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All eyes have been on Beijing since the EU’s decision last week to impose restrictions on Chinese electric vehicle exports. Retaliation is looming, including possible higher tariffs on gasoline-powered cars imported from Europe, according to state media. But it may not be European automakers that are hit the hardest.
Chinese automakers and industry groups have suggested to authorities that they raise tariffs on cars imported from the EU, state-run Global Times newspaper reported on Wednesday. The paper reported last month that the government-run Automotive Research Center had suggested Beijing raise import tariffs on large gasoline vehicles to 25 percent from the current 15 percent.
China is the EU’s third-largest market for auto exports after the United States and the U.K. According to the European Automobile Manufacturers Association, EU car exports to China last year totaled 19.4 billion euros, double the amount of electric vehicles imported to the EU from China.
However, for the major European car makers, China accounts for one-third of their total sales, but many of them are well-prepared to withstand the risk of higher tariffs. BMW, for example, has majority stakes in joint ventures with local manufacturers, which will help it avoid most of the damage. Volkswagen and Renault also have joint ventures with local manufacturers. Sales of Ferrari and Porsche, which have a high proportion of imported cars compared to their sales in China, will be hit hard. However, for these brands, their dependence on the Chinese market is limited in terms of their overall group sales.
The bigger risk for European automakers is indirect: China’s patriotic consumers have increasingly supported domestic brands in recent years. Previous boycotts of companies including Burberry, Dolce & Gabbana, Canada Goose, H&M and Nike have stemmed from nationalist backlash over a range of issues and have hit revenues, with some companies closing stores due to the lasting effects.
For now, Beijing is targeting European farmers rather than automakers, launching an investigation into EU pork imports, a sector less hedged than automakers, with more than $3 billion in annual imports at risk, up from nearly $8 billion at its peak.
While car makers escape relatively unscathed, any action by the Chinese government could increase risks to other European export industries, including pharmaceuticals, aviation, cosmetics and brandy.
june.yoon@ft.com
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