The EU has for the first time launched a formal review of a price undertaking offer from a company seeking to avoid its tariffs on Chinese-made electric vehicles, following a submission from Volkswagen's Chinese joint venture.

Over the course of 12 to 15 months, the European Commission will examine whether VW Anhui can replace its countervailing duties with a managed price system in a move that would effectively equalise the impact of the tariffs.

While the commission is not reopening its lengthy investigation - a source of tension with Beijing - the fact that it has finally accepted a narrow review process from a manufacturer may give others hope that tariffs could be reduced or removed.

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It is understood that VW Anhui started shipping its latest Cupra electric vehicle to Europe only after the investigation was completed and therefore could qualify for dispensation.

EU flags flutter outside the European Commission headquarters in Brussels. The bloc's commission will examine whether VW Anhui can replace its countervailing duties with a managed price system. Photo: Reuters alt=EU flags flutter outside the European Commission headquarters in Brussels. The bloc's commission will examine whether VW Anhui can replace its countervailing duties with a managed price system. Photo: Reuters>

VW Anhui is a joint venture between Volkswagen and JAC Motors located in Hefei, in China's Anhui province.

Volkswagen and its subsidiaries are subject to an additional 20.7 per cent import duty when they ship EVs from China to the EU, on top of a 10 per cent baseline duty for all models.

The review will be limited to this undertaking offer, and the commission will not change its subsidisation and injury findings. The existing tariff rate will remain in effect throughout the review process.

The Chinese government has lobbied furiously against the duties, which were imposed in October after an investigation found widespread market-distorting subsidies throughout the electric vehicle supply chain.

The tariff rates were set at a range of 7.8 per cent for Tesla to 35.3 per cent for the state-owned SAIC Group. BYD and Geely were given separate tariff rates of 17 per cent and 18.8 per cent, respectively.

Non-sampled firms - those that were not the focus of the investigation - were assessed a rate of 20.7 per cent if they cooperated with the probe and 35.3 per cent if they did not.

Talks between the EU, the Chinese commerce ministry and Chinese industry groups over price undertakings have run aground. It is thought that the Chinese side wanted to negotiate a blanket undertaking arrangement covering all models.

Brussels, meanwhile, pushed for a more dynamic deal involving different rates for different cars, which would change with market fluctuations.

Volkswagen has been among the noisiest corporate objectors to the tariffs.

During the investigation launched in October 2023, Volkswagen's CEO, Oliver Blume, frequently warned that German car companies in China could face retaliation if the duties were adopted, a scenario also floated in Chinese state media.

However, Beijing has yet to pull this lever. Its retaliatory investigations have instead focused on the EU's brandy, dairy and pork sectors, thereby angering those European exporters.

A year after the investigation, trade tensions continue to simmer. China's export restrictions on critical minerals, including rare earth elements and magnets, have accelerated efforts to wean Europe off its reliance on the country for important imports.

In some parts of the EU, such as its industrial powerhouse, Germany, anxiety is running high about a new China shock, with hypercompetitive mainland industrial upstarts now outflanking established European manufacturers in China, Europe and third markets.

On Wednesday, the EU unveiled an economic security communication aiming to turbo-boost its sluggish efforts to de-risk ties with Beijing.

This is meant to promote a more aggressive use of trade weapons and, by the second half of next year, will lead to a review on whether a specific instrument is needed to counter China's industrial overcapacity.

Eyeing Beijing's rare earth controls, the commission also launched a €3 billion (US$3.5 billion) plan to build self-sufficiency in critical minerals.

As part of this effort, export restrictions will be introduced next year to stop scrap permanent magnets leaving Europe, as it looks to lock down 20 per cent of its supply from recycling.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.

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