TMTPost -- German auto behemoth BMW AG may become a victim of the increasing trade frictions between the European Union and China.


Credit：BMW Mini

BMW’s full-electric Mini made in China is poised to face the highest electric vehicle (EV) tariff of 38.1% under the EU’s provisional plans, Reuters cited a source with knowledge of the matter on Friday. The reason that Mini will be hit most by the tariff is that a joint venture created by BMW and China’s Great Wall Motor Co., Ltd. failed to fulfil the EU’s survey to the level of detail required to be classed as a company cooperating with its anti-subsidy investigation, the source said. The venture, with a mass production of about 35,000 euros (US$37,345), started late last year, right after the investigation launched, and its production is still at early stage.

The European Commission announced on Wednesday that it has pre-disclosed the level of provisional countervailing duties it would impose on imports of battery electric vehicles (BEVs) from China, which would be introduced from July 4 if discussions with Chinese authorities do not result in an effective solution. The executive arm of the EU concluded through an anti-subsidy investigation that the BEV value chain in China benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers.

If the abovementioned duties are materialized, the European Commission would impose additional duties on three sampled Chinese EV makers, on top of the ordinary BEV import duty of 10%. The additional individual duties would be 17.4% for BYD, 20% for Geely and 38.1% for SAIC. According to the statement, other BEV producers in China, which cooperated in the investigation but have not been sampled, would be subject to the following weighted average duty: 21%, while all other BEV producers in China would face an extra duty of 38.1% if they did not cooperate in the investigation.

Companies seen as cooperating with the EU were subject to lower tariffs of 17.4%-21%, Reuters quoted a European Commission documents. That includes BMW Brilliance Automotive, another BMW joint venture which has produced the electric iX3 for export to Europe from China since 2021. The European Commission said that joint ventures producing cars in China would be subject to duties, without specifying more recently founded ventures could benefit from the lower 21% rate.

European auto giants criticize the upcoming extra tariffs right after the European Commission’s announcement. BMW CEO Oliver Zipse said the European Commission’s planned tariffs were the wrong way to go for the tariffs will harm European companies and interests of the continent. Protectionism risks starting a spiral: Tariffs lead to new tariffs, to isolation rather than cooperation, the head of German auto behemoth said. He said his company believes protectionist measures like introduction of import duties do not contribute to successfully compete on international markets, and is committed to free trade.

BMW and its Europe-based peers might also suffer a hit from China as Beijing was reportedly consider new tariff move on car imports. China is promoting introduction of procedures related to tariff hike on gasoline cars with large displacement engine, more exactly, gasoline cars powered by engines larger than 2.5 liters, according to an article posted by Yuyuan Tantian, a social media influencer affiliated with state broadcaster China Central Television (CCTV), citing insiders of China’s auto industry on Thursday. The article quoted estimates from the China Passenger Car Association (CPCA) that annual European exports of such large displacement engine-powered passenger car has reached US$18 billion, outweighing Chinese EV exports to the Europe last year.

If China raises provisional tariff rate of the abovementioned vehicles, European brands such as BMW and Mercedes-Benz will be the first to be affected, which means that European automobile exports to China will suffer a blow, Yuyuan Tantian wrote. The domestic auto industry calls for hike tariff on such vehicle imports to 25%, and the new tariff rate, if Beijing decides to impose, will be within the scope of China's commitment to the World Trade Organization (WTO) and does by any means contradict the WTO rules, Cui Fan, professor in International Trade, School of International Trade and Economics (SITE) of the University of International Business and Economics (UIBE), told Yuyuan Tantian.