In Brussels, Belgium, EU officials announced new taxes on Chinese electric vehicles (EVs) and shared the findings of an ongoing investigation into “state subsidies”.

Dozens of EU officials spent 250 working days in China, visiting more than 100 companies and gathering thousands of pages of evidence.

“The whole supply chain is subsidised,” a senior official at the meeting was quoted as saying by the SCMP, reporting on the findings of the investigation, which many predict could spark a trade war.

The official pointed out that this meant that the Chinese government was subsidising all players, and that this chain extended from the refining of lithium used in batteries, to the production of cells and batteries, to the production of BEVs [battery electric vehicles], and even the transport of BEVs to EU markets.

Automotive manufacturer pledges to ship hybrid cars to Europe

According to the SCMP reporter, “Chinese business representatives were shocked by the presentation. After a quick check of the figures, an executive from an electric car company promised to start shipping hybrid cars to Europe instead, as they would not be subject to such high taxes.

“The EU has ignored facts and WTO rules, disregarded China’s repeated strong opposition and acted unilaterally, disregarding the objections and warnings of many EU member governments and industries,” China’s Ministry of Commerce said in a statement minutes after receiving the notification.

Separate tariffs for three Chinese companies

Following the announcement in September by Ursula von der Leyen, President of the European Commission, that an investigation into Chinese electric cars would be launched, work began immediately and the sample size was reduced from 21 Chinese groups exporting electric vehicles to Europe to three.

These were BYD, soon to become the world’s biggest seller of electric vehicles; Geely, which spent the 2000s acquiring major European brands such as Volvo; and SAIC Motor, owner of the iconic MG and Volkswagen’s joint venture partner.

The final tax on most Chinese electric vehicle exports to Europe will be a weighted average calculated on the basis of the subsidies on the books of these three companies. This is likely to mean an additional tax of around 21 per cent on average.

When experts realised that the giant SAIC was on the list, they predicted that the countervailing duties could far exceed the EU’s average rate of 19 per cent.

Details of the EU investigation: Thousands of questionnaires sent out

As part of the investigation, the companies were sent questionnaires of more than 60 pages and 18,000 words each. They asked for access to financial information and forensic-level details of the assistance each received from the Chinese state.

According to the SCMP, the document said: “It is in your own interest to answer as accurately and completely as possible and to provide supporting documentation. You may supplement your answer with additional data”, but in reality it was a veiled threat to “comply or you will be excluded from the European market”.

According to Rhodium Group research, only SAIC chose not to comply and on Wednesday found itself facing the highest import tax on all EU electric vehicle shipments and the third highest tax ever imposed by the EU.

This tax is on top of the existing 10 per cent rate, meaning the cars will cost almost 50 per cent more.

Other companies, including BYD and Geely, will be taxed at a lower rate than standard EU models, with a weighted average of 21 per cent.

BYD could benefit from new taxes

“SAIC is very dependent on the European market and has no plans to localise production yet, so it will be very affected,” said Ilaria Mazzocco, an expert on China’s electric vehicle trade at the Centre for Strategic and International Studies.

BYD, on the other hand, appears to be in a good position with an EU factory, low tariffs and a geographically diversified market.

The EU also sent a series of questionnaires to the Chinese government, asking it to forward them to selected lithium suppliers and local banks. Beijing refused.

“The Chinese government has been very active in seeking justification for various steps. There has been a lot of interaction, but less positive activity on their side in terms of providing us with the information we requested,” the senior EU official said.

Instead, according to the EU, Beijing has tried to obstruct the investigation with a series of threats that have multiplied as the Brussels probe has drawn to a close.

EU not afraid of WTO

Brussels is confident it has a “watertight” justification for the tariffs and is not worried about a WTO challenge that would point to the fact that some Chinese companies pay lower taxes than their European competitors.

Judging by the EU’s findings, the inspectors found subsidies everywhere they looked. Lithium processors and battery makers are told by the state to sell to electric vehicle companies at below-market prices, while car companies are exempt from battery excise taxes.

The companies issue green bonds, which state financial institutions are required to buy, and are given preferential land, income tax breaks and cheap refinancing options mandated by the People’s Bank of China.

Chinese companies’ market share in the EU rises to 25 per cent

The EU believes its own companies are suffering as a result. Between January 2020 and September 2023, Chinese companies increased their market share in the EU from 4 per cent to 25 per cent, while the share of their local competitors fell from 69 per cent to almost 60 per cent, officials said.

The inspectors added that Chinese subsidies are “jeopardising” Europe’s green transition by depressing the price at which European companies can sell electric vehicles, meaning that in some cases they are making a loss on every vehicle sold.

BYD’s growth plans unaffected

Chinese electric vehicle maker BYD, led by billionaire Wang Chuanfu, can withstand the EU’s additional tariffs on electric vehicles from China and take market share from harder-hit rivals, analysts say, according to Forbes.

