European car makers that build EVs in China and import them back to the continent will be hit with 21% additional duty taxes by the EU.
Announced yesterday by the European Commission, these new tariffs, which could go as high as 38.1% for some Chinese car makers, are aimed at levelling Europe's automotive playing field.
The new taxes are on top of the existing 10% import tariff.
As well as penalising Chinese manufacturers that are undercutting local rivals with the help of government subsidies, the European Commission is also hitting firms – such as Mercedes-Benz, BMW and Renault – that have moved some production from Europe to China, where labour rates are cheaper.
BMW Group boss Oliver Zipse blasted the decision as "the wrong way to go".
He said: "The EU Commission is thus harming European companies and European interests.
“Protectionism risks starting a spiral. Tariffs lead to new tariffs – to isolation rather than cooperation.”
Tesla, which builds the Model 3 in Shanghai, “may receive an individually calculated duty rate”, the European Commission said.
EU trade commissioner Valdis Dombrovskis previously said: “Competition must be fair.”
This aggressive stance from the Commission is, however, aimed more at Chinese EV makers.
In documents released yesterday, the Commission confirmed each manufacturer will be hit with taxes ranging from 17% to 38.1%.
As part of a sample pool, it confirmed Volvo parent Geely will be charged an additional 20% tax duty, and BYD 17.4%.
MG owner SAIC, which the Commission has considered not to have cooperated with the probe, has been hit with a 38.1% rate. Others that fail to assist will be charged at the same rate, it said.
In layman's terms, this could potentially make the MG 4's £26,995 starting price rise to as much as £37,280.10, but in reality the brand will absorb most of the tax increase rather than pass it on to customers.
Talks will now be held with Chinese manufacturers over the levy and "should discussions with authorities not lead to an effective solution" tariffs will begin from 4 July.
The Commission said it could revise these figures if car makers provide "sufficient counter-balancing evidence".
Chinese-made EVs currently hold an 8% share in the EU market and the Commission predicts this will rise to 15% by the end of 2024.
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This is massive news. If introduced it will decimate sales of Chinese imports and do likewise to European exports when China introduces reciprocal tariffs.