Beijing said on Thursday that it hoped the European Union would change its “wrong practices” and resolve trade disputes via negotiation. Beijing denounced EU tariffs on Chinese electric vehicles as protectionist conduct.

China’s response, along with those of other parties involved in the issue, such as Chinese and European automakers, indicates a strong disapproval of the EU decision and a desire to defuse the situation.

Industry sources claim that since the EU procedure permits review, both Europe and China have good motivation to reach an agreement in the next months to prevent adding billions of dollars in extra expenses for Chinese electric vehicle manufacturers.

China declared that it will take “all necessary measures” to protect its interests following the European Commission’s announcement on Wednesday that imports of Chinese electric cars would be subject to additional taxes of up to 38.1% starting in July.

“We urge the EU to listen carefully to the objective and rational voices from all walks of life, immediately correct its wrong practices, stop politicising economic and trade issues, and properly handle economic and trade frictions through dialogue and consultation,” Chinese foreign ministry spokesperson Lin Jian said at a regular press briefing.

According to a commentary by official news agency Xinhua, Brussels seems to have given the two parties some leeway to continue their negotiations in an effort to find a settlement and prevent the worst case situation.

“It is hoped the EU will make some serious reconsideration and stop going further in the wrong direction,” added the statement.

Beijing has dismissed the claim made by the US and EU that China’s electric vehicle (EV) sector is operating at a level of overcapacity that puts foreign automakers at risk of exporting subsidised vehicles. It claims tariffs will increase consumer costs, jeopardise efforts to combat climate change, and hinder the use of electric vehicles.

Less than a month ago, Washington announced plans to double tariffs for Chinese electric vehicles to 100%. This is when the EU took action.

Brussels declared that, in addition to the regular 10% auto charge, it will counter Chinese subsidies with extra tariffs ranging from 17.4% for BYD to 38.1% for SAIC. This brings the highest rate to almost 50% overall.

China’s largest carmaker, SAIC, a state-owned company that depends on joint ventures with General Motors and Volkswagen, expressed its great worry about the levies on Thursday.

For almost 20 years, SAIC has been the largest carmaker in China, but according to Reuters, its sales have been declining, and it has been trying to cut staff.

In response to the decision, Geely voiced “great disappointment” on Thursday and promised to take “all necessary measures” to protect its legal rights.

The European Union has made it plain that loans from Chinese state-owned banks and government ownership would be treated as subsidies by European authorities and will be subject to extra taxes.

The Shenzhen government on Thursday announced measures to encourage the integration of new energy vehicles with the electric grid, including subsidies of up to 15 million yuan ($2 million) for each vehicle-to-grid project, suggesting that China has little intention of reducing its support.

China’s car sector, which consists of both state-owned and private companies, has cost advantages over international rivals, according to experts, in part due to government subsidies and the country’s supremacy in the refining of battery materials.

However, the fierce rivalry in the world’s largest EV market, China, has also pushed businesses to develop in ways that have reduced prices.

The EU provisional duties are scheduled to take effect on July 4; the investigation is expected to last until November 2, at which point definitive duties, which usually last for five years, may be imposed.

As was to be expected, stocks of Chinese EV manufacturers mostly ignored the news. BYD’s Hong Kong-listed shares ended the day 5.8% higher.

“The EU tariff hike result is slightly positive for BYD vs our previous tariff expectation of 30%, which improves BYD’s export growth visibility into 2Q/3Q24,” a research note from Citi stated.

Great Wall Motor’s Hong Kong shares decreased 1.2%, while Geely Auto and Leap Motor increased 1.7% and 2.7%, respectively. Shares of SAIC Motor dropped 1.6% in Shanghai.

Chinese electric vehicle manufacturers would have to pass on part of the cost hikes to customers, according to Joe Mazur, senior analyst at research consultancy Trivium China.

“But it’s by no means a death blow to the Chinese EV industry in Europe,” he stated.

Due to import taxes on its electric vehicles (EVs) built in China, Tesla said on Thursday that it plans to raise the price of its Model 3.

In order to partially evade the tariffs, Chinese automakers have raised their export prices relative to their domestic prices.

For instance, BYD occasionally costs over three times as much as it does in China for three important models.

The European car industry essentially opposes tariffs, despite the fact that Chinese competitors are supplying cheaper electric vehicles (EVs) that pose a threat to European automakers.

The major manufacturers in Europe, including Mercedes Benz, BMW, Volkswagen, and Stellantis, are some of the main rivals.

Particularly German manufacturers are afraid of Beijing’s retaliation since they rely so much on sales in China. Additionally, European automakers import their own cars built in China.

Fears of Chinese reprisal caused shares in several of Europe’s largest automakers, who get a large percentage of their sales from China, to drop for a second day on Thursday.

Geely’s majority-owned Volvo Car was the largest decliner, falling more than 6%.

A fear of reprisals extended outside the car industry, causing shares of Remy Cointreau, a manufacturer of cognac, to drop. A trade association representing French producers of cognac voiced grave concerns on Wednesday on the EU’s tariff decision.

China began an anti-dumping probe into EU brandy imports in January; this action was interpreted as a reaction to the growing trade tensions between Beijing and Brussels.

Global food producers, including those who export pigs and make dairy products, are likewise extremely cautious in case China retaliates.

(Adapted from ThePrint.in)

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