More than duties on electric vehicles, we need policies for the green transition

On 12 June, the European Commission announced the provisional results of its anti-subsidy investigation into China's battery electric vehicle (Bev) value chain, launched in October 2023. The investigation concluded that the entire value chain, including sectors such as mining, refined metals, lithium and shipping, had benefited from unfair subsidies by the Chinese government, harming or posing a threat to the EU Bev industry. The Commission assessed the impact of these subsidies on importers, users and consumers, analysed company records and consulted with stakeholders . In the wake of this investigation, it informed the Chinese authorities of the results and is seeking a World Trade Organisation (WTO)-compatible solution. Meanwhile, countervailing duties have been imposed as of 5 July, which will be added to the existing 10% tariffs on Bev. The new tariffs will remain provisional until the end of the investigation on 2 November 2024, after which they will become definitive. The duties are differentiated according to the level of subsidies granted to Chinese manufacturers and cooperation with the Commission's investigation. For example, Byd will face a 17.4% tariff, Geely a 20% tariff, while Saic will face a 38.1% tariff.

These tariffs aim to create a more level playing field, unlike the US 100% tariff on Chinese Bevs without prior investigation potentially violating WTO rules; however, they could hurt the EU by leading to higher consumer prices, production shifts, reduced EU exports to China, and market uncertainty. German Chancellor Olaf Scholz has shown serious misgivings and concern about possible retaliation by China, where German car manufacturers have several plants and fear repercussions of the duties on their exports.

Although it is too early to assess the impact of duties on European manufacturers, it is clear that this is a useful measure to open a dialogue with the Chinese authorities, but ineffective for the growth of the Bev market in Europe that should accompany the green transition. Data from the International Energy Agency show that, despite growth in recent years, the market share of electric cars will reach 25 per cent in Europe in 2024 compared to 45 per cent in China, although higher than the 11 per cent in the USA. China's dominance affects the entiresupply chain with 74% of lithium battery exports of the world total in 2023 and control of 56% of global refined lithium capacity. These numbers show us that the road ahead in order not to lose competitiveness in a market, the car market, which is strategic for European competitiveness is long and not without risks. The imposition of import duties is a measure to protect the internal market and favour European production, but it drives up the price of electric cars and makes (expensive) consumption incentives necessary. Moving towards the electric car means moving onto a different technological trajectory where the final product is only a fraction of the complex reorganisation of a production model based on new raw materials, different and reduced components, new infrastructure and skills. Moreover, EU car manufacturers, including German ones, have been overtaken by their Chinese counterparts in terms of software and digital car equipment. This explains Volkswagen's recent EUR 5 billion investment in the US start-up Rivian. If the EU wants to reach its goal of producing only zero-emission cars by 2035, it will have to adopt systemic policies that look at technologies, skills and infrastructure. Ursula von der Leyen, in her speech to the European Parliament that re-elected her as President of the European Commission for the next five years, declared that this EU Commission will be the one for investment. Only if these words are soon translated into appropriate policies will Europe be able to win the challenge of combining competitiveness and sustainability.