How European tariffs on Chinese EVs could hurt German companies

The Biden administration's efforts to protect American automotive manufacturers by implementing a 100 percent tariff on Chinese electric vehicles has prompted European lawmakers to analyst how this might affect them and their own approach to Chinese imports.

Research from Germany's Kiel Institute for the World Economy shows that almost half a million Chinese EVs were sold in the EU last year, compared to 1,700 sold in the U.S..

Currently EU tariffs on Chinese EVs are 10 percent, but the bloc has already been looking into whether state subsidies on those vehicles makes for unfair competition. A decision on this is expected by early June and could see those tariffs rise.

While such a move would make traditionally affordable Chinese EVs more expensive across the bloc, many German brands are warning against any actions as drastic as the one taken by Washington.

German chancellor Olaf Scholz agrees and has also voiced opposition to higher tariffs, suggesting it could invoke counteractions by Beijing: "We should not forget that European manufacturers… are successful in the Chinese market and also sell a lot of vehicles produced in Europe in China."

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According to figures from the German Association of the Automotive Industry, one out of every five new cars in China bears the logo of a German brand, making it Germany's third-largest market for EU vehicle exports after the UK and the U.S..

Scholz also pointed out that "currently, 50 percent of electric vehicle imports from China come from Western brands that produce there themselves and export them to Europe."

Top executives at BMW and Volkswagen have warned against imposing higher EU import duties on Chinese EVs, saying it could derail the bloc's Green Deal plan and harm automakers that import cars made in China.

Many German brands are manufacturing their cars in China, such as BMW which has earmarked close to $3 billion on its plant in Shenyang, where it will produce its Neue Klasse series of EVs starting in 2026.

Confusion over rules

While none of their vehicles are exported from China to the U.S., it is still unclear if they too would fall subject to Washington's new tariffs, says the Director of Business Development & China Projects, Centre for Automotive Research, Beatrix Keim.

"The tariffs are going against manufacturers from a Chinese entity which is under Chinese jurisdiction," she tells CGTN. "(Exported) to the U.S. is only local manufacturer German brands, or exports from let's say Germany or Mexico and so on - but nothing produced in China at the current point. 

"Would it be coming from China? Probably it would, not entirely aligned, because it is set in that jurisdiction. For example, the BMW plant - yes, it's a joint venture, but at the current time BMW have more shares in that joint venture. So while it is under BMW's China entity, it might be considered a foreign entity. The point is, that's not entirely clarified."

Of greater concern, says Keim, are U.S. tariffs of 25 percent also added to Chinese-made lithium-ion EV batteries and battery parts.

Europe's EV manufacturers heavily rely on Asia for these products, so such a move by Brussels could drastically affect EV production within the bloc.

"Is it an example of how to deal with them for Europe?" asks Keim. "No, because we have a very very different dependence on China. There is a lot of intertwining between Chinese and European industry, especially German industry, so it could hit us much harder."

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