EU slaps controversial tariffs on Chinese-built EVs

The European Union has slapped additional tariffs of up to 38% on electric vehicles built in China in a response to what the EU says are unfair subsidies.

Chinese-built cars already carry a 10% tariff and the new EV-specific tariffs are in addition to this.

It means electric cars built in China and shipped to the EU are set to get more expensive. The new temporary tariffs came into force on 1 July and will remain in place for four months, ahead of a vote in November to make them permanent.

It is not just Chinese-branded electric cars that will be impacted, either – the Dacia Spring, which is built in China, is now subject to the increased tariffs, as are the Polestar 2, BMW iX3 and Tesla Model Y.

SAIC, the company behind MG, has been hit with the largest tariff of a whopping 37.6%. Remember, this is on top of the existing 10% tariff, meaning MGs sold in Europe now face an eye-watering tariff of nearly 48%.

The tariff is so steep because the EU says SAIC didn’t cooperate in its preliminary investigation.

Others Chinese car producers that didn’t cooperate also face an additional 37.6% tariff. Meanwhile, companies that did cooperate face a 20.8% tariff.

Geely, which is the company behind Volvo, Polestar, Zeekr and others, faces a 19.9% additional tariff, and BYD has a 17.4% tariff.

Surprisingly, neither BMW nor Volkswagen Group were part of the EU’s initial sample analysis, so were automatically ruled to be non-cooperating companies. This would have seen both the new BMW MINI Cooper Electric and Cupra Tavascan face the highest additional tariff of 37.6%.

The EU has since indicated it may lower China EV import tariffs for BMW and Volkswagen, to the 20.8% additional tariff of competing companies.

Will the UK impose tariffs on Chinese EVs?

UK trade secretary Jonathan Reynolds has indicated he does not plan to follow the EU’s lead on increased tariffs on Chinese EVs. Speaking at a G7 meeting earlier in July, the FT reported he stated the UK will remain "vigilant" instead.

"I am not ruling anything out but, if you have a very much export-oriented industry, the decision you take has to be the right one for that sector," he said.

The FT added the British car sector itself has not formally asked for an investigation into Chinese EV imports, something that is required for the UK to launch a probe.

In 2023, the UK exported 700,000 cars. 60% went to the EU 27 and 7% went to China.

How much will the tariffs cost?

Some have said the tariffs could add tens of thousands of pounds to the price of some imported Chinese EVs, but this is incorrect.

That’s because tariffs are added to the wholesale price of the car, not the retail price. On a car that sells for £40,000, the wholesale price could be less than half this.

A 38% tariff on a £40,000 car will still, of course, be hefty – but not nearly as expensive as some have stated.

It also means there’s more potential for vehicle importers to absorb the cost, ensuring their vehicles remain competitive.

When do the tariffs come into force?

Remarkably, the tariffs are already in force. The EU used emergency legislation to activate them right away, ahead of a full vote.

The preliminary tariffs will remain in force for four months.

Member states will have the opportunity in November to vote on whether the tariffs should be made permanent.

The European Commission has already held an ‘advisory vote’ with a dozen EU members. France, Italy and Spain supported the tariffs, while Germany, Finland and Sweden abstained.

If the final vote passes later this year, definitive duties would come into force. These are typically applicable for five years.

A binding vote will pass unless a qualified majority of 15 member countries, representing 65% of the EU population, vote against.

How will car companies get round the tariffs?

Companies that build cars in China for Europeans can get around the tariffs by switching production to the EU instead.

While you may think this isn’t as easy as it sounds, it’s something that Volvo is already doing, with the new EX30 electric SUV set to be made at its factory in Belgium from 2025.

BMW has also switched plans and is set to make the Chinese-built Mini Cooper Electric at its Oxford plant from 2026.

Chinese brands are setting up here too, with BYD confirming a new factory in Hungary, set to open in late 2025. Chery has signed a joint venture to use a factory in Barcelona. Tesla, which builds the Model Y at its factory in Berlin, could start making the Model 3 there too.

Thanks to a partnership with Stellantis, Chinese Leapmotor T03 city cars are already rolling off the lines at the Stellantis plant in Tychy, Poland.