4 ASIAN LEGAL BUSINESS CHINA • 亚洲法律杂志-中国版 JULY 2024 BIG STORY China is meeting force with force after European Union decided to press ahead with new tariffs on certain Chinamade EVs following the collapse of more than three weeks of negotiations. EU decided to levy an additional 17.4 per cent import duties on Chinese EV champion BYD, 19.9 per cent on Geely, and 37.6 per cent on SAIC, on top of the current 10 per cent levies. Other carmakers will face extra duties of 20.8 per cent or 37.6 per cent, depending on whether they have cooperated with the EU investigation. Hang Guoliang, a partner at Global Law Office, tells ALB that the EU’s antisubsidy investigations typically focus on loans, raw materials, land, income tax CHINA EV MAKERS ‘HANDS TIED’ FACING FRESH EU TARIFFS, SAY LAWYERS 欧盟初裁向中国电动车加税， 救济手段略显乏力 exemptions, and government grants. These investigations would compare loan interest rates, raw material procurement prices, and land prices with benchmark prices in targeted countries to calculate the subsidy margins. “Generally, anti-subsidy investigations focus on raw material prices and loan interest rates, which usually account for over 70 per cent of the subsidy margins. However, in the case of EVs, there are also various government grants to consider,” says Hang. Since the beginning of the EU investigation, Chinese carmakers have been seeking ways to mitigate the potential impact under the imposition of additional tariffs. One of the most widely discussed and seemingly “once-and-for-all” options is to establish manufacturing plants overseas, particularly in Europe. However, a partner from a leading Chinese law firm specializing in overseas investments in new energy cautions that investing in local manufacturing might not be a practical solution for all. “The investment cycle for building a factory is long, requiring substantial fixed asset investments and extended construction periods. Additionally, companies must meet high environmental and other compliance standards, with no immediate returns during the construction phase,” the partner says. Even if succeeding in building factories, Chinese EV makers may still face potential anti-circumvention investigations. “According to EU anti-circumvention regulations, if 60 per cent or more of the component value is imported from a country subject to tariffs, and the added value from assembly does not exceed 25 per cent, it may be deemed as circumvention. Therefore, if carmakers simply ship parts to Europe for basic assembly with minimal added value, the EU may still consider the vehicles to be of Chinese origin and subject them to countervailing duties,” explains Hang. Even shifting production to other markets such as Southeast Asia and Latin America might not be sufficient to shield the China-made EVs from anti-circumvention investigations. In a more direct response, Chinese EV makers can opt to raise the prices of their vehicles in a bid to increase the price competitiveness of European cars. According to Reuters, Tesla has already announced price increases, while BYD and SAIC have not yet decided on them. Geely believes that its Spanish factory will mitigate some negative impacts, and Polestar – which it jointly owns with Volvo – is considering lowering supply chain costs to ease the pressure. Hang points out that an alternative avenue could be negotiating a price commitment agreement. “Price commitment means that Chinese car manufacturers commit to selling EVs to the EU at no less than a certain price. If they do not comply, the EU will continue to impose BY HU YANGXIAOXIAO, WITH ADDITIONAL REPORTING BY SARAH WONG 作者：胡阳潇潇、黄婉君 Cars for export are seen at a port in Lianyungang, Jiangsu province, China April 2, 2020. China Daily via REUTERS
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