China's electric vehicle exports to Europe: Although it has achieved a 'soft landing', it has once again entered a 'new test room'

For many Chinese car companies with export business to Europe, seeing the guidance document on submitting price commitment applications released by the European Commission, there is indeed a sense of relief - the once highest 35.3% anti subsidy tariff finally has an alternative solution. However, upon closer reading of the document terms, the complexity of reality gradually emerges: companies need to commit to a minimum import price (MIP) and an annual export volume cap in exchange for eligibility for exemption from countervailing duties. This means that each car model must be priced separately, and each company must declare an export "ceiling" and undergo a thorough review by the EU on sales channels, costs, and profits. A document from the European side has also drawn a new red line when opening a window. This guidance document has achieved a 'soft landing' for the China Europe electric vehicle case, "said Xu Yaozong, Deputy Secretary General of the Chinese Automobile Enterprise International Development Innovation Alliance. This result provides a buffer space and alternative path for car companies to avoid high tariffs on exports to Europe, which is beneficial for car companies to obtain greater profit margins and also provides more stable policy expectations for car companies to expand into the European market; However, at the same time, new thresholds have been set by raising prices, which may limit the export of other models such as PHEVs to the EU. What needs to be particularly noted is that if there is a lack of reasonable guidance for local development requirements such as investment commitments, it may lead to disorderly investment by enterprises, which is actually detrimental to the sustainable development of the industry.

Upon closer examination of the formation and implementation process of the price commitment mechanism, Xu Yaozong believes that attention should be paid to the following deep impacts.

The first possibility is the conversion of tax burden into income. If the application is successful, the enterprise does not need to pay high anti subsidy taxes. This part of the tax that was originally supposed to be paid to the EU will be converted into the enterprise's own income and profits, and the economic benefits can be improved. On the other hand, BEV exports to Europe may be affected in the short term. If the price commitment is successfully applied for, the enterprise can maintain exports to Europe, avoiding the risk of being marginalized by the market due to high prices caused by tariffs. However, the annual export volume and vehicle model quantity restrictions in the price commitment will to some extent inhibit the rapid growth of enterprises' exports to Europe. Price commitments require more refined management for enterprise pricing decisions. Enterprises need to comprehensively adjust the pricing logic of the EU market, accurately calculate MIP, management fees, and profit margins to ensure compliance with price commitment agreements, and their pricing strategies will be subject to strict supervision and review by the European Commission - undoubtedly compressing the operational space for price competition. At the same time, enterprises also face the risk of commercial information disclosure. The offer that car companies need to submit includes core information such as minimum import prices, terminal sales prices, sales channels, cost composition, and profit margins. Once the commitment plan is required to be publicly disclosed, it may to some extent affect the company's information advantage in competition. Under the terms of investment commitments, the development path of Chinese car companies is facing differentiation. Although the European side considers investment commitments as a "bonus point" for evaluating corporate applications, the localization development of the EU still faces non economic risks such as high operating costs, strict compliance environment, and potential foreign subsidy reviews. Top companies have steadily advanced their localization layout according to their own strategies, while more companies need to balance the difficult task of avoiding long-term trade barriers by fulfilling investment commitments, or accepting price commitments or tariffs to retain flexibility while bearing the risk of market access uncertainty? Faced with this complex chess game, Xu Yaozong believes that the government, industry, and enterprises need to work together to break through the game. At the government level, it is necessary to strengthen dialogue with the European side and provide clear institutional guarantees and cooperation. One is to make good use of the WTO dispute settlement mechanism and urge the European side to strictly implement it. The second is to collaborate with industry organizations to closely monitor the effectiveness of price commitment implementation and establish a dynamic evaluation and warning mechanism. Thirdly, we will continue to implement graded and classified management for overseas investment by enterprises, in order to avoid situations where companies flock to the EU to invest and build factories in an disorderly manner in order to gain bargaining chips. At the industry level, institutions should actively play a pivotal role in internal coordination and supervision. On the one hand, organizing experts to interpret EU guidance documents, clarifying vehicle models, configurations, pricing, application processes, and key nodes; On the other hand, industry organizations can represent the industry in regular communication with the European side on technical issues related to the implementation of the agreement, reduce compliance risks and friction costs for various enterprises, and supervise the implementation of the European side's commitment to non discrimination, objectivity, and impartiality in the review process. In addition, industry organizations can actively build a platform for China Europe industrial exchange, promoting cooperation in areas such as policies and regulations, technical standards, supply chains, and talent development; Establish an early warning mechanism, track the implementation of the agreement, and organize resources to assist in responding to potential investigations or reviews. At the enterprise level, it is necessary to adopt a multi pronged approach and layout carefully. Xu Yaozong suggested that firstly, one should actively evaluate their own business strategy in Europe, choose a development mode that suits their own situation, and submit a price commitment offer that meets the requirements; Secondly, it is necessary to carefully fill in investment commitments, continuously track the release of relevant EU notices and rules, and pay attention to national policies related to foreign investment to avoid compliance risks; The third is to continuously enhance non price competitiveness and overseas localization capabilities, strengthen product strength through technological innovation, brand building, and improving after-sales service system, and adopt diversified strategies to break through the situation; The fourth is to choose EU countries with political stability and good industrial foundations for capacity cooperation, joint venture cooperation or technology cooperation, and explore suitable EU localization development models based on the advantages of the enterprise itself.