According to a report by Nikkei, Germany's automotive industry has voiced strong criticism against the European Union's new tariffs on electric vehicles (EVs) from China, labeling the move as another severe blow to German automakers.
Hildegard Mueller, President of the German Association of the Automotive Industry (VDA), stated that this action is a "setback" for global free trade, European prosperity, job security, and economic growth. She warned that as the EU's tariffs on Chinese EVs take effect, the risk of a far-reaching trade conflict between China and the EU is growing.
In response, Germany voted against the EU's EV tariffs in early October. Germany's automotive industry contributes about 5% to the country's economy but has been suffering from weak demand in both Europe and China.
In the third quarter of this year, Volkswagen Group, Germany's largest carmaker, reported a 42% year-on-year drop in operating profit to €2.86 billion. Earlier, the company announced that, for the first time in its 87-year history, it might consider closing three plants in Germany and could plan to cut thousands of jobs.
Reuters quoted Volkswagen's Chief Financial Officer as predicting only 1% to 2% growth in the European auto market next year. He also indicated that it's unlikely for the European market to return to pre-pandemic sales levels anytime soon.
Meanwhile, workers are increasingly frustrated with their situation. Thousands of employees, including those in the automotive industry, are striking for higher wages. In northern Germany alone, Volkswagen, Mercedes-Benz, and automotive supplier ZF were hit by brief "warning strikes" lasting only a few hours.
The new EU tariffs on Chinese-made EVs add yet another challenge for German automakers. Volkswagen's Chinese joint venture partner, SAIC, now faces an import duty of 45.3%.
Mercedes-Benz is also struggling. In the third quarter, its EBIT dropped by 48% year-on-year, mainly due to declining sales of its highest-priced models.
Likewise, Porsche's operating profit fell by 41% year-on-year in Q3, and in September, it sold only 23 Taycan electric vehicles in China. Critics argue that given the sluggish Chinese auto market, the last thing German automakers need is for the EU to impose tariffs on cars produced in China.
Ferdinand Dudenhoeffer, Director of the Center for Automotive Research, pointed out that German EVs are already difficult to sell in China. He said that the strategy must be to develop and produce EVs locally in China, but German automakers now face high tariffs that hinder the economies of scale they need.
Critics add that the EU tariffs artificially increase the already high prices of EVs compared to gasoline vehicles, discouraging cost-sensitive consumers. This, in turn, may hinder European countries' climate goals, and carmakers failing to meet EV sales targets could face carbon emission penalties.
Dudenhoeffer also noted that China may retaliate by imposing tariffs on European gasoline vehicles, which could "significantly impact German automakers."
