European automakers find themselves at loggerheads with the European Union (EU) over the recent imposition of tariffs on Chinese electric vehicles (EVs).
Mercedes Benz AG criticized the move as a “mistake,” emphasizing how punitive tariffs can erode the long-term competitiveness of the industry. Simultaneously, BMW AG lamented the decision as a “fatal sign” for Europe’s auto sector, according to Reuters.
Volkswagen Group echoed these sentiments, denouncing the duties as a misguided approach that fails to enhance the European automotive industry’s competitiveness.
Despite the discord, European car manufacturers saw a surge in stock prices post the announcement, with Mercedes-Benz (OTC:MBGAF) and BMW (OTC:BMWKY) emerging as the top performers, witnessing respective increases of 1.06% and 2.04%.
EU Votes For Tariffs Against European Automakers
The EU recently deliberated and passed definitive tariffs of up to 45% on battery electric vehicles (BEVs) manufactured in China.
The European Commission’s proposal for imposing countervailing duties on Chinese BEVs garnered support from the EU Member States, ensuring the adoption of the tariffs.
Commenting on the tariffs, Nils Redeker, Deputy Director of Jacques Delors Institute, lauded the EU for flexing its strategic trade muscles when necessary, emphasizing the economic rationale behind the decision.
Furthermore, the EU pledged to engage in ongoing dialogues with China to seek resolution while underscoring the need for a comprehensive solution that addresses the subsidy-related issues identified by the Commission’s investigation, ensuring full compliance with WTO regulations.
European Automakers Opposed Tariffs Before EU Vote
Prior to the vote, last-minute negotiations aimed at averting the tariffs faltered, culminating in the imposition of provisional tariffs on China’s EVs by the European Commission in July. This move came despite prior warnings from Beijing regarding retaliatory actions.
German titans Mercedes-Benz and BMW had implored Berlin to veto the tariffs to prevent a rift with their vital market in China.
European automakers have grappled with sluggish global demand and specific challenges in pivotal markets like China and the United States. Notably, Germany has witnessed a notable decline in its auto exports to China over the past half-decade, reflecting heightened competition from domestic Chinese automakers.
Swedish automaker Volvo Cars reaffirmed its commitment to localized production, underlining its long-standing strategy of manufacturing vehicles where they are sold, consequently injecting substantial long-term investments into Europe.
European Nations Split On Tariffs
The imposition of tariffs witnessed varying stances among EU member states, with Spain urging a reevaluation of the duties to align with Germany’s position, contrasting with France’s endorsement.
Notably, the EU’s decision underscored the divergent perspectives within Europe concerning member states’ trade relationships with China, a pivotal export hub for the bloc.
A divided consensus emerged, as ten EU member states favored the tariffs, twelve abstained, and five opposed the proposition, with Germany notably among the dissenters. Spain opted to abstain from the voting process.
Lucas Guttenberg, Bertelsmann Stiftung Senior Advisor, highlighted Germany’s influential dissent as emblematic of the exigency for a cohesive industrial strategy within the EU, as underscored by former European Central Bank President Mario Draghi’s recent competitiveness report.
German Vote Against Tariffs Could Hurt Scholz
The backlash against the tariffs could reverberate against German Chancellor Olaf Scholz, with the contentious decision potentially undermining Germany’s broad industrial interests.
Despite recently navigating electoral challenges in Brandenburg, Scholz faces escalating criticism over the perceived capitulation to lobby pressures from Beijing, a move that resonates as a misstep both industrially and geopolitically, as opined by Reinhard Bütikofer, a former leader of Germany’s Green Party.
The EU is poised to unveil the implementing regulation and investigation findings regarding China’s subsidization of the industry by the end of October.
Disclaimer: Any opinions expressed are not investment advice and solely reflect the authors’ views. European Capital Insights only serves educational and informational purposes. The article represents an unpaid external contribution and has not undergone editorial modifications by Benzinga.
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