EU tariffs on Chinese EVs could backfire, German car bosses warn

By Nick Carey and Christina Amann

LONDON/BERLIN (Reuters) -Top executives at BMW (ETR:) and Volkswagen (ETR:) on Wednesday warned against imposing EU import duties on electric vehicles from Chinese automakers, saying it could upend the bloc’s Green Deal plan and harm automakers that import cars made in China.

The European Commission, which oversees trade policy in the 27-nation European Union, launched an investigation in October into whether fully-electric cars manufactured in China were receiving distortive subsidies and warranted extra tariffs.

“You could very quickly shoot yourself in the foot,” BMW CEO Oliver Zipse told reporters after the German premium automaker reported quarterly results.

BMW imports Chinese-made Mini EVs and the iX3 into Europe.

Like its German rivals Volkswagen and Mercedes-Benz (OTC:), BMW is heavily reliant on revenues from its Chinese business.

China is BMW’s second-largest market after Europe, accounting for nearly 32% of sales in the first quarter.

“We don’t think that our industry needs protection,” Zipse told analysts on Wednesday, adding that operating on a global basis gives major automakers an industrial advantage. “You can easily endanger that advantage by introducing import tariffs.”

Volkswagen, Europe’s biggest carmaker which also heavily relies on China, warned that potential duties generally carried a certain risk.

“There’s always some sort of retaliation,” Thomas Schaefer, CEO of the Volkswagen brand, told the FT’s Future of the Car Summit.

In March, the Commission started customs registration of Chinese EV imports, meaning they could be hit by tariffs from that point if the trade investigation concludes they are receiving unfair subsidies.

The probe is due to conclude by November, but the EU could impose provisional duties in July. Brussels should publish a summary of proposed provisional duties by June 5 and these duties would be imposed by July 4.

European Commission President Ursula von der Leyen said in Berlin on Wednesday that Europe needed to take steps to prevent China from flooding the bloc’s market with subsidised electric vehicles.

French President Emmanuel Macron and Von der Leyen urged Chinese President Xi Jinping on Monday to ensure

more balanced trade with Europe.

Zipse told analysts that BMW and other automakers have “bilateral dependencies not only on the final product, but on the component side and raw material side.”

Imposing duties could backfire as new EU CO2 emission standards that will require more EVs – that are reliant on Chinese battery materials – kick in next year.

“There will be no single car in the EU without components from China,” Zipse said.

He said that imposing tariffs would undo the EU’s industrial plan to ensure the bloc is a frontrunner in cutting carbon emissions and developing the technology required to do so.

“There is no Green Deal in Europe without resources from China,” Zipse said.