More than nine months have passed since the investigation into China's subsidised electric car batteries, a month since Europe imposed provisional tariffs on Chinese carmakers, and weeks since officials in Brussels and Beijing engaged in negotiations without finding amicable compromises. Today, ahead of the European Council vote scheduled for October, a confirmation of the tariffs, the solution most member states like best, is increasingly likely.

European manufacturers feel threatened by exports of China's hyped-up and cheap electric cars. A fear corroborated by the numbers. According to a study by the think tank Transport and Environment (T&E), the number of electric vehicles sold by Chinese brands across Europe rose from just 0.4 per cent in 2019 to almost 8 per cent last year. In France and Spain, almost one in three EV batteries sold in 2023 was produced in China. These are the figures that triggered Brussels' response, namely an investigation launched last September to determine whether batteries made in China benefited from illegal subsidies under World Trade Organisation rules.

Although the investigation has not yet officially ended, on 4 July, the European Commission already applied the first provisional tariffs, calibrating them according to the cooperative spirit of the Chinese companies. For four months BYD will have to pay import duties of 17.4%, 19.9% Geely and 37.6% SAIC. The same percentage is applied to all those companies that did not cooperate in the investigation.

Towards a confirmation of the tariffs

According to EU Trade Commissioner Valdis Dombrovskis, in October most member states will vote to confirm the tariffs. 'They realised that they need to protect the European car industry because the risk of damaging the continental market exists,' he revealed to the Financial Times. According to Dombrovskis the aim is not to punish China but to level the playing field.

However, some criticise Brussels' strong-arm tactics. Germany, for example, has publicly challenged the measure by defending the interests of German car manufacturers who sell a third of their cars in China. The fear of commercial retaliation from Beijing is high. While German Economics Minister Robert Hadbeck pushes for more dialogue between the parties, Berlin abstained along with 9 other countries in a July consultative poll: tariffs or no tariffs? 11 states voted in favour, only 4 voted against. Abstention means supporting the Commission's position. The votes of 15 countries representing 65% of the EU population are needed to block the measure. According to government sources gathered by Reuters, France, Italy and Spain supported the duties, while among the abstainers were Finland and Sweden, hoping for a more diplomatic solution.

While the position of Chinese Trade Minister Wang Wentao seems in favour of dialogue, Zheng Shanjie, chairman of China's National Development and Reform Commission, seems to have more intransigent thoughts. He denied accusations of drugging the market with unfair subsidies, saying that the development of China's energy industry is the result of technological and commercial advantages fostered by fierce competition. 'We will do everything to protect Chinese companies,' he said during a meeting with Hadbeck.

Italian ecobonus should do better at stimulating companies

The Ministry of Business and Made in Italy (MIMI) did not respond to our request for comment regarding the rumour about possible Italian support for the tariffs. Meanwhile, from the working table dedicated to the automotive sector on Wednesday 7 August - attended by the main representatives of the supply chain - important news emerged on the incentives front, especially in terms of electric cars.

First of all, under consideration there is the introduction of an incentive mechanism that favours production with a high content of European components and that guarantees the sustainability of production. Unofficial sources have been leaking that, in the future, green car manufacturers will have to prove that they use at least 40 per cent Made in Europe components in order to obtain subsidies. The incentive program for scrapping the most polluting vehicles, on the other hand, will be reshaped over the next few years, shifting the focus on supply and aiming for a multi-yearprogramming of resources to favour car manufacturers.

On 3 June, the 200 million euro incentives made available on the Ecobonus platform to buy electric cars were exhausted in less than nine hours. With 41% of bookings made by people with low ISEE. However, this successful incentive campaign was not followed by an increase in the production volumes of Italian factories. For Minister Adolfo Urso, the priority from now on will be to support the national supply chain and continue to support low-income families.

"The measure is good, subject to possible adjustments in the distribution of funds between one emission bracket and another to further stimulate sales of cars with very low or zero environmental impact," wrote the National Association of the Automotive Industry (ANFIA) in a statement. "The ecobonus is to be understood as a one-off intervention to kick-start certain sales dynamics, both because it is expensive to maintain for a long time and because it can not replace natural market mechanisms".

This article is also available in Italian / Questo articolo è disponibile anche in italiano

Cover image: Valdis Dombrovskis photographed by Ryan Lim © European Union, 2024