China, European Union to Dialogue on EV Tariffs

Top officials from China and the European Union have revealed that the two major EV markets are holding talks on electric vehicle tariffs. Depending on how the discussions go, Chinese automakers may be spared from a series of tariffs that would have made their EVs much more expensive in Europe.

Chinese EVs were set to lose their unique affordability in the European Union after EU leaders announced that they were considering levying provisional tariffs on electric vehicle imports from China. This came months after the European Commission began investigating whether the Chinese government was artificially lowering EV prices undercutting European automakers in their home markets by pumping billions of dollars worth of subsidies into China’s EV industry.

Days prior to the EU levying provisional tariffs on Chinese EVs, the Biden administration passed a 100% tariff on electric vehicles imported from China to protect America’s automotive industry. China responded to the EU’s provisional electric vehicle tariffs by launching an antidumping investigation into pork exported from Europe. In addition, with European carmakers such as Mercedes Benz and BMW relying on the Chinese market for a significant percentage of their earnings, experts say China holds a powerful bargaining chip.

European Union leaders have now opened a dialogue with Chinese leaders to discuss the impending series of import tariffs and taxes in both regions. Even though plenty of friction remains between the EU and China, top officials said they are discussing the import taxes and are open to further negotiations. This makes it the first time leaders from China and the EU have agreed to hold negotiations since the European Union threatened to hike tariffs on Chinese electric vehicles by up to 38%.

China’s automakers produce and sell the most affordable electric vehicles on the globe, a rarity in an industry where the average EV is several thousands of dollars more expensive than similar gas-powered cars. Now that the early adopter market has mostly been fulfilled, automakers are desperate to attract the general market with more affordable prices. However, the high costs involved in building electric cars make it nigh impossible to lower EV prices without impacting profitability.

As more affordable electric cars began streaming into the EU, the European Commission said China was subsidizing its electric vehicles “unfairly” while China argued that the EU was engaging in protectionism and had breached trade rules. Both markets seem to have abandoned their antagonistic stances, and the BBC reports that China’s trade commissioner Wang Wentao and his European counterpart Valdis Dombrovskis are now engaged in “candid and constructive talks.”

EV makers such as Kandi Technologies Group Inc. (NASDAQ: KNDI) will be following the China-EU talks to see how the escalating tensions between major EV markets are toned down so that the industry can grow without additional complications resulting from geopolitical issues.

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