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Beijing has reportedly ordered Chinese automakers to halt investments in European countries that support higher tariffs on Chinese electric vehicles. Reuters reported Wednesday.

The warning comes after reporting earlier this month discovered that Chinese automakers were planning to stop expanding in Europe.

It is the first retaliatory measure that comes after the European Union on Wednesday finalized tariff increases of up to 45% on electric vehicles made in China following planned negotiations between Brussels and Beijing to avoid tariff increases. fell.

However, Beijing is taking a carrot-and-stick approach, apparently rewarding countries that abstained or voted against the highest rates for electric vehicles. On a diplomatic visit this week, Finland was promised visa-free entry for its citizens to China and greater cooperation in green energy.

Chinese electric vehicle companies have maintained a solid lead this year: BYD reported third-quarter revenue on Thursday $23.2 billion with approximately 1.1 million car sales in the three-month period, surpassing Tesla’s quarterly sales for the first time. However, BYD’s internal price war with other Chinese EV makers means profits have taken a hit, with gross margins falling by around 0.2 percentage points year-on-year.

SIGNS

China’s approach is deepening divisions in Europe

The bloc’s vote on tariffs on Chinese electric vehicles underscored divisions among its member states: “Music to the ears of Chinese policymakers.”wrote an expert from the European Council on Foreign Relations. Countries such as Germany and Hungary, which rely heavily on China for trade and foreign investment, find themselves increasingly “at odds” with more aggressive EU members such as France. “Beijing has long made it a priority to divide Western allies in a bid to prevent the emergence of bolder European policies or even joint US-EU measures, such as export controls on critical technology, against China.” , added the expert.

Higher tariffs unlikely to slow Chinese leadership in electric vehicles

The new European Union tariffs on Chinese electric vehicles are graduated according to the company and those below 40% They probably won’t be high enough. to curb the gains that Chinese automakers have made in the EU market, going from 3% in 2022 to 20% this year, Rhodium Group analysts said. Even if tariffs erase some or all of the profits from some EVs, the analysts added, EV makers “may be willing to give up profits in the short term and sell at a loss to gain market share in the future.” the second largest market in the world. Electric vehicle market.” Ultimately, the EU will not benefit from an increase in tariffs beyond a certain point, noted The New York Times: A 100% tax like the US, for example, would that Chinese electric vehicles “prohibitively expensive”, hindering the block’s green energy transition.

If elected, Trump’s protectionism could impact the EU

China will likely wait until after the US presidential election on November 5 to enact broader retaliatory measures against the EU, Bloomberg noted. While both candidates have promised higher tariffs on Chinese goods, Trump has laid out a sweeping plan that could have far more significant economic implications for China than the EU tariffs. “The only people more worried about the US elections that the Americans are the Chinese,” an expert on Chinese trade policy told the outlet. If Trump is elected, he could also pressure the bloc to toughen its position on China, even as he adopts a protectionist approach: “In theory, a Trump administration would be less geopolitical than a Harris administration and push everything much further into the realm of economic protectionism“one analyst told Euronews.