Shares in the Chinese carmaker jumped 8.8 per cent in Hong Kong and up to 6 per cent in Shenzhen on Thursday as the tax hike was significantly lower than the 30 per cent previously expected.

The EU said BYD would have to pay an additional 17.4 per cent tax on top of the current 10 per cent from next month.

Kenny Ng, a Hong Kong-based securities strategist at Everbright Securities International, said: “The market believes that the impact on BYD will not be as severe as previously feared. Compared with other Chinese automakers, BYD may have an advantage in the region at the moment,” said Kenny Ng, a Hong Kong-based securities strategist at Everbright Securities International.

SAIC calls for ‘decision review’

Ng says BYD could take market share from SAIC as tariff hikes could reduce the appeal of the MG brand in Europe.

Thanks to its competitive pricing, MG counts Western Europe as its biggest market, where it was the fifth-largest EV brand by deliveries last year, according to market research firm Canalys.

The MG4, for example, has a starting price of 28,990 euros, compared with around 33,000 euros for its main rival, Volkswagen’s ID.3.

In a public statement, SAIC called on the EU to reconsider its decision, which it said would have a major negative impact on economic cooperation between China and the region.

Strong reaction from German car industry

On the other hand, the new tariffs imposed by Brussels have led to a split between Germany on the one hand and France on the other.

Berlin worked behind the scenes to stop the tariff increases, while Paris backed Leyen. One senior official said the Germans even used the term “so-called overcapacity” in the meetings as a sign of how much they were aligned with Beijing.

Wolfgang Niedermark, a board member of the Federation of German Industries, said: “The focus now should be on minimising the negative impact on international supply chains and European companies. European companies have no interest in an escalation of the trade conflict with China,” Niedermark said.

The VDA, which represents carmakers such as Volkswagen, BMW and Daimler, strongly criticised the decision, with president Hildegard Müller warning that it was “another step away from global cooperation”.

European carmakers producing electric vehicles in China will also be affected. The largest group is Dacia and BMW, which will face an import duty of 21%.

This is even higher than Chinese carmaker BYD, which will see a lower tariff of 17.4% for participating in the Commission’s investigation and providing evidence that it benefits from less state support.

ACEA, the European Automobile Manufacturers Association, whose members have more diverse interests, said it had merely “noted” the decision.

German government pushes for negotiations

“The European Commission’s punitive tariffs are hitting German companies and their best products,” said German Transport Minister Volker Wissing (FDP) in X.

“Vehicles must become cheaper, not through trade wars and market fragmentation, but through more competition, open markets and significantly better business conditions in the EU,” Wissing wrote.

Similar comments were made by Economy Minister Robert Habeck (Greens), who told German media that “tariffs are always a political measure of last resort and often the worst option”.

“It is very important that talks take place now,” Habeck said, calling for negotiations between the EU and China.

German firms fear retaliation

German companies are also concerned about possible Chinese retaliation, with Volker Treier of the German Chambers of Industry and Commerce (DIHK) warning that “the tariffs announced by the Commission on Chinese e-cars will not be without consequences for the export-oriented German economy”.

Fears were fuelled by the response of the Chinese Ministry of Commerce, which said it was ready to “take all necessary measures” to protect the interests of its manufacturers.

“It is also up to China to come to Europe with constructive proposals to prevent an escalation of trade conflicts and to stop anti-competitive behaviour consistently and quickly,” said VDA’s Müller, calling on the EU and China to resolve the issue through negotiations.

Müller said they needed China to solve global problems, including climate change, and argued that a trade war would jeopardise this transformation.

Objections from the Czech Republic and Malta

Like the German manufacturers, the Czech Association of the Automotive Industry has announced that it believes such measures could have a negative impact.

“On the contrary, it was the removal of trade barriers that led to an increase in international trade and prosperity in recent years, especially in the automotive sector, which relies on strong exports,” said Zdeněk Petzl, the association’s executive director.

Petzl warned that China could aggravate already tense trade relations by retaliating against Europe and the US, stressing that European car companies import more than 90 per cent of key materials for electric vehicles and batteries from China.

“The introduction of new tariff measures will certainly be felt by Chinese manufacturers and may slow their growth, but we do not expect it to affect China’s subsidy policy,” Petzl said, advocating a systemic approach to strengthen European industry, increase competitiveness and open new markets.

Malta’s energy minister, Miriam Dalli, told The Post last month: “We don’t want tariffs that don’t help us achieve our decarbonisation goals. Having more expensive products will not help us achieve our ambitious targets,” she told The Post last month.

