Tesla and BMW Challenge EU Tariffs on Chinese-Made Electric Vehicles.

Elon Musk’s Tesla and German automaker BMW have taken legal action against the European Union's recently imposed tariffs on electric vehicles (EVs) manufactured in China. Both companies have filed cases with the Court of Justice of the European Union (CJEU), joining Chinese automakers BYD, Geely, and SAIC in opposing the additional import duties, which can reach up to 35%, according to an announcement by the European Commission on Monday.

“We acknowledge these legal challenges and are prepared to defend the measures in court,” said Commission spokesperson Olof Gill in a statement to AFP.

Background on the Tariffs

The EU implemented the additional tariffs in late October following an anti-subsidy investigation that concluded China’s state-backed support for its EV manufacturers created an unfair competitive advantage, undermining European automakers. The move comes at a time when Europe’s automotive sector is grappling with high production costs, challenges in transitioning to electric vehicles, and heightened competition in the critical Chinese market.

The EU’s decision mirrors similar actions by the United States. Under former President Joe Biden, the U.S. significantly raised import duties on EVs from China to 100%, accusing Beijing of leveraging unfair industrial policies to gain an edge. In response to these accusations, China has consistently denied any wrongdoing and lodged a formal complaint with the World Trade Organization.

As part of the escalating trade tensions, China retaliated by imposing "anti-dumping measures" on EU imports, including brandy, signaling a tit-for-tat approach to the dispute.

Impact on Automakers

Under the EU’s tariff framework, Tesla faces an additional 7.8% surcharge on its vehicles produced at its Shanghai facility, in addition to the standard 10% duty for Chinese EV imports. Meanwhile, BYD, Geely, and SAIC are subject to surcharges of 17%, 18.8%, and 35.3%, respectively.

The measures have drawn criticism from some EU member states, including Germany, which expressed concerns about potential retaliatory actions that could impact its own manufacturers. Germany’s automotive giants, including BMW, have a significant presence in China, producing certain models for export to the European market. Similarly, Tesla's Shanghai factory supplies Europe with its popular Model 3.

Rising Market Presence of Chinese EVs

China's EV market share in the EU has surged in recent years, with Chinese electric cars accounting for 14% of the EU market in the second quarter of 2024, up from less than 2% in 2020. Chinese-built vehicles including those made by foreign brands like Tesla have seen their market share rise to 27.2% during the same period, compared to just 3.5% four years earlier.

Ongoing Discussions and Industry Concerns

The complaints filed by Tesla, BMW, and Chinese automakers were submitted last week to the General Court, the lower chamber of the CJEU. While the details of their claims remain undisclosed, the cases are expected to challenge the validity of the EU’s new customs duties.

With over 13 million employees and contributing around 7% of the EU’s GDP, the automotive sector plays a crucial role in the region’s economy. In light of these challenges, European automotive executives and EU officials are set to convene on Thursday under a new initiative led by EU Commission President Ursula von der Leyen to discuss the future of the industry.