Geely-owned Volvo Cars is planning to shift more of the manufacturing of China-made cars to a plant in Belgium in order to avoid stiff new import tariffs applied by the EU to Chinese cars.

A report in The Times newspaper citing anonymous sources at Volvo said the company would cease sales of Chinese-built EVs if new tariff hikes are introduced by Brussels following a probe into anti-competitive subsidies that have allegedly benefited Chinese car companies.

The report said that Geely/Volvo is considering moving production of the EX30 and EX90 models from China to a Volvo plant (Gent) in Belgium to avoid new tariffs.

The EU Commission’s anti-subsidy investigation was launched in October and the bloc can impose provisional anti-subsidy import duties nine months after the start of its investigation.

A big hike to the EU’s import tariffs on Chinese cars (the common external tariff level applying to new cars imported to the EU from any territory without a bilateral trade deal is set at 10%) would likely meet retaliation from Beijing – something that could harm automotive companies with big interests in the Chinese market and industry.

Chinese car companies such as BYD are targeting the European market with relatively low-price electric cars which analysts say European OEMs will struggle to compete with.

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GlobalData analyst Justin Cox told Just Auto: “The competitive threat from Chinese made BEVs with very low price points is coming ahead of the long-term market transition from combustion engines to electrified powertrains.

“It’s obviously a huge opportunity for Chinese exports, but trade blocs exist to protect their strategic economic interests and industries and that’s what the EU will be looking to do. However, it’s something of a balancing act to ensure that any protective measures do not provoke a level of retaliatory actions that damage the interests of the very companies they are trying to protect and make globally competitive.”    

The Biden administration in the US recently decided to raise tariffs on Chinese car imports to 100%.