German car industry urges EU to drop tariffs on China-made cars

BERLIN (Reuters) -Germany's VDA auto association has urged the European Commission to drop its planned tariffs on China-made electric vehicles in a last-ditch effort to influence negotiations ahead of the tariffs which take effect on Thursday.

The association said in a statement on Wednesday the tariffs would hurt European and U.S. carmakers exporting from China and risked retaliation by China with counter-tariffs, which would hit the German industry hard given its high volume of exports to China.

In a separate statement, BMW CEO Oliver Zipse called the tariffs a "dead end", arguing they would harm global companies, slow decarbonisation by limiting the supply of EVs to Europe, and do nothing to strengthen European manufacturers' competitiveness.

The value of passenger car exports from Germany to China last year was more than three times the value of imports from China, and the value of exports by component suppliers was four times as much as the value of imports, according to the VDA.

The Commission should instead focus on securing access to critical raw materials - many of which are controlled by China - for Europe's EV industry, reducing barriers to market access, and creating transparency on trade policy, the VDA said, proposing the creation of a council to discuss such matters.

China and the European Commission have been in negotiations since last week over the curbs that Beijing wants scrapped, rejecting accusations of unfair subsidies.

Brussels has made clear that it expected China to come to technical talks taking place this week with a road map for "addressing the injurious subsidisation" of its EV industry if there were to be a negotiated outcome.

CHINA RETALIATION

Chinese automakers urged Beijing last month to hike tariffs on imported European gasoline-powered cars in retaliation for the tariffs, the state-backed Global Times newspaper reported on June 19.

A closed-door meeting to discuss the response was attended by companies including SAIC, BYD, BMW, Volkswagen and its Porsche division, two people with direct knowledge of the matter said.

German economists are divided on the tariffs, according to an Ifo survey published on Wednesday.

While a third of them think it's an appropriate step to counter Chinese subsidies, another third would prefer no tariffs at all for fear of a trade war, the survey found.

Eleven percent called for lower duties, while 6% favoured higher ones.

"Dealing with China is challenging," Ifo economist Niklas Potrafke said in a statement. "Geopolitical risks, responses to China's economic and export strategy and maintaining free trade must be weighed up against each other."

(Reporting by Victoria Waldersee and Chiara Holzhaeuser; Editing by Michael Perry and David Holmes)