China floats perks for carmakers to stop EU levies on EVS

Beijing dangling carrots and sticks to enlist Berlin's help to get bloc to drop tariff plan

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Beijing has suggested Germany’s luxury car manufacturers could benefit if Berlin convinces the European Union to drop tariffs on Chinese electric vehicle (EV) exports, according to people familiar with the matter.

China floated lowering its existing tariffs on large-engine cars in return for scrapping planned EV levies on imports from the Asian nation, said the people, who spoke on condition of anonymity to discuss private talks.

Beijing imposes a 15 per cent fee on passenger vehicles from the EU.

China’s Commerce Minister Wang Wentao hinted at the possibility of the advantages to his German counterpart Robert Habeck during a meeting on June 23 in Beijing, one of the people said.

His three-day visit to the world’s No. 2 economy came weeks after the EU proposed hiking charges on electric cars to as high as 48 per cent later in 2024.

The exchange reflects a mismatch between how the EU and China are approaching the dispute. The European Commission says it is setting tariffs based on the legal conclusions of an in-depth study into Beijing’s massive state subsidies. The levies look to level the playing field by offsetting Chinese aid with something of equal value.

But that legal exercise was always vulnerable to political pressure, and President Xi Jinping’s government has been dangling both carrots and sticks to persuade Berlin to help it horse trade.

Beijing had previously signalled it could unleash a 25 per cent fee on large European cars, a move that would hit German luxury carmakers including Mercedes-Benz Group and BMW.