A U.S.-based company and Chinese manufacturers are locked in a legal dispute that could significantly impact the EV market. Their collaborative efforts reflect a shared opposition to the EU’s trade measures, which stem from the Commission’s findings that Chinese EV manufacturers benefit from substantial government subsidies, enabling them to compete unfairly in the European market. If these challenges succeed, they could reduce profits and competitiveness in the European EV sector, potentially hindering progress toward ambitious climate targets.
Industry insiders told POLITICO that Chinese exporters plan to contest claims that certain funds qualify as subsidies, question the methodology used to calculate subsidy amounts, and dispute the assumption that these subsidies have harmed the European EV industry. They will also challenge the Commission’s analysis of the subsidies and the rationale for implementing tariffs.
In a filing on the court’s website on Monday, Tesla argued that the tariff rate was too high for its business model and should be reduced to around 8%, which is lower than the rates facing most other EV manufacturers. The automaker is also seeking a recalculation of its tariff based on the specific subsidies it received from the Chinese government, which the company said were “limited and non-distorting.”
The cases opened a new front in Brussels’ conflict with Musk, who emerged as an ally of U.S. President Donald Trump and promoted the idea that electric vehicles can be made affordable for most households. If the cases succeed, the dispute could escalate into a larger trade fight, with the companies’ challenges potentially setting broader precedents for how the World Trade Organization (WTO) handles disputes involving state subsidies.
Tesla’s decision to join a legal challenge against the European Union’s EV tariffs is a rare move for the U.S.-based manufacturer, which usually focuses on lobbying and public relations to shape global policy. The company’s participation in the case is another sign of its deepening engagement in global economic arenas as it aims to safeguard its position in the competitive EV market.
The European Commission’s anti-subsidy tariffs, set at a maximum of 36.3 percent in July, are scheduled to go into effect in September unless the bloc’s 27 member states vote against them by the end of October. A veto by any member country would delay the imposition of the tariffs, which are expected to last for five years. Those measures could prompt retaliation from Beijing, which is already involved in several trade disputes with the EU over the protection of its manufacturers. That could further strain relations between the two and lead to a tit-for-tat escalation that would threaten global economic stability. The resulting trade conflict also could divert attention from the push to bolster the global economy and climate fight. A trade war also might undermine the EU’s attempts to ratify a new international climate deal. —By David Shanker, unique to POLITICO.