Growing interest in Chinese electric vehicles (EVs) is presenting challenges for European automakers and Brussels, as national governments seek to protect their domestic industries.
The European Commission, which oversees trade policies in the EU, is navigating a complex situation involving the need to avoid a trade war while revitalizing an economy that is struggling.
Recently, the EU has proposed minimum pricing for Chinese-made EVs as an alternative to implementing higher tariffs. In 2024, the EU imposed tariffs as high as 35.3% on EVs imported from China after an anti-subsidy investigation found that subsidies in China were giving those manufacturers an unfair edge over European competitors. Since then, both parties have been discussing alternative solutions.
The new guidelines released by the Commission last week allow companies to propose minimum prices for vehicles exported to the EU. These commitments will be evaluated fairly, with the requirement that they effectively counteract the negative impacts of subsidies and mimic the effect of tariffs.
The document aims to guide Chinese exporters considering price commitments for battery electric vehicles facing countervailing duties. Currently, one price commitment has been received by the Commission, but details regarding the company or model were not disclosed. They are open to receiving additional proposals that meaningfully address the competitive advantages derived from subsidies.
Ferdinand Dudenhöffer, a prominent German automotive expert, expressed doubts about the potential of minimum pricing to truly enhance competition. According to EU estimates, Chinese manufacturers gain a price benefit of approximately 20% in the European market due to subsidies. Tariffs were therefore imposed, affecting not only Chinese companies but also German and American firms operating in China. In retaliation, China has enacted tariffs on EU goods such as alcohol, pork, and dairy.
CAR reports that Chinese manufacturers are selling models in the EU at an average markup of 118% on domestic prices, indicating significant leeway for price reductions.
The latest findings from Eurofound highlight that the EU automotive industry employs around six million people directly and another six million indirectly. However, since 2019, job losses have accelerated, with around 100,000 layoffs announced from European companies in early 2025.
The biggest job losses have been in countries with major car manufacturers. While France faces a structural decline, Germany, Italy, and to a lesser extent Spain have all seen job cuts, with Central and Eastern European nations potentially losing production due to shifts to regions with cheaper labor.
This trend is driven in part by the increasing presence of Chinese EVs in the EU market, which includes models produced in China for Western brands.
Germany, traditionally a leader in car manufacturing, is facing a dilemma as demand for EVs grows, yet the domestic market is struggling against competition from international manufacturers. In 2025, German EV sales surged, with Chinese manufacturer BYD experiencing notable growth.
However, the increasing competition has caused German carmakers to report declining sales in China, further complicating the situation where German manufacturers rely heavily on the Chinese market.
Additionally, countries like Bulgaria, while not major automobile producers, are experiencing growth in their automotive component industries, driven by orders from European manufacturers. The EU-China trade dispute over EVs could impact this growth, depending on the competitiveness of European automakers.
Analysts believe that while EU protections may shield manufacturers, Chinese investments in Europe could present new opportunities for suppliers like those in Bulgaria.
Dudenhöffer anticipates a contraction in the automotive sector in Germany and Europe as manufacturers relocate production to regions like the US or Asia, emphasizing that Asian companies are dominating the market.
In December, the EU altered its green policies by reconsidering a ban on new petrol and diesel cars to support the struggling auto sector. The revised proposal, which requires a 90% reduction in emissions from 2021 levels, allows automakers to continue selling a limited number of polluting vehicles under certain conditions, leading to criticism from environmentalists and industry stakeholders.
The fate of German automakers, and by extension the broader EU automotive sector, is tied to developments in China. Dudenhöffer asserts that manufacturers must focus on producing electric vehicles specifically for the Chinese market, highlighting the necessity for European companies to adapt to competition from Chinese manufacturers.
This article is based on information from ENR participating agencies.
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