EU Tariff Fallout: China Warns of WTO Suit, Tesla to Hike Prices

Beijing has warned it “reserves the right” to file lawsuits in the World Trade Organization (WTO) against new import tariffs implemented by Europe on Chinese electric vehicles makers.

China’s Ministry of Commerce said the added tariffs of as much as 38% on Chinese electric vehicles were “blatant protectionism” and violate WTO rules, according to a report by Chinese state-backed newspaper Xinhua.

The ministry’s spokesperson He Yadong also rejected findings of the European Commission’s investigation into benefits of state subsidies for Chinese electric vehicles — which formed the bedrock of EU’s new tariffs.

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The findings by the European side in its pre-disclosure lack both a factual and a legal basis, He said at a press briefing on Thursday.

He added that EU’s new levies “undermine the legitimate rights and interests of China’s EV industry.”

They also “distort global automotive industrial and supply chains, including those in the EU,” the Xinhua report quoted He as saying.

The EU’s anti-subsidy investigation into Chinese EVs is its highest-profile case in years. It launched the probe under its newly-passed Foreign Subsidies Regulation, which is designed to curb foreign companies that operate within the bloc and receive distortive subsidies.

China has been the clear focus of the law.

The bloc’s recent report on state-led distortions in the Chinese economy has also opened the door for anti-dumping complaints from EU chip or clean-tech producers.

Even so, the tariffs have not been well-received across the region.

German car producers, which export some 30% of their models to China, have been most critical of the tariffs. They have also consistently sounded fears of possible retaliatory tariffs being imposed by Beijing.

Meanwhile, European countries such as Norway, Hungary and Sweden have also opposed the tariffs.

Industry insiders say the tariffs are unlikely to stop the flood of Chinese electric vehicles into Europe, with carmakers likely to simply pass on the higher costs of the new levies to customers.

Tesla may raise price of China-made cars

In keeping with that view, Tesla called on its prospective European buyers to place purchase orders in June as it was expecting prices to go up from July.

“We’re anticipating a requirement for us to increase pricing for Model 3 vehicles as of 1 July 2024,” said a message displayed on Tesla’s website for countries including Germany, France, Ireland, Belgium and Hungary.

“This is due to additional import duties likely to be imposed on electric vehicles manufactured in China and sold in the EU.”

The message did not specify the size of the expected price increase.

Tesla’s plans underscores concerns around the efficacy of the tariff hikes. The Elon Musk-led carmaker is considering hiking prices even though it would be subject to a lower tariff of 21% as it had cooperated with the European Commission’s investigation.

Tesla exports Model 3 cars from Shanghai to Europe, and the car’s pre-tariff entry price currently stands at 40,990 euros ($44,262).

That is far-higher than the likely entry price of a cheaper Chinese rival, such as the European version of BYD’s Seagull. In May, BYD’s managing director Michael Shu said the car would cost less than 20,000 euros ($21,550) in Europe.

That’s despite selling the car at an at least $10,000 premium in Europe, as compared to China, which suggests EU tariffs are unlikely to cut into the company’s profit margins either.

Vishakha Saxena, with Reuters

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]