Overview
China has shifted its approach to EU trade on electric vehicles, allowing Chinese manufacturers to negotiate directly with the European Union for model-specific tariff exemptions. The change follows the European Commission’s first approval under the current regime: a reprieve for Volkswagen’s China-built Cupra Tavascan, tied to a minimum price and a cap on sales volumes.
What Changed
- Beijing now supports company-level negotiations using the EU’s established mechanism of price undertakings.
- The Commission approved an exemption for the Cupra Tavascan after Volkswagen agreed to a minimum import price and a sales cap.
- This sets the first precedent since the EU imposed additional duties on Chinese-made EVs in 2024.
How the EU Mechanism Works
The EU’s anti-subsidy duties, adopted in 2024, sit on top of the bloc’s longstanding 10% tariff on passenger cars. Under price undertakings, companies can avoid punitive duties by committing to price floors and accepting volume limits that address concerns over undercutting by subsidized imports.
Before its exemption, the Cupra Tavascan faced an additional 20.7% duty, illustrating the financial stakes for models caught by the measures.
Implications for Automakers
- Approvals are assessed model-by-model, making the process granular and potentially slow.
- Exemptions are tailored to specific vehicles, not entire brands, pushing firms to prioritize key models for applications.
- The combined effect of the standard 10% tariff and model-specific add-ons can reshape pricing, margins, product plans, and sourcing.
- Volkswagen’s deal provides a template for others considering similar arrangements.
Outlook
- Chinese EV makers are likely to pursue more applications, encouraged by Beijing’s support for undertakings.
- Expect incremental, uneven approvals given detailed negotiations over price floors and quotas for each model.
- Diplomatic talks between Brussels and Beijing will continue alongside company-led deals, testing a calibrated approach that preserves limited market access while targeting perceived unfair pricing.
Bottom line: The Cupra Tavascan exemption is the first crack in the current tariff regime. With Beijing now open to firm-level talks, Chinese EV makers have a clearer—if narrow—path to seek relief on select models.
