German carmakers warn EU against tariffs on cars made in China

Frankfurt — Germany’s top carmakers on Friday urged Brussels and Beijing to avert looming tariffs on imports of China-made electric vehicles through a negotiated deal, highlighting fears over what an escalating trade conflict will mean for business.

Earlier, the European Commission received enough support from EU member states to implement tariffs in a long-awaited vote pitting China-dependent economies such as Germany against member states with less exposure.

The proposed duties on China-built EVs of up to 45% would cost carmakers billions of extra dollars to bring cars into the bloc and are set to be imposed from November for five years.

The European Commission, which oversees the bloc’s trade policy, has said it would counter what it sees as unfair Chinese subsidies after a year-long anti-subsidy investigation, but it also said on Friday it would continue talks with Beijing.

A possible compromise could be to set minimum sales prices.

In a pivotal vote on Friday, 10 EU members backed tariffs and five voted against, with 12 abstentions, EU sources said.

“Today’s vote is a fatal signal for the European automotive industry. What is needed now is a quick settlement between the EU Commission and China to prevent a trade conflict from which no-one gains,” BMW CEO Oliver Zipse said.

Germany voted against the tariffs at Friday’s meeting, seeking to keep good business relations with China, the world’s biggest car market.

“The fact that Germany voted against the tariffs is an important signal and increases the chances for a negotiated settlement,” Zipse said.

German carmakers would be most exposed to potential countermeasures as trade data shows almost a third of their 2023 sales came from China. And while most vehicles sold in China are made locally, many top-end models are still imported from Germany.

“A trade conflict only knows losers,” said Hildegard Mueller, president of Germany’s car lobby, VDA.

Mercedes-Benz, which counts China’s Beijing Automotive Group and Geely chair Li Shufu as its two top shareholders, said on Friday the tariffs were a “mistake”, urging the European Commission to delay their implementation to allow further talks about a deal.

Volkswagen, Europe’s top carmaker and majority owner of Porsche, also called on both sides to find a “political solution”, adding that tariffs would not make Europe’s car sector more competitive.

The company said a deal was still possible until the decision was officially implemented at the end of October.

The EU’s stance towards Beijing has hardened in the last five years. It views China as a potential partner in some issues, but also as a competitor and a systemic rival.

The Commission says China’s spare production capacity of three million EVs per year, which needed to be exported, is twice the size of the EU market. Given 100% tariffs in the US and Canada, the most obvious outlet for those EVs is Europe.

Reuters