Germany’s Stance on EV Tariffs

German Chancellor Olaf Scholz has voiced his opposition to restricting automotive trade, as the European Union moves closer to imposing tariffs on electric vehicles (EVs) imported from China. Scholz emphasized that Germany‘s auto industry, which benefits significantly from business in China, can remain competitive with Chinese carmakers if trade is “fair and free,” reports Bloomberg.

The Risk of Retaliation

Germany could be severely affected if China retaliates against EU tariffs. German automakers, including BMW, Mercedes-Benz, and Volkswagen, generate around 20-23% of their global profits in China, mainly from internal combustion engine vehicles. In response to the EU’s potential tariffs on Chinese EVs, China has threatened a 25% tariff on primarily German ICE vehicles.

Industry Concerns

The German auto industry association (VDA) has strongly opposed tariffs on Chinese EVs, warning that they could spark a trade war and endanger German jobs. German automakers have been advocating for free trade and lobbying against the tariffs in Brussels.

EU’s Determination

Despite Germany’s concerns, the European Commission is poised to impose provisional tariffs on Chinese EVs as early as next week, potentially increasing import duties beyond the current 10%. This move aims to counter what the EU perceives as unfair trade practices and market distortion by China.

The Surge in Chinese EV Imports

Chinese EV imports into the EU surged from €1.5 billion in 2020 to €11.5 billion in 2023, accounting for 37% of all EV imports in the bloc. The EU’s investigation into Chinese subsidies could result in tariffs ranging from 15-30%, according to estimates.

Balancing Trade and Protection

Germany faces a challenging position. Its auto industry heavily relies on China for profits, while the EU seeks to protect domestic EV manufacturers from cheaper Chinese imports. Chancellor Scholz and the German government have expressed skepticism about the tariffs, warning of potential harm to the national economy.

EVXL’s Take

Germany’s caution against trade barriers highlights the complex interplay between maintaining economic ties and protecting domestic industries. As the EU moves forward with tariffs, the impact on the global automotive market will be closely watched. For the drone industry, this situation underscores the importance of fair and free trade practices, which can foster innovation and competition without compromising economic stability.