Automakers Eye Tariff Relief as EU Opens Door to Minimum Price Deals for Chinese-Built EVs

The European Commission and China's Ministry of Commerce unveiled joint guidance on Monday that paves the way for lifting tariffs on select electric vehicles (EVs) imported from China to Europe. This move targets models like Volkswagen's Cupra Tavascan, offering automakers a pathway to sidestep duties through voluntary export caps and price floors.

European Commission officials emphasised their openness to alternatives since imposing the tariffs. "We have said from the start... that we’re willing to look at alternatives to the anti-subsidy duties," stated spokesman Olof Gill. Automakers complying with these limits could avoid duties of up to 35%, enacted in late 2024 to counter alleged Chinese subsidies.

Voluntary Limits as Tariff Alternative

Under the new procedure, automakers can propose binding restrictions on EV shipments from China and minimum sales prices in Europe. Approval requires sign-off from both the European Commission and EU member states, meaning deals won't activate immediately.

Volkswagen pioneered this approach earlier this year by imposing limits on Cupra Tavascan exports from its Hefei factory, alongside an undisclosed price floor. In return, it sought exemption from its 20.7% tariff. 

Tensions with China and Past Precedents

China's Ministry of Commerce urges Chinese-based automakers to negotiate collectively, warning that individual bids could spark unhealthy competition for concessions. This contrasts with its 2025 push for separate price undertakings from European brandy exporters.

EU officials remain cautious, fearing price floors could enable profiteering. A 2013 solar panel deal saw Chinese firms set high minimum prices, dodging tariffs while funding expansion that crushed European competitors. Trade experts worry a repeat could undermine Europe's EV ambitions amid US tariff threats under President Trump.

The framework aligns with Europe's pivot toward diversified trade partners, as US deficits lure exporters but Trump's policies loom large. China, meanwhile, prioritises domestic substitution over imports.

Broader EV Market Pressures

Shifting dynamics ripple globally. General Motors reported a $7.1 billion Q4 2025 loss, largely from writedowns on battery plants and EV lines. Tesla marked its first annual sales dip below BYD, hit hard by vanished US incentives.

Ford and GM are scaling back EV output amid slumping demand and policy reversals post-Trump inauguration. These headwinds underscore the high stakes in EU-China talks as the world accelerates toward electrification.