Ritika Janiya
The European Union has decided to impose a 9% tariff on Tesla’s cars made in China, following a big investigation into China’s “unfair” subsidies for electric vehicles (EVs). This move comes after EU officials found that Tesla benefited from Chinese government help, such as cheap batteries and land. The new tariff will start by the end of October.
The European Union (EU) has started a major investigation into how China is helping its electric vehicle (EV) makers in ways that the EU believes are unfair. This investigation has led to a new tariff, or tax, on electric cars made by Tesla in China. Here’s what you need to know about this situation.
Tesla’s New 9% Tariff
The EU has announced that Tesla will face a 9% tariff on its electric cars made in China and sold in the EU. This is a big deal because it’s much lower than the tariffs other companies might face. For example, companies that didn’t cooperate with the EU investigation could end up with tariffs as high as 36.3%.
Tesla, which is based in California, asked to be treated differently during the EU’s investigation. The EU agreed, and Tesla’s tariff is much lower than the 21.3% average tariff that other companies might face. However, it’s important to remember that this 9% tariff is in addition to the existing 10% duty on Chinese EVs.
Why Is This Happening?
EU officials have been looking into how China supports its electric vehicle industry. They found that China has been giving a lot of help to its EV companies. This includes providing below-cost batteries, cheap land, and grants to help with exporting cars. For example, Tesla has received around $426 million in support for its Shanghai factory.
In June, EU officials visited Tesla’s Shanghai operations to check how much support Tesla was getting from China. They found that Tesla did benefit from these subsidies, but not as much as China’s biggest EV maker, BYD. BYD received a huge $3.7 billion in aid, making it the biggest beneficiary of Chinese government support.
What About Other Companies?
The EU has also set new tariff rates for other Chinese EV makers. BYD, which competes with Tesla for the top spot in global EV production, will face a 17% tariff. Geely, another major Chinese car company, will have a 19.3% tariff, while SAIC will face a 36.3% tariff. These rates have been adjusted slightly down from earlier proposals, but they could change again.
Timing and Impact
The new tariffs are expected to start by October 31, 2024, but they still need approval from EU member states. The EU has decided that companies will not have to pay these tariffs until they officially come into effect. This decision was made because the EU believes that European car manufacturers are facing a “threat of injury” rather than actual harm. This means that while there is a risk of harm to European carmakers, no factories have closed or jobs been lost yet.
Concerns and Future Steps
An EU official has warned that if nothing is done, the growth of subsidized Chinese EV exports could soon hurt EU car manufacturers. They said the EU’s rules allow them to take action before the damage becomes severe, such as factory closures or job losses.
According to the Kiel Institute for the World Economy, China’s support for its EV industry amounted to about $5.6 billion in 2022. This support is mainly through direct payments to manufacturers, which were phased out last year. The Soapbox website, which looks at trade data, reported that the EU accounted for 45% of the total value of Chinese EV exports between June 2020 and June 2024.
Trade Data Insights
Customs data shows that there was a sharp increase in exports of Chinese EVs in April, right before the EU was expected to introduce these new tariffs. This increase in exports was also matched by a rise in the number of Chinese EVs registered in the EU. However, this spike didn’t last, and the number of imports dropped after May.
The EU’s decision to impose a 9% tariff on Tesla’s Chinese-made cars is part of a broader investigation into how China’s subsidies might be affecting European carmakers. While Tesla is getting a relatively lower tariff, other Chinese companies are facing higher rates. This move is intended to level the playing field and protect European jobs and factories from unfair competition.
