Decoding China: Beijing's delicate EV mission in Europe

China's commerce minister, Wang Wentao, wrapped up a delicate political mission to the European Union this week, as Beijing seeks to fend off, or at least amend, upcoming European import tariffs on Chinese battery electric vehicles (BEVs).

Talks on Thursday with EU Trade Commissioner Valdis Dombrovskis were dubbed as "constructive," with both sides reaffirming "political will to pursue and intensify efforts in finding a mutually agreeable solution" along with agreeing "to take a renewed look at price undertakings."

But constructive or not, the talks will have no effect on the ongoing proceedings and deadlines.

In October 2023, the European Commission launched a probe into Chinese government subsidies of BEVs, stating that "imports of new battery-powered electric passenger transport vehicles originating in the People's Republic of China are subsidized and thereby causing injury" to EU industry.

As a result, Brussels imposed "provisional countervailing duties" on Chinese electric vehicles in June ranging between 17.4% and 38.1%, depending on the manufacturer.

According to information provided by the EU, the sum was calculated on the basis of an investigation and corresponds to the amount of subsidization found in each case.

An exemption with a reduced tariff applies to Tesla. The US company produced 947,000 battery-powered electric cars at its Shanghai mega-factory in 2023, a third of which were exported.

Vote on Chinese tariffs postponed?

China has criticized the new tariffs, and said the procedure initiated under the leadership of EU Commission President Ursula von der Leyen was geopolitically motivated.

Beijing pointed out that no car manufacturer had complained to the European Commission about distorted competition, and claimed the EU measures were against the spirit of free trade and a barrier against globalization.

Since the end of August, the tariffs process has been in the third and final "definitive stage." Officially, the EU's 27 member states are due to hold a binding vote on the punitive tariffs before the end of the month, and the outcome will be valid for at least five years.

Shortly before Chinese minister Wang met with Dombrovskis, however, the US news outlet Politico reported that the vote on the introduction of punitive tariffs against China's e-cars had been postponed.

Brussels insiders said a vote on the matter is to be held before the end of October, at the latest.

Beijing seeks EU member state support to avoid tariffs

The punitive tariffs can be averted if 15 EU countries, or countries with at least 65% of the EU population, vote against them. This is a high hurdle, one that is rarely reached in Brussels.

But China is busy trying to forge a "no" alliance among EU member states. In the test vote in July, four EU countries were against and 11 abstained, including Germany. Twelve member states were in favor of the punitive tariffs, among them France, Italy and Spain.

Recently, however, Madrid indicated it was no longer in favor of the measure. This was announced by Spanish Prime Minister Pedro Sanchez during his trip to China at the beginning of September.

Sanchez called on the EU countries and the EU Commission to rethink the tariffs. "We don't need another war, in this case a trade war," said Sanchez in Beijing.

However, during Wang's visit to Italy earlier this week, Italian Foreign Minister Antonio Tajani reiterated that Rome supported Brussels' punitive tariffs, calling China "a partner" but also a "competitor."

Among 55 ongoing EU trade defense proceedings, 44 cases are directed against China.

Germany calls for political solution

In Berlin on Tuesday, Wang met with his German counterpart, Economy Minister Robert Habeck, who said a trade conflict with spiraling tariffs that ultimately harms both sides needs to be avoided at all costs.

Habeck added that Germany did "not shy away from competition with China." But, he added, "we must ensure fair competitive conditions," calling for a political solution.

While in Germany, Wang expressed disappointment that the EU had rejected a proposal from Chinese carmakers.

Talking with Wolfgang Schmidt, Chancellor Olaf Scholz's chief of staff, Wang said China would "not give up" and would "negotiate until the last minute."

"China hopes that Germany, as a core member of the EU, will take an active role and urge the European Commission to show political will and resolve the matter reasonably together with China," Wang said.

Putting pressure on the EV market?

According to the German Association for the Automobile Industry (VDA), China was the world's largest market for EVs in 2023. With 7.3 million electric cars sold, every second electric car in the world was sold there.

China has said it wants to offer European consumers inexpensive e-cars so that carbon emissions in the transport sector can be reduced quickly.

However, Asian car manufacturers do not yet have any assembly plants in Europe, and serve the EU markets exclusively through exports. The EU's special tariffs make Chinese e-cars more expensive in Europe.

To make matters worse for car dealers, the German government allowed its purchase premium for e-cars to expire in 2023 for budgetary reasons.

German sales figures have also fallen. According to the Federal Motor Transport Authority, only 27,024 new cars with battery-electric drive systems were registered in August. This was nearly 69% less than in the same period last year.

That lack of interest does not bode well for the the German government's goal to have 15 million e-cars on German roads by 2030. As of January 1, 2024, there were only 1.4 million.

This article was originally written in German.