Volkswagen is poised to bypass new European Union tariffs on Chinese-made electric vehicles (EVs) through a pricing agreement, a move that has drawn attention from Beijing. The EU recently imposed tariffs on Chinese EVs, citing unfair state subsidies that distort the market. However, manufacturers can avoid these duties by agreeing to sell models at a pre-approved minimum price.
The Pricing Loophole
The Volkswagen Group, specifically through its Cupra brand, is leveraging this loophole for the Tavascan model, which is currently manufactured in China. If approved by the European Commission, the Tavascan can enter Europe without the 20.7% punitive tariffs. This arrangement aligns with existing EU regulations, yet it has raised concerns among some observers who view it as preferential treatment.
China’s Response
While publicly maintaining a positive stance, Chinese officials privately express unease that Volkswagen may be receiving more favorable conditions than other manufacturers. China initially advocated for a broader industry-wide agreement but now appears to be adapting to a case-by-case approach, realizing that individual deals may be the most viable solution given ongoing negotiations.
Administrative Hurdles
Securing these minimum pricing agreements is a lengthy process, often taking over a year per vehicle model. Not all Chinese brands are expected to pursue this route, particularly those already profitable despite the tariffs. However, Volkswagen deems the administrative effort worthwhile for the Tavascan, which shares its MEB platform with the VW ID.5 and offers a range of up to 353 miles.
“Volkswagen’s move highlights a pragmatic approach to trade tensions, demonstrating that compliance with regulations can still allow for strategic market access.”
This arrangement underscores the complexities of international trade and the willingness of automakers to navigate evolving regulations. The outcome will likely set a precedent for future EV trade negotiations between Europe and China.
