe’s carmakers are not taking a victory lap, either. They did not ask for the probe, which was launched under pressure from France’s government. German companies such as Volkswagen and BMW, which make lots of cars in China and export plenty there, have been particularly vocal opponents. Now they fear retaliation from Beijing, which looks inevitable.
China has hinted at raising its tariffs on large-engine (in other words, German) vehicles from 15% to 25%. It could also make life harder for foreign carmakers in China with more onerous regulations and spread the net of tariffs wider to agricultural goods or aviation. In January it fired a warning shot at France by initiating an anti-dumping investigation of cognac and other European brandies.
Europe’s tariffs will hit not only Chinese firms. Foreign companies that make cars in China for export back to Europe will be subject to duties of 31% on average. Tesla, the American EV pioneer, is by far the most exposed. But Europe’s mass-market carmakers, which face the greatest threat from cheap Chinese electric runarounds, are also in the firing line.
Carlos Tavares, chief executive of Stellantis, which counts Citroën and Peugeot among its many brands (and whose largest shareholder part-owns The Economist’s parent company), once seemed to favour tariffs. He has become less keen since a deal last October with Leapmotor, a Chinese startup, to make cheap evs in China for the European market. Renault has not explicitly called for tariffs but rather a “level playing-field”, and a more supportive European industrial policy. It also sends evs to Europe from China under its Dacia brand.
As for Chinese carmakers, higher duties may temporarily slow their progress and give the Europeans the opportunity to catch up by launching a new generation of more competitive vehicles. But the tariff barrier is unlikely to stop all the Chinese in their tracks. Having set prices in Europe a little lower than for competing European models, they have scope to cut. byd, which will now be subject to an extra 17% tariff, sells its Seal EV for around $24,000 in China and double that in Europe, suggesting that it could absorb the new duties and still make a profit. Rhodium, a research firm, reckons that tariffs of 40-50% would apply the brakes more fully. saic, which will be hit with a 48% tariff on its popular mg marque, may have more problems, unless its starts to help with the investigation.
Indeed, in the long run the tariffs could even hasten China’s conquest of the European car market. To become significant forces on the continent, the Chinese companies were always going to have to produce their EVs locally. byd, which aims to become the region’s top ev-maker by 2030, will build a factory in Hungary and is soon expected to announce another in Spain. Chery signed a deal in April also to make cars in Spain. Others are reportedly knocking on the door of big European contract manufacturers, according to Matthias Schmidt, a consultant.
Chinese carmakers, in other words, aren’t going anywhere. In a sign of the times, byd has taken over from Volkswagen as the main sponsor of the European football championship, which kicks off on June 14th in Germany. Even if EU member states vote later in the year to make the tariffs permanent, it will do little to put Chinese noses out of joint." [1]
1. The call of duties. The Economist; London Vol. 451, Iss. 9401, (Jun 15, 2024): 57, 58.
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