Linkedin
Facebook
Email
more
The European Commission has taken further steps in its ongoing anti-subsidy investigation regarding imports of battery vehicles (BEVs) from China. The investigation aimed to determine whether BEV value chains in China benefit from illegal subsidization and whether this causes economic disadvantages to EU BEV producers. On the 20th of August, the Commission concluded that both were true and published its draft decision to impose 5-year definitive countervailing duties on these imports. The conclusion of the investigation is still pending during the provisional stage, and parties may provide feedback. This investigation was raised due to the influx of low-priced BEVs from China, which is part of the EU’s strategy to protect its automotive industry from unfair trade practices. Therefore, this article provides an overview of the Commission’s findings, their implications on the EU automotive industry, the Chinese response, and the next steps in this trade defense procedure.
This article was written by Lorena Velo ([email protected]) and Iman Zalinyan ([email protected]). Lorena and Iman are part of RSM Netherlands Business Consulting Services, with a strong focus on International Trade matters.
Background
The investigation was first launched on the 4th of October 2023, after the Commission’s president, Ursula von der Leyen, expressed concerns about the rapid increase of low-price exports of electric vehicles from China to the EU. Preliminary findings were published and led to the provisional countervailing duties taking effect on July 5th 2024. The investigation aligns with the strict legal procedures of the EU and WTO rules, where all affected parties, including the Chinese government, have the opportunity to present their comments, arguments, and evidence.
Key Findings
The main developments in the disclosure of the draft definitive findings, which are still subject to change based on substantiated comments by interested parties, are as follows:
There is a slight adjustment to the proposed duty rates for Chinese exporters:
- BYD: 17,0%
- Geely: 19,3%
- SAIC: 36,3%
- Other cooperating companies: 21,3%
- All other non-cooperating companies: 36,3%;
- Tesla will be granted a lower individual rate of 9%, which is lower than the anticipated 20.8%
- The possibility for several Chinese exporters and certain joint ventures with EU producers, which did not yet export at the time of the investigation period, to benefit from the lower duty rates
- The Commission’ decided not to collect countervailing duties retroactively.
The draft definitive measures pose both challenges and opportunities for the European automotive industry. On the one hand, imposing countervailing duties could help mitigate competitive pressures EU manufacturers face and support long-term sustainability. On the other hand, the investigation may affect trade relations with China, a key player in the BEV market. BYD's tariff was reduced from 17.4% to 17%, Geely from 19.9% to 19.3%, and SAIC from 37.6% to 36.3%.
However, the trade dispute extends beyond the automotive sector. China responded to the EU’s tariffs on imported electric vehicles by initiating an anti-subsidy investigation into dairy products imported from the EU. This move is seen as a political payback. It follows earlier Chinese investigations into EU port imports (announced on June 17 and worth nearly €3 billion last year) and brandies (on January 5 and worth €1.6 billion). The latter impacts France the most, as it has also been the leading advocate of the Commission’s EV probe and supplies 99% of the EU’s brandy exports to China.
In contrast, European companies can now be more incentivized to invest in the production and innovation of electric vehicles. However, these measures could lead to higher prices as potential countermeasures from China impact other sectors such as aviation and agriculture.
Forward-Thinking
This investigation extends beyond trade considerations by encompassing sustainability concerns across the EU’s automotive industry. Therefore, the investigation's findings may have implications for the future of the EU-China trade relationship in the context of green transition. Parties can request hearings with the Commission and provide comments within ten days. After implementing the comments, Member States will vote on the decision. This vote will be decisive, with the final measures expected to be published in the Official Journal by October 30, 2024, at the latest. The measures are set to remain in force for five years with the possibility of extension, which indicates the EU's long-term goal of restoring distortions of competition within the EU's internal market caused by foreign subsidies.
RSM is a thought leader in the field of International Trade and Strategy Consulting. We offer frequent insights through training and sharing of thought leadership that is based on a detailed knowledge of regulatory obligations and practical applications in working with our customers. If you want to know more, please reach out to one of our consultants.