Beijing urged to hit European petrol cars with ‘most severe’ taxes

Beijing is said to be considering tariffs on imported European petrol cars that use engines of 2.5 litres or above, such as BMW's X7

Chinese carmakers have urged Beijing to hit back against European Union tariffs on electric vehicles (EVs) with the “most severe measures” in the latest sign of global trade tensions.

At a private meeting organised by China’s ministry of commerce car manufacturers reportedly called on their government to retaliate by imposing tariffs on imported European vehicles with high-powered engines.

German carmakers and Britain’s Jaguar Land Rover which makes Land Rover Discovery and Land Rover Defender models in Slovakia could be hit along with Italian luxury brand Ferrari.

The meeting on Tuesday was also attended by European manufacturers as reported by the Global Times newspaper and China Central Television (CCTV) – both regarded as mouthpieces for Beijing.

The Global Times said Chinese manufacturers “called on the government to adopt firm countermeasures [and] suggested that positive consideration be given to raising the provisional tariff on gasoline cars with large-displacement engines”.

A separate account of the meeting from a social media account associated with CCTV said China’s carmakers called for “the most severe measures” in retaliation to the EU tariffs, according to Bloomberg.

The European Commission has proposed slapping extra duties of up to 38pc on China’s EV manufacturers after an investigation found they had benefited heavily from “unfair” state subsidies.

But in retaliation, Beijing is now said to be mulling tariffs of 25pc on imported European petrol cars that use engines of 2.5 litres or above.

That would potentially take in a host of popular sedans, sports cars and SUVs, including the Mercedes S-Class and GLE SUV, Porsche’s Cayenne and Panamera models and BMW’s X7.

Earlier this month, analysts at Bank of America warned that German carmakers were the most exposed to potential Chinese tariffs. Porsche, Mercedes and BMW collectively ship hundreds of thousands of vehicles to China annually.

Porsche imports all the cars it sells in China and relied on the country for 25pc of its sales in 2023. It is expected to ship 70,000 cars to China this year.

BMW and Mercedes depended on imports for around 15pc and 18pc of their sales in China last year.

German carmakers have vocally opposed tariffs on China’s EV manufacturers in recent months with BMW’s chairman warning it would “harm the German industry much more than the other way around”.

They are now hoping that talks between Brussels and Beijing can avert a trade war before the EU’s proposed tariffs come into force in July.

Patrick Schoenowski, from the German Association for small businesses DMB, called for Mr Habeck, the economy minister, to “act as a mediator between the EU and China and resolve a trade dispute early” during his visit to Beijing this week.

Andrew Bergbaum, an automotive expert at consultancy AlixPartners, warned that consumers would bear the brunt of any trade clash through higher prices.

He said: “The imposition of tariffs by the European Union and China on each other’s exports will only hasten the unravelling of global automotive supply chains as manufacturers are forced to produce more cars locally.

“I expect to see more announcements of Chinese brands building factories in Europe, as they seek to avoid these duties.”

A Porsche spokesman said the company did not comment on “speculation” but insisted the carmaker had a “very balanced sales structure”, adding: “Porsche AG stands for free world trade and dialogue.

“The free movement of goods must continue to be possible.”

A Mercedes-Benz spokesman said: “Free trade, fair competition and the removal of trade barriers lead to prosperity and economic growth – not only in Germany, but all over the world.

“Against the background of globalization and the economic interdependencies of our time, the motto for securing prosperity and peace is: Dialogue and constructive cooperation.

“We are counting on the efforts of politicians to continue this dialogue.”

A spokesman for Jaguar Land Rover said: “As a global business, JLR advocates free and fair trade.”

BMW declined to comment.