The European Commission has approved antidumping tariffs that range from 4.3% to 45.3% on tires imported for passenger cars and light vans from China. This decision follows an investigation initiated in November of the previous year and marks a significant escalation in the existing trade tensions between the EU and China, with repercussions across various sectors, most notably in the electric vehicle market.
What has happened?
The European Commission claims that Chinese tires were being sold in the EU at artificially low prices, a practice identified as dumping. This activity reportedly harmed the European tire industry, which employs over 80,000 people across 14 EU nations, as stated by the Commission itself.
Tariff Breakdown
Notably, the tariffs are not uniform across all manufacturers. The Shandong Yongsheng Rubber Group, known for its budget-friendly tires, faces the highest tariff at 45.3%. In contrast, 64 other companies, including production lines of well-known brands like Pirelli, Goodyear, Continental, and Sumitomo, will be subject to a tariff of 24.4%.
Why Does It Matter?
The EU tire market, valued at over 18 billion euros in 2024, consumed approximately 330 million units, with about 93 million coming from China. This figure accounts for a 28% market share, up from 18% in 2021, indicating rapid growth. The Commission has reported concerning trends regarding sales, employment, and profitability for European manufacturers during the review period conducted.
Market Segments
More than 90% of Chinese tire imports sit in the lower tier of the market (known as “tier 3”). According to the Coalition Against Unfair Tire Imports, the dumping margins found ranged between 41% to 104%, with Chinese prices undercutting European prices by 30% to 65%.
Calculating Dumping
To determine the presence of dumping, the Commission required reliable reference prices for comparison. However, it deemed domestic Chinese prices untrustworthy due to significant state influence over companies. Consequently, Turkish prices were used as a benchmark for evaluating Chinese pricing, a decision that has not pleased Chinese manufacturers and South Korean firms like Kumho Tire and Hankook.
Both groups argue that Turkish prices shouldn’t be considered a valid standard. Nevertheless, the Commission has stood by its decision.
Response from China
The Chinese Chamber of Commerce has expressed concerns that these tariffs may inflate costs for the automotive sector. In a statement, they warned of potential implications for competitive dynamics between both Asian and European companies with manufacturing operations in China.
Impact on Consumers
According to calculations by German media source Automobilwoche, the tariffs apply to the import value, rather than the final sales price. Given that the average import value in 2024 was 30.30 euros per tire, the added costs range from approximately 7.40 euros (for a 24.4% tariff) to around 13.70 euros (for a 45.3% tariff). With VAT included, consumers could see a price increase of 9 to 16 euros per tire before retailers apply their own margins, with the entry-level segment facing the most significant impact.
What’s Next?
This move does not end the ongoing disputes between the EU and China in the tire sector. The EU is conducting a parallel investigation into the possibility of illegal subsidies for Chinese manufacturers, with results expected in December. Analysts from Citi, as reported by SCMP, suggest that the newly imposed tariffs may stabilize the European tire industry and potentially boost stock market performance for firms like Goodyear, Michelin, Continental, and Pirelli.