China eases stance as EV makers begin direct tariff talks with EU

Summary

China has signalled it is open to electric vehicle (EV) manufacturers negotiating tariff arrangements directly with the European Union, following the European Commission’s decision to grant Volkswagen’s Cupra brand partial relief from additional duties on its China-made Tavascan SUV. The shift suggests enforcement of EU anti-subsidy measures may increasingly occur on a model-by-model basis rather than through broad industry-wide negotiations.

Beijing/Brussels, Feb 12 — China has indicated it is open to electric vehicle (EV) manufacturers negotiating tariff arrangements directly with the European Union, marking a shift in tone as trade tensions over China-made EV exports continue.

The change follows the European Commission’s decision to grant Volkswagen’s Cupra brand a partial tariff exemption for its China-produced Tavascan electric SUV — the first such relief since the EU imposed additional anti-subsidy duties on Chinese EV imports in 2024.

Policy shift after first exemption

Previously, Beijing had advocated for a coordinated, government-led response to the EU’s trade measures and discouraged separate negotiations involving individual companies.

However, China’s commerce ministry signalled that it now recognises the practical framework of EU trade enforcement, which allows model-by-model “price undertakings” under anti-subsidy rules.

A ministry spokesperson said China hopes more domestic EV manufacturers can reach agreements with European authorities through such pricing commitments — arrangements that permit exporters to avoid higher additional duties if they adhere to minimum pricing thresholds and related conditions.

The EU’s handling of the Cupra case suggests enforcement may increasingly be applied at the individual model level rather than through broad industry arrangements.

What the Volkswagen case signals

Under the new arrangement, Cupra’s all-electric Tavascan SUV — manufactured in China — will not be subject to the additional tariff rate previously applied under the EU’s anti-subsidy measures, although the standard 10% EU import duty remains in place.

The exemption was approved in exchange for agreed pricing commitments and sales limitations, according to officials familiar with the matter.

For global automakers with production facilities in China, the decision offers a potential pathway to maintain access to the European EV market despite heightened trade scrutiny.

However, analysts caution that each application is likely to undergo detailed review as the European Commission assesses pricing structures, subsidy exposure and potential market distortion on a case-by-case basis.

Broader trade backdrop

The development comes against the backdrop of the EU’s anti-subsidy investigation into Chinese EV imports, launched amid concerns that state support had enabled competitively priced vehicles to gain market share in Europe.

Brussels has sought to protect domestic EV manufacturers while avoiding broader supply chain disruption. Beijing, meanwhile, has criticised the duties as protectionist.

Allowing individual negotiations may help manage diplomatic tensions and reduce the risk of escalation. At the same time, it signals that continued market access for China-made EVs in Europe will depend increasingly on compliance with pricing and regulatory conditions.

Industry implications

For Chinese EV manufacturers, the evolving framework suggests that future access to the EU market may hinge less on political negotiation and more on structured commercial agreements aligned with EU trade rules.

For European policymakers, the approach offers a calibrated enforcement tool — applying pressure without resorting to blanket bans or sweeping retaliatory measures.

Why this matters

The EU-China EV dispute sits at the intersection of industrial policy, climate transition and geopolitical competition.

Europe is attempting to accelerate its electric vehicle adoption while protecting domestic manufacturers from what it views as state-supported competition. China, meanwhile, sees the European market as critical to sustaining export growth amid slowing demand at home.

By shifting toward model-specific price undertakings, both sides appear to be exploring a more controlled mechanism for managing trade friction — one that avoids broad escalation while preserving regulatory leverage.

The outcome could shape how advanced economies balance open trade with strategic industrial protection in emerging technologies.

FAQs

Q1: What changed in China’s stance?

China signalled that it accepts individual EV manufacturers may negotiate tariff arrangements directly with the EU, rather than relying solely on a unified, government-led approach.

Q2: Why is Volkswagen’s Cupra exemption important?

It marks the first instance of tariff relief granted for a specific China-made EV model under the EU’s recent anti-subsidy framework.

Q3: What is a price undertaking?

A price undertaking is an agreement under EU trade rules in which an exporter commits to minimum pricing or related conditions in exchange for avoiding higher additional duties.

Q4: Do tariffs on Chinese EVs in Europe disappear under this system?

No. The standard EU import duty continues to apply, and exemptions from additional tariffs depend on strict compliance conditions.

Q5: Will other Chinese EV makers receive similar exemptions?

Possibly, but approvals are expected to be handled individually, which could make the process lengthy and uncertain.

Q6: What does this mean for the EU EV market?

It allows the EU to manage competitive pressure from imports while keeping selective supply channels open, balancing industrial policy with market access.