Tesla and BMW have brought actions before the General Court of the European Union to challenge the European Commission's (EC) decision to impose additional duties on electric cars made in China. This legal action reflects the growing opposition of car manufacturers to EU initiatives aimed at curbing Chinese government subsidies.

What customs duties apply?

According to bmwblog, the duties imposed last year following the EU investigation apply to all electric cars made in China, on top of the existing 10% import duty. 

BMW, which produces the electric MINI Cooper (J01) and Aceman (J05) models in China, faces a high duty of 20.7%. 

Tesla's electric cars assembled in Shanghai were subject to an additional tariff of 7.8%. 

Other Chinese manufacturers, including BYD, Geely and SAIC, have also been targeted. Duties on some companies are as high as 35.3%. Cars made in China and imported into the EU are also subject to a 10% import tax.

BMW offers

The EC bases its decision on the fact that China supports domestic EV manufacturers with subsidies such as cheaper land, favourable financing and support for suppliers. 

According to the authority, this allows Chinese manufacturers to sell cars in Europe at lower prices and compete unfairly with domestic manufacturers.

Both Tesla and BMW have criticised the duties, arguing that they undermine global trade, reduce the availability of electric cars in Europe and could slow the decarbonisation of the transport sector. 

Tesla has not commented publicly on its lawsuit, but Elon Musk has previously criticised trade barriers for disrupting supply chains and increasing consumer costs.

Difficult decisions

BMW and Tesla are faced with difficult choices - whether to absorb the extra costs, reducing profit margins, or pass them on to consumers and risk lower sales. Another option is to move production to Europe, which would be a costly and time-consuming alternative.

BMW has the opportunity to relocate part of its production, as some of its plants, such as those in Oxford and Munich, are already preparing to produce electric cars, while the Debrecen plant, which opened this year, will produce Neue Klasse models. 

For Tesla, the situation is more complex. In Germany, where it has long dominated the electric car market, sales fell by 60% in January and by 63% in France. In the UK, sales fell by 8%.