Clock ticking on new EU tariffs for Chinese EVs

The clock is ticking on the European Union (EU) introducing heavy tariffs on Chinese-made Electric Vehicles (EVs) entering the 27-nation bloc.

After a vote earlier this month that was far from unanimous, with ten in favour, five against and 12 abstentions, the EU is set to impose tariffs that will run as high as 45 percent for some manufacturers. These will kick in at the start of next month and run for the next five years.

One thing about the EU in these cases is that nothing is over until the very last minute and even then, as may happen in this case, talks about taking an alternate route to tariffs may still be open.

For now, talks on finding a solution other than Brussels introducing tariffs on Chinese EVs and Beijing countering with its own tariffs on products coming from Europe to China are in full swing.

Meetings are happening at the highest level, with Chinese Premier Li Qiang and EU Council President Charles Michel meeting on the sidelines of the ASEAN summit in Laos. Li urged the EU institutions to formulate an "objective and rational" policy on China.

The EU Commission says the tariffs are necessary because Chinese Government subsidies for the EV industry allow manufacturers to produce and sell EVs far cheaper than those made in Europe and are undercutting the EU EV industry.

China argue they are doing nothing that European and U.S. carmakers haven't done in the past and have pointed to EU subsidies on exports such as meat, dairy and brandy.

One solution that has been floated is a guaranteed minimum price for an EV sold in the EU. However, this was dismissed by the EU Commission.

Despite that, the idea is still not off the table. The Europeans will want the cap set higher as the current average price for a battery-powered car in the EU is 66,000 euros ($72,261).

If a solution is not found by October 31, then the tariffs will come into force. China has already announced tariffs as high as 39 per cent to be levied on brandy coming into the country from the EU.

France, which voted in favour of tariffs, is responsible for 99 per cent of the EU's brandy exports to China - an industry that was worth $1.85 billion last year. The big concern in Germany, which voted against the China tariffs, is that China is studying measures to raise tariffs on imported large-engine fuel vehicles.

This would impact major EU manufacturers like Mercedes, BMW and Volkswagen, for whom China makes up 40 per cent of the projected sales. The export of cars and car parts from Germany to China was valued at just over $29bn last year.

The auto industry represents as much as ten per cent of German economic output and employs five per cent of the national workforce. A reciprocation from China in tariffs on the auto industry could have huge ramifications for the German economy.

German car manufacturers like Mercedes have stated publicly they hope a deal will be reached, as have political leaders such as German economy minister and vice-chancellor Robert Habeck.

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