In the film The Leopard (1963), adapted by Italian director Luchino Visconti from the novel of the same name by Tomasi di Lampedusa, the adventurer Tancredi Falconeri (Alain Delon), explaining his decision to join the Garibaldians to Don Fabrizio Salina (Burt Lancaster), says at one point: “If we want things to remain as they are, some things will have to change”.

Something similar could be said about the European Parliament (EP) elections. I would like to point out that, despite all the ‘far-right storm’, the ‘centre-right’ European People’s Party (EPP), which did much better than the pre-election polls, came out on top; moreover, this is the group of Ursula von der Leyen, the President of the European Commission, one of the most bellicose figures in the EU… Indeed, EPP leader Manfred Weber immediately called for a second term for Leyen. If the Socialist Group in the EP and the liberal Renew also support the EPP, the EP of the last mandate could continue in the same way.

So we have to say that the claims that the wind is changing in the EU, that ‘pro-Russian’ parties are coming to the fore, that ‘fascism’ is on the rise, that ‘the (centre) left is finished’ are greatly exaggerated. Moreover, despite the success of the right in Central European countries, we should not forget that we are facing a fragmented picture: Although Germany is divided between the CDU/CSU and the AfD, it must be remembered that the Christian Democrats have moved far away from the Angela Merkel line and joined the German ‘war party’. Marine Le Pen’s National Union (RN), which won a major victory in France, distanced itself from the AfD shortly before the elections. It was also noted that the ID, of which the RN was a part, had a lower representation in the polls, and half of this representation came from the RN. We know that Le Pen has also softened her former ‘radical’ positions as she prepares her party for power. For example, the possibility of a ‘Frexit’ is no longer on the horizon.

The party of Giorgia Meloni, leader of the European Conservatives and Reformists (ECR), which increased its number of seats in the EP, came first in the country of the Italian Brothers (FdI), and it is understood that this group will act as a ‘bridge’ between the EPP and the ID. Meloni’s ‘mainstreaming’ after coming to power through a rapid shift towards anti-Russianism reminds us to stay away from simplistic interpretations.

Also in Hungary, Prime Minister Viktor Orban’s Fidesz party still came first with around 8% of the vote, while the new ‘centre-right’ Tisza party, founded by former Fidesz member Peter Magyar, pulled off a big surprise and came second with around 30% of the vote. The election for mayor of Budapest, also held on the same day as the EP elections, was won by the opposition-backed Gergely Karácsony.

We can see that the composition of the EP has remained more or less similar, while at national level there have been significant changes, especially in Central Europe. Even at the national level, we can see that each region has its own specificities, for example, there has not been a massive ‘shift to the right’ in the Scandinavian countries or in Iberia. Or in Greece, for example, we see that New Democracy is losing ground, but parties such as Pasok, Syriza and the Communist Party of Greece are gaining votes. In other words, we can say that the national reactions against the EU and the governments are flowing into different channels.

All this points to a new and hybrid regime in which the ‘centre’ is shifting to the ‘right’, but in which elements on the fringes are also swinging to the ‘centre’. In Europe, the ‘centre’ had already been disintegrating for decades after the eurozone crisis. Now, war, militarisation, the return of geopolitics and years of prolonged economic stagnation require something to change in order to maintain order.

The introduction of industrial policies and the resonance of the ‘new mercantilist’ economics associated with Trump in Europe, but especially in exporting countries such as Germany, Austria and Hungary, is leading to hybridisation. The fact that Joe Biden is picking up where Trump left off in many areas, and that many European countries are moving towards a balance between ‘liberals’ and ‘illiberals’, points to this. Reactions to the Israeli occupation of Gaza are an interesting example of this. We recently analysed the relationship between Likud and the European right. When it comes to the preservation of ‘Judeo-Christian Europe’, the fact that parties of the right and left are competing with each other provides some clues.

The elections in the UK in July and the US in November will show how far this hybridisation has progressed. They will also show that the EU and the EP elections alone cannot set the course for the world.

But at the end of the day, those who are worried about the AfD, for example, should ask themselves this question: If the SPD-Greens-FDP war coalition is collapsing, is it not better to worry about another war party, the CDU, coming to the fore?

The elections to the European Parliament (EP), which began on 6 June, ended yesterday, 9 June.

In contrast to previous elections, the European People’s Party (EPP), led by the German Christian Democrats, remained in first place in the elections, which attracted considerable interest both inside and outside the EU.

The ‘centre-right’ EPP, which includes European Commission President Ursula von der Leyen, is expected to continue governing the EP together with the Social Democrats and Liberals. Indeed, EPP leader Manfred Weber said immediately after the first results that the ‘stability’ of the EU would be ‘endangered’ if Leyen did not continue as president,

In the 720-member EP, the EPP won 184 seats, with an increase of 8 MEPs. It was followed by the progressive alliance of Socialists and Democrats (S&D), which won the same number of MEPs as in 2019 (139). The liberal Renew group, to which French leader Emmanuel Macron’s party belongs, was the biggest loser, with 80 seats, 22 fewer than in 2019.

