In the maze of modern global supply chains, it is increasingly difficult to determine what makes a car truly European. Is a Mercedes made in America still German? Or a Volkswagen assembled in China? These are questions that are becoming crucial in an era of trade wars and tariffs, and Volkswagen is hoping that its European roots will give it an edge.
It seems that this strategy is already yielding first results. According to the Carscoops portal, the European Commission has decided to review the tariffs applied to Volkswagen Group vehicles manufactured in China. Instead of a classic tariff rate, the German giant is reportedly targeting an alternative model that includes an “import quota and a minimum price mechanism”.
The request for exemption was submitted by Volkswagen Anhui, a joint project with the Chinese manufacturer JAC. It is in this plant that the attractive electric SUV, Cupra Tavascan, is produced, for which the management of the company has already warned that the new customs duties represent a “serious threat” to business.
If the European Commission approves this request, Tavascan could be exempt from the additional customs duty, which amounts to 20.7 percent for Volkswagen. The decision could be made within a few months, but it remains to be seen whether the officials will be convinced by the German manufacturer’s arguments.
However, even if the model is exempt from duty, the minimum price proposal may not be a much better solution. Namely, European officials insist that “any minimum price would have to be as effective and enforceable as the tariffs themselves”, which means that the final cost to customers could remain similar.
Manufacturers face high tariffs in Europe. The aforementioned 20.7 percent duty on Volkswagen models from China is added to the already existing basic duty of 10 percent on vehicle imports. Rates vary from manufacturer to manufacturer, depending on the level of cooperation with European investigators. Thus, SAIC (owner of the MG brand) faces a 35.3 percent tariff, BYD with 17 percent, and Geely with 18.8 percent.
In any case, the outcome of Volkswagen’s petition could set an important precedent. The European Commission’s decision will not only determine the fate of the Cupra Tavascan on the European market, but could also indicate how the EU will deal with a globalized automotive industry in the future, where the borders of origin are becoming increasingly blurred.