China pauses investment in EU countries backing tariffs on electric vehicles

China has told its automakers to halt big investment in European countries that support new tariffs on Chinese-built electric vehicles, Reuters says referring to its sources.

The new European Union tariffs of up to 45.3% came into effect after a year-long investigation that divided the bloc and prompted retaliation from Beijing. Ten EU members including France, Poland, and Italy supported tariffs in a vote this month, in which five members including Germany opposed them and 12 abstained.

BYD, SAIC, and Geely were told at a meeting held by China’s Ministry of Commerce on October 10 that they should pause their major investment plans in countries that backed the tariffs, sources say.

China’s government is seeking leverage in talks with the EU, keen to avoid a sharp fall in electric vehicle exports to the key market. Europe accounted for more than 40% of electric vehicles exported from China in 2023, according to Reuters’ calculations.

Given 100% tariffs on Chinese-made electric vehicles in the U.S. and Canada, a drop in electric vehicle exports to Europe would risk growing overcapacity Chinese automakers face in their home market.