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Beijing — China on Thursday slammed EU tariffs on its electric vehicles (EVs) as protectionist behaviour and said it hoped the European bloc would correct its “wrong practices” and handle trade frictions through dialogue.

The reaction from China and others embroiled in the dispute, including European and Chinese carmakers, points to clear opposition to the EU decision and an eagerness to de-escalate the situation.

Industry insiders say Europe and China have reasons for wanting to strike a deal in the months ahead to avoid the addition of billions of dollars in new costs for Chinese electric carmakers, as the EU process allows for review.

China said it would take “all necessary measures” to safeguard its interests after the European Commission announced on Wednesday it would impose extra duties of up to 38.1% on imported Chinese electric cars from 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.

Brussels seemed to have left some room for the two sides to continue their consultations to find a solution and avoid the worst scenario, state news agency Xinhua said in a commentary. “It is hoped the EU will make some serious reconsideration and stop going further in the wrong direction,” it said.

Beijing has rejected the EU and US argument that China’s EV industry is running at a degree of overcapacity that threatens overseas vehicle makers through subsidised exports. It says tariffs will slow the uptake of EVs, endanger climate change goals and push costs higher for consumers.

The EU’s move comes less than a month after Washington revealed plans to quadruple duties for Chinese EVs to 100%.

Brussels said it also would combat Chinese subsidies with additional tariffs ranging from 17.4% for BYD to 38.1% for SAIC, on top of the standard 10% car duty. That takes the highest overall rate to nearly 50%.

State-owned SAIC, which has joint ventures with Volkswagen and General Motors, said on Thursday it was deeply concerned by the tariffs. SAIC has been China’s biggest vehicle maker for nearly two decades but its sales have come under pressure and it has been working to reduce headcount, Reuters has reported.

Geely on Thursday expressed “great disappointment” at the move, vowing “all necessary measures” to safeguard its legitimate rights.

The EU has made clear that European regulators would view loans from Chinese state-owned banks and government ownership as subsidies subject to additional tariffs.

In a sign China has little intention of dialling back its support, the government of the city of Shenzhen on Thursday announced measures to encourage the integration of new-energy vehicles with the electric grid, including subsidies of up to 15-million yuan ($2m) for each vehicle-to-grid project.

China’s automotive industry, a mix of state-owned and private firms, has cost advantages over foreign competitors in part because of government subsidies and the nation’s dominance of battery-minerals refining, analysts say.

But the high level of competition in China’s EV market, the world’s largest, has also driven companies to innovate in ways that have brought down costs.

The EU provisional duties are set to apply by July 4, with the investigation due to continue until November 2, when definitive duties, typically for five years, could be imposed.

Chinese EV maker stocks mostly shrugged off the news, which was expected. The Hong Kong-listed shares of BYD closed up 5.8%.

“The EU tariff hike result is slightly positive for BYD versus our previous tariff expectation of 30%, which improves BYD’s export growth visibility into the second and third quarter of 2024,” Citi said in a research note.

Geely Auto rose 1.7% and Leap Motor gained 2.7% while Great Wall Motor’s Hong Kong shares eased 1.2%. In Shanghai, shares of SAIC Motor fell 1.6%.

Joe Mazur, senior analyst at research consultancy Trivium China, said Chinese EV makers would be forced to pass along some of the cost increases to consumers. “But it’s by no means a death blow to the Chinese EV industry in Europe,” he said.

Tesla said on Thursday it expected to increase its Model 3 prices because of the import duties on its Chinese-made EVs.

Chinese vehicle makers have charged more for exports than they have in their home market, offering some protection from the tariffs. BYD, for example, charges more than double — sometimes nearly triple — the price it gets for three key models in China.

While European carmakers are being challenged by an influx of lower-cost EVs from Chinese rivals, there is virtually no support for tariffs from the continent’s automotive industry. Some of the biggest opponents include BMW, Volkswagen, Stellantis and Mercedes-Benz.

German vehicle makers, in particular, are heavily dependent on sales in China and fear retribution from Beijing. European manufacturers also import their own Chinese-made vehicles.

Shares in some of Europe’s biggest carmakers fell for a second day on Thursday due to fears of Chinese retaliation. Volvo Car, majority-owned by Geely, was the biggest faller, down more than 6%.

Concerns over retaliation spread beyond the automotive sector, knocking shares in cognac maker Remy Cointreau. A trade body for French cognac producers expressed deep concern on Wednesday over the EU’s tariff decision.

In January, China launched an anti-dumping investigation on EU brandy imports, in a move seen as a response to the widening trade disputes between Beijing and Brussels.

Global food companies from dairy producers to pork exporters are also on high alert for potential retaliation from China.


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