The European Union and China have announced steps aimed at resolving their ongoing trade dispute concerning Chinese electric vehicle (EV) imports. The EU has issued a guidance document outlining instructions for Chinese EV manufacturers to submit price undertaking offers, which could potentially replace the existing countervailing tariffs.
Guidance Framework
The European Commission's guidance document details the process for Chinese EV exporters to submit price undertaking offers, which include instructions on minimum import prices. The Commission indicated that these offers may incorporate commitments to specific annual shipment volumes and planned future investments within the EU. The EU stated that varied vehicle types would necessitate specific minimum import prices to address the effects of alleged subsidization. The Commission affirmed that each assessment would be conducted objectively, fairly, without discrimination, and in accordance with World Trade Organization (WTO) rules.
Background on Tariffs and Investigation
The EU initiated an anti-subsidy investigation into Chinese EVs in October 2023. This investigation concluded in 2024 with the imposition of countervailing duties ranging from 7.8% to 35.3% over a five-year period. These existing tariffs could potentially be replaced by minimum import prices under the newly introduced scheme.
Official Reactions
China's Ministry of Commerce stated that this development reflects a spirit of dialogue and the capacity of both entities to resolve disagreements through consultation within WTO rules, aiming to preserve the stability of global automotive industrial and supply chains. The Ministry also commented that the development supports the "healthy development of China-EU economic and trade relations" and "safeguards the rules-based international trade order." The China Chamber of Commerce to the EU characterized the agreement as a potential "soft landing" for the EV dispute.
Rico Luman, a senior economist at ING, suggested that the minimum prices could offer Chinese brands a framework to continue exports and potentially avoid higher tariffs, expecting continued market penetration.
Broader Context of Trade Tensions
- EU manufacturers rely on Chinese-made components, including batteries, rare earths, and computer chips.
- The global expansion of Chinese EV manufacturers has prompted concerns among European and U.S. automakers.
- The EU had implemented tariffs to address what it described as an influx of affordable Chinese EV models, citing benefits from government subsidies.
- The U.S. imposed a 100% tariff on China-made electric cars in 2024.
- The value of battery-powered car imports into Europe increased from $1.6 billion in 2020 to $11.5 billion in 2023. A majority of these imports originated from Western automakers with production facilities in China, such as Tesla and BMW.
- EU officials had expressed concerns that China's domestic automakers could gain significant market share through lower prices, supported by various government subsidies. These subsidies reportedly include:
- Orders for government fleets
- Low-interest loans from state-owned banks
- Access to inexpensive land for factories
- Tax breaks
- Subsidized raw materials and parts from state-owned industries
Market Dynamics and Future Outlook
- Chinese car brands have continued their expansion into Europe despite tariffs.
- According to data from the European Automobile Manufacturers’ Association (ACEA) and S&P Global Mobility, China-manufactured cars accounted for 6% of sales in the EU during the first half of 2025, an increase from 5% in the same period of 2024.
- EU-based manufacturers held 74% of total EU car sales in the first half of 2025. Germany produced approximately 20% of cars sold in the EU, followed by Spain, Czechia, and France.
- A 2023 forecast by consultancy AlixPartners projected that Chinese automakers could double their European market share to approximately 10% by 2030.
- The EU aims to cut greenhouse gas emissions by 55% by 2030, a goal that may necessitate access to affordable electric cars, including those from abroad.