Tariffs on Chinese EVs have long been a sticking point between the EU and Beijing with the EU originally putting the tariffs on these vehicles to protect their markets from a wave of cheap Chinese electric vehicles.

Talks aimed at resolving the issues between the two were cold, but EU officials appeared to confirm via a report from Reuters they have achieved a small kernel of progress with officials appearing to confirm they are open to removing the tariffs thanks to newly published guidance.

Tariffs to potentially be replaced by price controls

A major sticking point between the two parties has been tariffs with the EU charging up to 35.3% of a fee on Chinese EV imports. A proposed pricing framework recently unveiled by the EU would see the current tariffs be eliminated.

In their place would be a new pricing control system that would force companies like Geely, BYD, and SAIC to agree to sell their vehicles at a minimum price in Europe with the bloc taking note of prior contributions the companies have made to electric vehicles in Europe. The new pricing controls would also attempt to negate the impact of subsidies given to the firms by China.

China stands to gain a considerable amount if this new pricing framework is put into place. A large chunk of the Communist nation’s economy is focused on import and exports and while Chinese automakers have established a presence in some markets, they have been locked out of larger markets like the EU and North America by tariffs. The proposed controls would provide a gateway into the EU and allow these firms to establish a presence.

But there’s a catch

Like everything else in life, there is a bit of fine print baked in that’s designed to help protect European automakers and that comes in the form of how the pricing controls would be laid out.

While Beijing favors a setup where a minimum price is broadly applied across the board, the EU wants minimum prices on each EV model and the configuration of said EV model. The EU executive is also requiring that any offered prices eliminate the harmful effects of subsidies, have an effect equivalent to duties, be practicable and minimise cross-compensation.

These provisions would allow the pricing to be higher in some segments like SUVs and pickups while being lower in other segments like sedans and minivans where their sales figures are less when compared to trucks and utilities.

The guidance also addresses existing hybrid imports and it would be harder to accept undertakings from companies selling other vehicles, such as hybrids, into the EU due to the risk of cross-compensation. Hybrid imports into the EU from Chinese firms have increased considerably when compared to a year earlier.

China’s Ministry of Commerce was welcoming and receptive of the new guidance saying that “The EU’s adherence to non-discrimination and objective based assesments showed both sides could settle their differences through dialogue.”