The European Commission and China’s Ministry of Commerce published guidelines on Monday that could lead to the elimination of tariffs on some electric vehicles imported from China, with a particular focus on Volkswagen’s Cupra Tavascan model. The move represents a significant turnaround in trade relations and could reshape the European car market.
Namely, the European Commission, the executive body of the European Union, presented a procedure that enables car manufacturers to voluntarily propose limits on the number of electric vehicles they deliver from China to Europe. In addition, manufacturers would be required to determine the minimum prices at which these cars will be sold on the European market.
Manufacturers who agree to such limits on the number of imported vehicles and commit to price thresholds could be exempted from anti-subsidy tariffs, which the European Commission introduced at the end of 2024 and which reach up to 35 percent. The deal comes as a potential solution to strained trade relations.
“As the European Commission and as the investigative body in this case, we have said from the beginning that we are willing to consider alternatives to the anti-subsidy duties that we have introduced,” he said. Olof Gillspokesperson of the European Commission.
The framework announced Monday comes as Europe seeks to strengthen trade ties with regions outside the US in response to President Trump’s sweeping tariffs and other initiatives. However, European leaders are faced with a dilemma. The United States is the only country that has been willing to maintain extremely large trade deficits in recent years, which has made the American market attractive to European exporters. On the other hand, China has severely limited purchases from Europe through a broad program to encourage domestic production as a substitute for imports.
Volkswagen’s precedent and the caution of the Union
Any deal that would allow automakers to avoid tariffs on electric vehicle shipments to Europe may not take effect so soon. Each manufacturer’s plan will have to be separately approved not only by the European Commission, but also by the member states of the European Union, which is a potentially lengthy process.
By the way, the new procedure followed this winter after Volkswagen stepped outside of the framework of the Chinese car industry, voluntarily offering to limit deliveries of its Cupra electric cars from the factory in Hefei, China to Europe. They also proposed setting an undisclosed minimum price for those models upon their arrival on the European market. In exchange, Volkswagen asked the European Commission to stop charging their 20.7 percent anti-subsidy duty on the Cupra.
“We issued this guidance because the first meaningful price commitment offer came in in December. We made the decision to issue this more detailed additional guidance in case other offers come in,” Gill said.
On the other hand, China’s Ministry of Commerce argued that manufacturers with factories in China should negotiate as a bloc with the European Commission, instead of submitting their own bids. They believe that if manufacturers make separate proposals, they could compete with each other in concessions to Europe. Interestingly, the Chinese ministry took a different stance late last year when it sought concessions from foreign producers, requiring each cognac producer in Europe to submit its own offer to cap prices when sold in China.
European trade officials are wary of accepting agreements that allow automakers to set high minimum prices for their electric vehicles. Such a mechanism could lead to price fixing, whereby producers would keep profits from limited sales in Europe instead of paying tariffs.
A similar agreement was reached by the European Commission in 2013 with Chinese solar panel manufacturers, which resulted in the Chinese solar industry making huge profits, which it invested in new factories. This helped the Chinese industry become so dominant that most solar panel manufacturers in Europe had to close or drastically reduce their operations.
In any case, the proposed mechanism offers a way towards easing trade tensions between the EU and China in the key sector of electric vehicles. However, lessons from the past, such as the case of solar panels, call for caution. The outcome of these negotiations and eventual agreements will be crucial not only for the future of the European automotive industry, but also for its ability to compete in a rapidly changing global market.