The European Commission has concluded its anti-subsidy investigation into Chinese electric vehicles (EVs), initially launched in October 2023, by announcing final tariff rates that are set to impact major Chinese automakers differently. In a surprising turn, Tesla has emerged as the biggest beneficiary, with its tariff rate significantly reduced to 9% from the previously applied 20.8%.

The new rates, which come into effect pending approval from the 27 EU member states, show a slight reduction for cooperating companies. For instance, BYD sees a marginal decrease to 17%, Geely to 19.3%, and SAIC to 36.3%. Companies that did not cooperate with the investigation face the maximum tariff of 36.3%. The cooperating companies, excluding Tesla, will be subject to a 21.3% tariff, an increase from the preliminary 21%.

This favorable rate for Tesla is a result of the company’s request for an individual examination based on the actual subsidies it receives, highlighting the difference in state support compared to Chinese companies. Tesla, as the largest exporter of EVs from China to the EU, benefits greatly from this ruling, given that all Model 3 vehicles sold in the European market are sourced from its Shanghai factory.

The European Commission’s decision has sparked mixed reactions. While it is seen as an effort to protect the EU’s EV industry from what it perceives as unfair competition, the reduced tariff for Tesla indicates a recognition of the company’s lower reliance on subsidies. However, the higher tariffs imposed on other Chinese manufacturers, such as SAIC, could lead to increased costs for their vehicles in the EU market.

The Chinese Ministry of Commerce has expressed strong opposition to the EU’s plan, stating that it will take all necessary measures to defend the rights and interests of Chinese enterprises. The ministry argues that the EU’s actions are protectionist and not based on facts or World Trade Organization rules, potentially disrupting the global automotive supply chain and harming European consumers.

The final plan is set to be presented to the EU member states in October, with the tariffs expected to be implemented by November 2024 if approved. These measures are intended to last for five years and may be extended.

The situation has also raised questions about the future of joint ventures like Spotlight Automotive Limited, a partnership between BMW and Great Wall, which plans to produce electric Minis from 2024. With the joint venture not cooperating in the investigation, it remains to be seen how the new tariffs will affect their operations and the production of electric vehicles in China for the European market.

As the dust settles on this latest trade development, it is clear that the EU’s new tariffs will have a profound impact on the global EV market, with Tesla navigating these changes more favorably than its Chinese counterparts. The long-term effects of these tariffs on the European automotive industry and international trade relations are yet to be fully understood.

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