Hungary hopes to ease tensions as it reacts to EU tariffs on Chinese EVs

Hungary is expected to try to ease EU-China tensions over new tariffs on Chinese electric vehicles when it takes over the European Union presidency in July.

The Hungarian government - which enjoys closer relations with Beijing than most of its European counterparts - is expected to present a plan it claims will enhance the global competitiveness of Europe's EV industry.

The European Commission last week announced provisional additional duties on Chinese Electric vehicles citing levels of state support for the industry.

The EU argues that tariffs are necessary to protect its domestic car makers. However, there is disagreement over whether this is the right path for the bloc.

"Protectionism instead of cooperation is not the right way to go," said Peto Erno, president of the Hungarian-Chinese Chamber of Commerce.

Starting in July, the EU's additional tariffs on some Chinese electric vehicle brands could reach up to 38.1 percent. To avoid these additional duties, analysts say Chinese automakers could follow the lead of BYD, which is constructing its first European EV manufacturing plant in Hungary. However, this strategy is not straightforward.

"According to the EU customs regulation, a product is EU made if the components are at least 52 percent of the total product, so if a Chinese company decides to produce in Europe, they must take care of this regulation," Erno added.

Chinese EV makers currently have an 8 percent share of the EU market, up from under 1 percent in 2019, and this could rise to 15 percent by next year. Analysts say competitive pricing have won over new European buyers looking for a greener alternative to gasoline.

"These kinds of tariffs have never helped in the past to develop the industries that they aim to protect, so in my opinion, it will just slow down the development of the European firms," said Tibor Antaloczy, founder and editor-in-chief of Villanyautosok, Hungary's leading EV magazine.

Antaloczy noted that Chinese EVs have outperformed European-made electric vehicles in various aspects, appealing strongly to European buyers. "Mostly price and new designs are what these cars bring to the market, and the availability of the cars, very often they are available right on the spot," he said.

There is a lot at stake. In 2023, China and the EU maintained their status as each other's second-largest trading partners, with combined trade reaching $783 billion.

Hungary's government has criticized the EU tariffs on Chinese electric vehicles, advocating for cooperation and free competition. On July 1, Hungary is set to take over the EU rotating presidency and to introduce an action plan to accelerate EV adoption in Europe. The plan includes a new EU incentive program to boost electric vehicle adoption among consumers and new standards to enhance the competitiveness of European EV makers.

"During this presidency, maybe we can tell everyone what is the main focus and idea of the Hungarian government; we want connectivity, we want to throw away this kind of sanctioning policy because this is not good for anybody," said Levente Horvath, founding director of the Eurasia Center and former consul general of Hungary in Shanghai.

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