Turkey announces 40% tariff on Chinese vehicle imports as EU imposes multi-band tariffs against Chinese OEMs

In a significant protectionist policy move, Turkey has announced a 40% additional tariff on vehicle imports from China, effective from July 7, 2024. The decision aims to mitigate potential negative impacts of Chinese EVs saturating Turkey’s domestic market and bolster its national automotive industry against what is widely perceived as Chinese vehicle ‘dumping’.

The approach follows growing global concerns about China’s unwieldy EV exports; recognised as being heavily subsidised by Beijing, and follows the US’ decision to impose its own 100%+ tariff hike on Chinese EVs.

EU announces anti-Chinese EV tariffs ranging from 17.4% to 38.1%

Following the US decision, all eyes shifted to the European Union, following its anti-subsidy investigation into Chinese EV dumping on the continent. Today, the silence broke with The European Commission’s announcement that it will indeed impose additional tariffs on electric cars produced in China, ranging from 17.4% to 38.1%. Preliminary results from its anti-subsidy investigation confirmed that Chinese state support is distorting prices, as suspected.

Interestingly, the EU’s duties will vary by carmaker, with the highest duty of 38.1% imposed on Chinese state-owned manufacturer SAIC, while Geely will face a 20% duty, and BYD 17.4%.

Western brands producing electric cars in China, including Tesla, Dacia, and BMW, will also face a 21% duty.

With protectionist policies increasing against China, Turkey’s move indicates its awareness of China’s questionable practices concerning automotive exports, but where the EU seems to have ‘bands’, the Turkish ministry has opted for a blanket imposition.

Turkish government rationale for protectionist policy

The Turkish Trade Ministry highlighted the necessity of its measures to protect the dwindling share of domestic vehicle production, saying: “An additional tariff will be imposed on the import of conventional and hybrid passenger vehicles from China to increase and protect the decreasing share of domestic production.” The tariff will be applied as either a 40% surcharge or a minimum of $7,000 per vehicle, whichever is higher.

With the increased costs of Chinese vehicles, coupled with the new EU tariffs, European and domestic brands could gain a competitive edge in Turkey’s domestic market

The ministry underscored that this decision aligns with Turkey’s broader economic strategy to reduce its chronic current account deficit, which stood at $45.2 billion last year. “The additional tariff decision was made taking into account current account deficit targets and efforts to encourage domestic investment and production,” it said.

China’s Chery and MG provide comment on Turkish tariffs

Chinese automobile brands, which have significantly increased their market presence in Turkey, have responded to this new regulation. Si Fenghuo, president of Chery Turkey, (one of Turkey’s leading Chinese brands), stated: “Turkey is one of our most strategic markets and is also an important part of Chery’s European strategy. We respect the government’s decision on tax regulation.”

Fenghuo also revealed that Chery is conducting a feasibility study for setting up production facilities in Turkey. “While we are working to adapt to the changes made, on the other hand, we are working intensively on the feasibility analysis of factory construction and production in Turkey together with the relevant ministries.

“We are striving to carry out production in Turkey in a short time. We are and will continue to be there for our customers with our sales and service through our authorised dealer network throughout Turkey.”

Turkish market implications

The tariff increase, which also affects second-hand vehicle prices, has raised concerns about its broader market implications. Hüsamettin Yalçın, general manager of the automotive data company Cardata, speaking to Türkiye media outlet said of the potential fallout: “The new additional 40% customs duty imposed on Chinese-origin vehicles has had a great impact on the industry. This regulation will significantly affect inventory management and pricing strategies of importing companies.”

Yalçın also foresaw a rapid sale of current Chinese vehicle stocks before the tariff’s implementation, followed by a substantial drop in sales. “Large campaigns can be organised to liquidate stocks and record sales can be seen in this process. However, it is possible that sales will drop significantly after July 8,” he explained.

With the increased costs of Chinese vehicles, coupled with the new EU tariffs, European and domestic brands could gain a competitive edge in Turkey’s domestic market. The shift could also prompt other brands to reconsider their pricing strategies. The regulation may also hinder the introduction of hybrid and electric vehicles into the Turkish market; imports of which were previously encouraged by favourable policies.