European suppliers' group warns against China tariffs as a quick fix

BRUSSELS -- Any tariffs imposed on Chinese electric vehicle imports to Europe could boomerang against European companies, officials at suppliers’ lobbying group CLEPA said.

The European Commission has opened an investigation into Chinese government subsidies and incentives for EVs, following concerns that European automakers could be facing unfair competition.

While the issue could be seen as a win for European consumers, a trade war with China set off by tariffs could hurt European industry, said Benjamin Krieger, the executive director of CLEPA.

Major automakers such as BMW and Mercedes-Benz both export cars to China and have assembly plants there, while Chinese domestic brands source components from Europe-based suppliers, which also have factories there.

“There is a lot of European technology in Chinese EVs,” Krieger said last week in Brussels at CLEPA’s annual Innovation Awards event, citing thermal management systems as an example. 

European suppliers “have compelling offerings and these are to be found in vehicles around the world,” he said. “The application of tariffs would have an impact on their business, too.”

“The European Commission looking into this broader topic is a good thing,” he said. “This suggests that they take competition from other regions seriously and they see the need for action.” But, he added, there are “doubts” that subsidies can do more than provide immediate relief to address the issue of affordable electric mobility.

The cost of EVs has become a major topic in Europe, with just one automaker, Citroen, prepared to offer an electric vehicle built on the continent at a price below 25,000 euros. 

A few Chinese companies such as SAIC’s MG are finding success by undercutting European EVs on price, but there are fears that what is now a trickle could become a flood of imports. BYD, the largest maker of electrified (full-electric and plug-in hybrid vehicles) is poised for a major European push.

Last year, Chinese brands sold about 100,000 EVs in Europe; while Western brands that build EVs in China, including BMW, Tesla and Renault, exported even more than that to Europe. A recent study by PwC found that there could be a total of 800,000 Chinese-built cars sold in Europe by 2025, most of which would be full-electric.

European regulators have created a huge demand for EVs, Krieger said, “but we are struggling to meet that demand.” Chinese companies are looking to exploit that shortfall, he said.

Rather than tariffs, he said, European regulators should focus on creating an infrastructure that encourages lower-priced EVs, including securing supplies of raw materials for batteries -- something he said China has been working on for decades -- and providing affordable sustainable energy and electricity. 

“We need to take better care of our single market,” he said.

Thorsten Muschal, an executive at Forvia (formerly Faurecia) who is the departing president of CLEPA, said in an interview at the awards event that members of the suppliers' group could see the issue from different angles, depending on their customers.

“If you are a small, family-owned company and you are only shipping to European carmakers, then your position is pretty clear” in favor of tariffs, he said. “If you are a multinational with 20 to 30 percent of sales in China, and somebody puts tariffs in place, there is maybe retaliation -- and then you may take a different position.”

“A big European supplier has maybe 30 to 40 plants in China,” Muschal added. “Doing business there is part of a global approach.”