The European Union and China have taken a significant step toward potentially resolving their long-standing dispute over electric vehicle imports, with officials from both sides agreeing to explore minimum pricing as an alternative to the current tariff system, a European Commission spokesperson confirmed on Thursday, according to Reuters.

Negotiations Begin on Pricing Framework

EU Trade Commissioner Maros Sefcovic and Chinese Commerce Minister Wang Wentao held discussions within the past 24 hours, resulting in an agreement to investigate minimum pricing structures for Chinese-manufactured EVs entering the European market. China’s Commerce Ministry issued a statement confirming that “negotiations were set to start immediately.”

The development follows a report by German newspaper Handelsblatt earlier on Thursday that negotiations had already commenced.

This potential shift in trade policy comes approximately six months after the EU implemented substantial tariffs on Chinese EVs, which went into effect last October. The EU imposed tariffs of 17.0% for BYD, 18.8% for Geely, and 35.3% for SAIC, on top of the EU’s standard 10% car import duty.

The Challenge of Setting Minimum Prices

Sefcovic has previously stated that any minimum price agreement would need to be as effective and enforceable as the current tariffs. However, implementing such a system presents unique challenges.

Previous minimum price agreements within the EU have typically involved homogenous commodities rather than complex products like automobiles. The Commission has indicated that a single minimum price would likely be inadequate to counter the injury caused by subsidies, suggesting a more nuanced approach may be necessary.

Industry analysts note that establishing fair minimum prices for the diverse range of Chinese EV models—spanning from entry-level city cars to premium SUVs—will require sophisticated economic modeling and close industry consultation.

Industry Reaction to Potential Agreement

The German auto industry, which maintains significant manufacturing and sales presence in China, has expressed support for finding alternatives to the tariff system. The German auto industry association VDA welcomed the talks, labeling the duties a “mistake” and advocating for a negotiated solution.

“Regardless of current global developments, it must also be discussed here how to reduce obstacles and distortions in international trade, rather than building new hurdles,” the VDA stated on Thursday.

German automakers, which generated one-third of their sales in China last year, have opposed the tariffs due to concerns about trade conflicts with their second most important trading partner after the Estados Unidos.

Impact on Chinese Manufacturers

The existing tariff structure has created varied challenges for Chinese manufacturers seeking to expand in Europa.

To handle the increased costs despite tariffs, some Chinese brands have adjusted their pricing strategies, while others have accelerated plans to establish manufacturing facilities within Europe or nearby regions.

Chinese manufacturers have also increasingly turned to hybrid vehicles, which are not subject to the same tariffs as pure electric models. This strategic pivot has allowed companies to maintain their European market presence while navigating the tariff landscape.

Global Trade Context

The discussions between the EU and China come amid evolving global trade dynamics. The potential truce over the longstanding EV dispute unfolds as U.S. President Donald Trump has embarked on a trade war with some of America’s closest trading partners, including the EU and China.

The EU-China EV dispute has already triggered retaliatory measures, with Beijing imposing punitive tariffs on French cognac last year, affecting sales in what is the world’s second-largest economy and a major market for global brands including Hennessey, Remy Cointreau, and Pernod Ricard.

EVXL’s Take

The exploration of minimum pricing rather than tariffs represents a potentially significant shift in the EU’s approach to addressing perceived market distortions caused by Chinese government subsidies to its EV manufacturers.

While minimum price agreements could provide more market certainty than fluctuating tariff rates, implementing such a system for complex products like electric vehicles presents unprecedented challenges. Unlike commodities with standardized specifications, EVs vary widely in features, battery capacity, range, and technological sophistication.

For European consumers and EV enthusiasts, a successfully negotiated minimum price agreement might eventually lead to more stable pricing and greater availability of Chinese models. However, the complexity of these negotiations suggests that any resolution may still be months away.

Industry stakeholders will be watching closely as these talks progress, particularly for indications of how pricing thresholds might be determined across different vehicle segments and what enforcement mechanisms might be implemented to ensure compliance.