EU to push for Chinese EV tariffs after divided vote

The European Union will press ahead with hefty tariffs on Chinese-made electric vehicles, the EU executive says, even after the bloc's largest economy Germany rejected them, exposing a rift over its biggest trade row with China in a decade.

The proposed duties on Chinese-built EVs of up to 45 per cent would cost carmakers billions of extra dollars to bring cars into the bloc and are set to be imposed from next month for five years.

The Commission, which oversees the bloc's trade policy, has said they would counter what it sees as unfair Chinese subsidies after a year-long anti-subsidy investigation but it also said on Friday it would continue talks with Chinese officials.

A possible compromise could be to set minimum sales prices.

In a pivotal vote on Friday, 10 EU members backed tariffs and five voted against, with 12 abstentions, EU sources said.

It would have taken opposition from a qualified majority of 15 EU members, representing 65 per cent of the EU population, to block the proposal.

Reuters reported on Wednesday that the measure was likely to pass with France, Italy and Poland in favour.

The government of the region's biggest economy and major car producer, Germany, voted against the proposal, sources said on Friday.

The EU executive said it had obtained "the necessary support" to adopt the tariffs although it would continue talks with China to find an alternative solution.

Noah Barkin, senior adviser at Rhodium Group, said it was a big victory for the Commission after acute pressure from Germany and China to kill the duties and cut a deal.

He said it strengthened the EU's hand in negotiations but felt the chances of a deal were slim given the high bar the Commission had set for an agreement.

"The risk is that Beijing feels a need to respond to the duties with retaliatory measures of its own, which torpedo the chances of a negotiated solution," he said.

Friday's vote reflected divisions on EU commercial relations with China.

Some countries want a firm line against what they see as excessive state subsidies and are mindful of the EU's failure to impose tariffs on Chinese solar panels a decade ago.

China now has a share of more than 90 per cent of the EU photovoltaic market.

Other countries want to encourage Chinese investment or fear a tit-for-tat trade war.

In what was already seen as a retaliation, China this year launched its own probes into imports of EU brandy, dairy and pork products.

China's Commerce Ministry expressed strong opposition to planned EU tariffs, calling them "unfair, non-compliant and unreasonable," violating World Trade Organisation rules.

It has already launched a WTO challenge.

BMW Chief Executive Oliver Zipse described the vote as "a fatal signal for the European automotive industry" and said a quick settlement was needed to prevent a trade conflict.

Geely Holding expressed "deep disappointment" in the Commission's decision, saying it could hinder EU-China economic relations and harm European companies and consumers.

Hungarian Prime Minister Viktor Orban said the EU was headed for an "economic cold war" with China.

However, France's PFA car association said it was good EU members had backed duties, adding it was in favour of free trade as long as it was fair.

Stellantis said it supported free and fair competition and that the sector was under pressure from carbond dioxide reduction plans and "the Chinese global commercial offensive".

The Commission says China's spare production capacity of three million EVs per year, which needed to be exported, is twice the size of the EU market.

Given 100 per cent tariffs in the United States and Canada, the most obvious outlet for those EVs is Europe.

The EU tariffs range from 7.8 per cent for Tesla to 35.3 per cent for SAIC and other companies deemed not to have co-operated with the EU investigation.

These tariffs are on top of the EU's standard 10 per cent import duty for cars.