EU’s Electric Vehicle Tariff Dispute: A Chain Reaction Across the Industrial Supply Chain-Iota

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News > Dynamic industry > EU’s Electric Vehicle Tariff Dispute: A Chain Reaction Across the Industrial Supply Chain

EU’s Electric Vehicle Tariff Dispute: A Chain Reaction Across the Industrial Supply Chain

In October 2023, the European Commission quietly launched an investigation targeting Chinese electric vehicles (EVs), suspecting that these companies received “unfair subsidies” from the Chinese government and were dumping products in the European market at prices below cost. Like a stone thrown into a calm lake, this investigation sent ripples throughout the entire automotive supply chain — even reaching seemingly unrelated sectors such as the silicone industry.

On June 12, 2024, the EU announced preliminary findings from the investigation and declared it would impose provisional countervailing duties on Chinese EVs starting July 4. The tariffs were divided into three tiers: 17.4% for BYD, 20% for Geely, and 38.1% for SAIC Motor. Other companies that cooperated with the investigation would face an average of 21%, while those that did not cooperate would be taxed at 38.1%. The announcement sent shockwaves through Chinese EV manufacturers. SAIC Motor was the first to respond, expressing “deep disappointment,” stating that the decision violated market economy principles, and pledging to take legal action to protect its rights.

The immediate effect of the tariffs would be a sharp decline in sales of Chinese EVs in Europe. Take, for example, a popular BYD model priced at around €30,000 in Europe — a 17.4% tariff would significantly raise costs. Manufacturers now face a tough choice: increase prices and lose their competitive edge, or absorb the cost and risk selling at a loss. Either option could disrupt their expansion plans in the European market.

However, the impact goes far beyond the automotive sector. EV production heavily relies on silicone materials, used for battery pack sealing, motor insulation, and lightweight body components. China is one of the world’s largest producers and consumers of silicone, and the EU’s tariff policy indirectly threatens the lifeblood of this industry.

“If Chinese EVs can’t sell in Europe, our demand for silicone will drop too,” said a concerned executive from a Chinese silicone company. About 30% of their products are supplied to the automotive sector, including export orders to Europe. Once the tariffs are in effect, not only will Chinese EV exports suffer, but there could also be a domino effect on upstream raw material demand, potentially destabilizing the entire silicone supply chain.

Chinese automakers are not sitting idly by. Companies like BYD and NIO are accelerating efforts to establish factories in Europe, aiming to avoid tariffs through localized production. Meanwhile, SAIC Motor is calling on the EU to “carefully reconsider” its decision, while quietly restructuring its global supply chain. These responses may help relieve tariff pressure in the medium term, but in the short term, the competitiveness of Chinese EVs in Europe will be affected.

The EU’s decision has also stirred internal controversy. The German Association of the Automotive Industry publicly opposed the move, calling it “a wrong decision” that would harm European consumers and hinder EV adoption. BMW CEO Oliver Zipse bluntly stated, “Trade protectionism will only trigger a chain reaction that ultimately harms everyone.”

On October 29, 2024, the European Commission announced the final decision: it would impose definitive countervailing duties on Chinese EVs for five years. Though slightly adjusted, the structure remained largely the same: 17% for BYD, 18.8% for Geely, 35.3% for SAIC, 20.7% average for cooperating firms, and 35.3% for non-cooperating firms. China’s Ministry of Commerce strongly opposed the decision and stated it would take necessary measures to safeguard the legitimate rights and interests of its enterprises.

Months have passed since the announcement, but the effects continue to reverberate. In this smoke-free trade war, there are no true winners. The EU’s tariff policy could ultimately hurt the entire global EV industry. Meanwhile, Chinese automakers and the silicone industry are searching for new paths and opportunities amid the storm.

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