These three groups were the ‘government’ in the previous EP, having secured a majority.

The other big losers were the Greens with 19 seats (52 in total), while the European Conservatives and Reformists (ECR) and Identity and Democracy (ID), to the right of the EPP, continued their rise with 73 and 58 seats respectively. Girogia Meloni’s Brothers of Italy in the ECR and Marine Le Pen’s National Rally (RN) in the ID were the clear national winners.

Other winners were parties without a group in the EP or newcomers to the elections. The Alternative for Germany (AfD) came second in Germany with 16.2% of the vote, while another non-aligned party, Hungary’s ruling Fidesz, came first. In Germany, the Sahra Wagenknecht Alliance (BSW), which broke away from the Left Party (Die Linke), also got off to a fast start with around 6 per cent of the vote in its first election.

National nuances

In Germany, especially in the former GDR, the AfD was the clear winner with around 27 per cent of the vote. In the east it was followed by the CDU with around 21 per cent and the BSW with around 14 per cent.

In the west, however, the CDU-CSU swept the ‘traffic light’ coalition government (SPD-Greens-FDP).

In France, the RN’s doubling of the ruling Renaissance party prompted Macron to dissolve parliament and call early elections. I can’t pretend that nothing has happened,’ Macron said in his statement, arguing that rising nationalism is a threat to Europe.

Meanwhile in France, Jean-Luc Melenchon’s Unyielding France (LFI), which opposes the war in Gaza and Ukraine, increased its share of the vote to 10 per cent.

In Austria, the Freedom Party (FPÖ), which is part of the ID, came first, while the People’s Party (ÖVP), which is part of the EPP, came second. The Social Democrats came third and the Greens fourth.

In Belgium, too, the votes were divided among the right. The ID member Vlaams Belang (VB) came first with 13.9% of the vote, while the liberal Renew member Reform Movement came second with 13.5%. The separatist New Flemish Alliance, a member of the ECR, came third with 13.39%.

In the Netherlands, the Green-Labour alliance came first with 21.6%, Geert Wilders’ ID-member Party for Freedom (PVV) came second with 17.7% and the EPP-member VVD came third with 11.6%.

In Italy, Meloni’s ECR member Brothers of Italy (FdI) came first with 26.6% of the vote, while coalition partners Lega (ID) and Forza Italia (EPP) remained on 8.8%. The Democratic Party (PD) came second with 25.5% and the 5 Star Movement third with 9.6%.

In Spain, the People’s Party (EPP) came first with 34.2% and the Spanish Socialist Workers’ Party 30.1%. The right-wing ECR member Vox came third with 9.6% of the vote, while the left-wing platform Sumar won 4.6%.

In Portugal, the Socialist Party came first with 32.1 per cent, the Democratic Alliance second with 31.1 per cent and the right-wing Chega, a member of the ID, third with 9.8 per cent.

In Sweden, the Social Democrats came first with 24.9%. The moderate Union Party came second with 17.5%, the Greens third with 13.8% and the right-wing Sweden Democrats fourth with 13.2%.

In Finland, the National Coalition Party, a member of the EPP, came first with 24.80 per cent. In Denmark, the Socialist People’s Party came first with 17.4%, followed by the Social Democrats with 15.6%.

In Greece, the ruling New Democracy (ND) remained in first place with 28 per cent of the vote, despite a significant loss of votes. Syriza came second with 14.9 per cent, PASOK third with 12.8 per cent, Greek Solution fourth with 9.3 per cent and the Communist Party of Greece (KKE) fifth with 9.2 per cent.

In Poland, the ruling coalition Civic Platform (KO), an EPP member, came first, while the former ruling party and ECR member Law and Justice (PiS) came second. The right-wing Confederation, which does not belong to any EP group, came third with 11%.

In Hungary, too, the independent governing party Fidesz came first, despite a large loss of votes. The new ‘centre-right’ party Tisza, founded by former Fidesz member Peter Magyar, was a big surprise, coming second with almost 30% of the vote.

The national parties with the most seats in the EP are

In the EPP, which won 191 seats, the largest group will be the German CDU with 23 seats.
In the S&D, which won 137 seats, the largest group will be the Italian PD with 20 seats.
In Renew, which won 85 seats, the largest group will be the French Renaissance with 7 seats.
In the ECR, which won 78 seats, the largest group will be the Italian FdI with 23 seats.
In the ID, which won 62 seats, the largest group will be the French RN with 30 seats.
In the Greens/EFA, which won 52 seats, the largest group will be the German Greens with 12 seats.
With 39 seats, the largest group on the left will be the French LFI with 8 seats.