A potential boomerang

China has built a formidable EV industry, with Chinese manufacturers controlling around 43 per cent of the global market for EV batteries and maintaining cost advantages through government subsidies

- ADITYA SINHA

The European Union's decision to impose up to 35.3 per cent tariffs on Chinese electric vehicles (EVs) represents a major step in the EU's attempt to protect its auto industry from the growing dominance of Chinese manufacturers. This action follows an investigation revealing that Chinese EV companies benefit from significant state subsidies, which allow them to undercut European competitors on price. Chinese EV makers like BYD and SAIC have rapidly expanded into the European market, challenging European automakers struggling with higher production costs, particularly for batteries.

By imposing these tariffs, the EU hopes to create a level playing field for European carmakers facing significant challenges competing with state-backed Chinese firms.

Despite the European Commission's decision, the vote exposed deep divisions within the bloc. Germany, the EU's largest car-producing country, alongside Hungary and a few others, opposed the tariffs, fearing that they could ignite a trade war that would hurt their economies. Germany's car industry, heavily reliant on exports to China, has expressed strong concerns that retaliatory tariffs from Beijing could have devastating consequences. German carmaker Volkswagen, for instance, criticised the move, arguing it would undermine global cooperation, which is essential in the global fight against climate change.