TMTPost -- Head of German auto giants warn that the European Union could only hurt its industry and green transition  if tariffs on Chinese electric vehicles (EVs) were imposed.

Credit：BMW

"You could very quickly shoot yourself in the foot," Oliver Zipse, chairman and CEO of BMW Group, issued an warning against tariffs after the company reported quarterly results. The leader claimed fears about an onslaught of Chinese EV arriving on the Europe were overblown and that imposing restrictions completely contradicted free trade.

China, as BMW's second-largest market after Europe, made up nearly 32% of sales in the first quarter. “And as soon as [Chinese car makers] begin to gain a foothold in Europe, we’re getting worried, although they’re not even fully here yet,” Zipse said.“From a Chinese point of view, this is not comprehensible at all. And we understand that this is not comprehensible.”

Zipse warned that getting into a tit-for-tat trade war would “harm German industry much more than the other way around”. He insisted that Europe’s currently being swamped with Chinese products is certainly not true, and European car makers already had good market access in China. He said BMW was against introducing customs duties and warned: “Doing anything like that on a permanent basis, it will harm the German industry much more than the other way around.”

Zipse said BMW doesn’t think the European auto industry needs protection,instead, one can easily endanger the industrial advantage that major automakers gain through worldwide operation by introducing import tariffs. He pointed out BMW and other automakers are not only dependent on the final product but on the component and raw material from China. He said that imposing tariffs would undo the EU's industrial plan to become a frontrunner in reducing carbon emissions and developing technology required to do so. "There is no Green Deal in Europe without resources from China," Zipse said.

The top executive of Volkswagen Group also cautioned that tariffs generally carried retaliation risk. "There's always some sort of retaliation," said Thomas Schaefer, CEO of the Volkswagen brand.

Warnings from two German automakers came as increasing signs of EU’s looming protectionist action emerged. 

The EU officially launched an investigation into EVs from China on October 4 2023.The European Commission is set to decide whether to impose tariffs more than the current 10% standard rate for cars within 13 months once the investigation started. The possible tariff will affect not just Chinese automakers but also foreign brands that produce vehicles there such as Tesla, Renault and BMW.

The probe may result in tariffs close to the 27.5% level already imposed by the U.S. on Chinese EVs, Bloomberg reported last September following the European Commission President Ursula von der Leyenan unveiled the EV probe plan. Global markets “are now flooded with cheaper Chinese electric cars”, and their price is “kept artificially low by huge state subsidies”, which is distorting European market, von der Leyen said in her state of the union stress to the European parliament on September 13. Head of the executive arm said Europe is open for competition, not for a race to the bottom.

In a document published in March, the European Commission said it has found “sufficient evidence” tending to show that imports of battery electric vehicles (BEVs) originating in China are being subsidized.It also said it had evidence showing that a substantial increase in BEV imports from China benefiting from subsidies. 

The EU’s main executive body warned there is a risk that an increasing number of EU producers will suffer from diminishing sales and reduced production levels if imports continue at the current increased levels at allegedly subsidized prices from China. It said it is clear that that risk will negatively impact employment and the overall performance of EU producers, which would constitute injury which would be difficult to repair.  

These findings made the EU more likely to take remedies include tariffs to protect local EV manufacturers. The  European Commission decided to start customs registrations of Chinese EV imports in March. It said it could not could not estimate the amount of any potential retroactive tariffs. The retroactive tariffs, if possible, result from an anti-subsidy probe last year and could be announced by July though the probe is due to be concluded by November.  

Following her meeting with Chinese President Xi Jinping on Monday, von der Leyen said the EU gets ready for deployment of all the tools to defend its economies if China fails to offer fair access to its markets.  “For trade to be fair, access to each other’s market also needs to be reciprocal,” von der Leyen said. “We discussed how to make real progress on market access. I remain confident that more progress can be achieved. At the same time, we stand ready to make full use of our trade defense instruments if this is necessary.” She was reported to add that heavily subsidized Chinese products like electric vehicles (EVs) and steel are flooding Europe, and said the world cannot absorb China’s surplus production.