The European Union (EU) plans to reduce the high tariffs on two models of BMW and Volkswagen made in China and imported into Europe. This step, reported on July 18, seeks to ease the burden on these carmakers and boost the availability of electric vehicles in Europe. Here’s a look at the details, the current tariff situation, and the impact on the car industry.
BACKGROUND ON TARIFFS
In early July, new EU rules led to tariffs as high as 37.6% on some vehicles made in China and imported into Europe. These high tariffs have been a big issue, especially for BMW’s new electric MINI and Volkswagen’s Seat Cupra Tavascan. Both models, made in Chinese plants, faced the steep tariff rate, affecting their competitiveness in Europe.
PROPOSED TARIFF REDUCTION
According to Reuters, the European Commission plans to nearly halve the tariffs on the BMW MINI and Volkswagen Tavascan to 20.8%. This change aims to reduce the financial strain on these models and promote their adoption in Europe. The proposed cut from 37.6% to 20.8% marks a significant shift in the EU’s tariff policy towards these vehicles.
The EU’s tariff system works on a sliding scale. For instance, BYD, a Chinese carmaker, faces a lower tariff of 17.4% because it cooperated with the EU’s probe into state subsidies. The probe showed that BYD got fewer state subsidies compared to other carmakers. In contrast, MG’s parent company, SAIC, faces the highest tariff of 37.6% due to not cooperating with the probe.
IMPACT ON BMW AND VOLKSWAGEN
The probe does not target every vehicle made in China. But the BMW MINI and Volkswagen Tavascan models, which are not covered by the probe, are automatically subject to the highest penalties. To fix this, the EU is considering reclassifying BMW and Volkswagen as “cooperative companies.” This reclassification would lower the tariffs to 20.8%, giving some relief to these carmakers.
INTERNAL EU DIVISIONS
The EU member states are divided on the issue of tariffs. Although the high tariffs came into effect on July 4, they are only temporary for the first four months. The EU still needs to vote on whether to make them permanent. In a recent vote among the 27 EU member states, the temporary tariffs received mixed support: 12 states voted in favor, 4 opposed, and 11 abstained. This division shows differing views on trade policy and economic protectionism within the EU.
BMW’S STANCE ON TARIFFS
Ironically, BMW is one of the German car brands that has opposed the EU’s tariff policy. BMW’s opposition to the tariffs highlights the broader debate within the car industry about protectionist measures versus free trade. Cutting the tariffs on the MINI could align with BMW’s stance and support the company’s market strategy in Europe.
IMPACT ON THE CAR MARKET
The potential cut in tariffs on the BMW MINI and Volkswagen Tavascan could have several effects:
1. Increased Competitiveness: Lower tariffs would make these models more price-competitive in Europe, possibly boosting sales.
2. Market Dynamics: The cut could prompt other carmakers to seek similar tariff adjustments, leading to a more competitive market.
3. Consumer Benefits: European consumers could benefit from more electric vehicle options at better prices.
4. Trade Relations: The move might improve trade relations between the EU and China, fostering a more cooperative economic environment.
CONCLUSION
The EU’s plan to cut tariffs on China-made BMW and Volkswagen models marks a significant move in the ongoing trade talks between Europe and China. By cutting the tariffs from 37.6% to 20.8%, the EU aims to support these carmakers and increase the availability of electric vehicles in Europe. This move, while still needing a final vote, shows the complexities and divisions within the EU on trade policy. As the situation evolves, the car industry and consumers will be keenly interested in the final outcomes and their broader effects.
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