Volkswagen Group has responded to the European Commission’s (EU) decision to impose additional tariffs of up to 38% on Chinese EVs, following preliminary results of its anti-subsidy investigation which found that prices are being distorted by Chinese state support.

SAIC VW Changsha

SAIC-VW joint venture’s Changsha branch in China

The investigation provisionally concluded that the battery EV (BEV) value chain in China benefits from “unfair subsidisation” which is “causing a threat of economic injury to EU BEV producers”. 

As a result, the commission has pre-disclosed the level of provisional tariffs it would impose on Chinese BEV imports if Chinese authorities do not come to an agreement on an effective solution. Duties will differ per carmaker, with three of the major Chinese OEMs sampled and singled out for specific tariffs. If this agreement is not reached, from July 4 the commission would apply an additional tariff of 17.4% on BYD, 20% on Geely and 38.1% on SAIC. Tesla may also receive an individually calculated duty rate when definitive tariffs are imposed.

Volkswagen Group’s joint venture with SAIC
Volkswagen Group could also find itself affected by the tariffs, as its largest joint venture in China is with SAIC, known as SAIC-VW based in Shanghai. A VW Group spokesperson told Automotive Logistics that the timing of the EU Commission’s decision is “detrimental to the current weak demand for BEV vehicles in Germany and Europe”.

The spokesperson for the OEM added that VW Group stands for an open and rules-based trade policy with free and fair trade, and open markets, but said that countervailing duties are “generally not suitable” for strengthening the competitiveness of the European automotive sector in the long term. The spokesperson said: “We reject them.”

The global group has confidence in its products and ability to innovate but said that the negative effects of the decision outweigh any potential benefits for the European, and especially the German, automotive industry.

“Europe needs a regulatory environment in which the automotive industry is strengthened in the transformation to e-mobility and climate neutrality,” the spokesperson added. “The VW Group confidently accepts the growing international competition, including from China, and sees this as an opportunity. This also benefits our customers.”

SAIC-VW was first formed in 1984 and currently offers more than 15 model families in the Chinese market under the VW and Skoda brands, with one of the largest and most complex supply chains across China, including nine manufacturing plants. SAIC-VW was among the first across the group to produce EVs, including the MEB platform, which has been in production since 2020. Last month, it was announced that Oliver Bronder, who previously led vehicle logistics for VW Group Logistics, would take responsibility across all logistics functions for SAIC-VW.

Both BYD and Geely have also been contacted for comment.

Other BEV OEMs in China which cooperated in the investigation but haven’t been sampled iwould be subject to a tariff of 21%, and those which didn’t cooperate with the investigation will be subject to a 38.1% tariff.

Next steps in the investigation
The investigation, which was initiated on 4 October 4 last year, is set to be concluded in a maximum of 13 months. Provisional countervailing duties may be published by July 4 at the latest, and definitive measures are to be imposed within four months of the imposition of the provisional duties.

The EU Commission said the sampled companies have individually received information about their own calculations and have the possibility to comment on the accuracy of the findings. If it is found that there is enough evidence to counterbalance the EU’s findings, the commission can revise its calculation in accordance with EU law.

Margaritis Schinas, vice-president of the EU Comission said the value of Chinese EVs “benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers”.

Valdis Dombrovskis, executive vice-president of the EU Commission added: “When our partners breach the rules, we will assert our rights. Today we have reached a milestone in our anti-subsidy investigation. This is based on clear evidence of our extensive investigation and in full respect of WTO rules.”

If the provisional tariffs are imposed, it could bring in more than €2 billion ($2.165 billion) a year to the EU, but it also risks starting a trade war with China that could see countermeasures against EU imports to China put in place.

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Germany, Sweden and Hungary’s governments have stated previously that they did not approve of the tariffs, with German chancellor Olaf Scholz recently stating that the customs barriers would “ultimately just make everything more expensive, and everyone poorer”.

The EU’s decision follows in the footsteps of the US government, which announced in May that it would increase import duties on EVs by more than 100% to control imports from China, effecting $18 billion-worth of imports from the country. Turkey has also just announced a 40% additional tariff on vehicle imports from China, effective from July 7, 2024. 

Similarly, in a significant protectionist policy move, Turkey has announced a 40% additional tariff on vehicle imports from China, effective from July 7, 2024. The decision aims to mitigate potential negative impacts of Chinese EVs saturating Turkey’s domestic market and bolster its national automotive industry against what is widely perceived as Chinese vehicle ‘dumping’.