China's dominance in the electric vehicle market scrutinized
Beijing has lodged complaints with the World Trade Organisation over the EU's recently imposed tariffs on Chinese electric vehicles (EVs). The move comes as China, the world's largest market for EVs, continues to experience an explosive growth in the sector.
According to the International Energy Agency, approximately 10.1 million electric vehicles, including hybrids, will be sold in China this year – an eight-fold increase from 2021. The boom in the Chinese EV market is largely due to years of government subsidies and tax breaks for both producers and consumers, as well as major strategic investment in the development of technology and infrastructure.
In July 2022, retail sales of "new-energy" cars (electric vehicles and hybrids) in China surpassed those of internal combustion engine cars for the first time, making up 51.1% of all sales. This shift is significant, as sales of conventional cars in China fell 26% to 840,000 in the same month.
The EU's tariffs, which impose a 10% duty on Chinese EVs, will now be increased by 17%-38%, depending on the manufacturer's compliance with an anti-subsidy investigation. The highest tariffs have been imposed on Chinese electric cars, ranging from 7.8% for Tesla to 35.3% for Shanghai-based SAIC and non-cooperating companies. These tariffs apply uniformly across the EU rather than being set individually by member countries.
European brands like Mercedes and Renault, which export EVs made in China, will also pay additional tariffs. The Financial Times argues that the EU's action is not justified, as it may delay the decarbonisation of their economies and could lead to a trade war with China.
Interestingly, the UK is refraining from joining the tariff wars, according to the Financial Times. Despite the EU's actions, the International Energy Agency forecasts that global EV sales will grow to 20 million in 2025 and then double to 40 million by 2030, accounting for 30% of all car sales by that point.
The marketing of electric vehicles in China often emphasizes cost and the range of available products, rather than environmental benefits. This focus on affordability and variety may contribute to the rapid growth of the EV market in China.
The US has also raised its import duty on Chinese EVs, with the rate now standing at 100%. The EU's tariffs on Chinese EVs are currently provisional while the investigation into Chinese state support for EV makers continues.
As the global EV market continues to grow, it remains to be seen how these tariffs will impact the industry and relations between nations. The EU's problem, according to the Financial Times, is "not too many Chinese imports but rather too few".
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