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Commission says it has necessary support for tariffs

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Says will continue talks with Beijing

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More states back tariffs than oppose, many abstentions

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Case is Commission's biggest trade clash with China in a

decade

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Beijing has threatened retaliation if tariffs go ahead

By Philip Blenkinsop

BRUSSELS, Oct 4 (Reuters) - Brussels will stick to plans

to impose hefty tariffs on China-made electric vehicles, the EU

executive said on Friday, even after the bloc's leading economy

Germany rejected them and exposed a rift over its biggest trade

row with Beijing in a decade.

The proposed duties on Chinese-built EVs of up to 45% would cost

carmakers billions of extra dollars to bring cars into the bloc

and are set to be imposed from next month for five years.

The Commission, which oversees the bloc's trade policy, has

said they would counter what it sees as unfair Chinese subsidies

after a year-long anti-subsidy investigation, but it also said

on Friday it would continue talks with Beijing.

A possible compromise could be to set minimum sales prices.

In a pivotal vote on Friday, 10 EU members backed tariffs and

five voted against, with 12 abstentions, EU sources said.

It would have taken opposition from a qualified majority of 15

EU members, representing 65% of the EU population, to block the

proposal. Reuters reported on Wednesday that the measure was

likely to pass with France, Italy and Poland planning to vote in

favour.

The region's biggest economy and major car producer,

Germany, voted against the proposal, sources said on Friday.

The EU executive said it had obtained "the necessary

support" to adopt the tariffs, although it would continue talks

with Beijing to find an alternative solution.

Friday's vote reflected divisions in Europe on commercial

relations with China. Some nations want a firm line against what

they see as excessive state subsidies and are mindful of the

EU's failure to impose tariffs on Chinese solar panels a decade

ago. China has a share of over 90% of the EU photovoltaic

market.

Other countries want to encourage Chinese investment or fear

a tit-for-tat trade war.

In what was already seen as a retaliation, Beijing this year

launched its own probes into imports of EU brandy, dairy and

pork products.

A FATAL SIGNAL?

BMW Chief Executive Oliver Zipse described the vote as

"a fatal signal for the European automotive industry". He said a

quick settlement was needed between Brussels and Beijing to

prevent a trade conflict.

Volkswagen said the planned tariffs were "the wrong

approach."

Geely Holding expressed "deep disappointment" in

the Commission's decision, saying it could hinder EU-China

economic relations and harm European companies and consumers.

China's foreign ministry did not immediately respond to a

Reuters request for comment.

Hungarian Prime Minister Viktor Orban said the EU was headed for

an "economic cold war" with China.

However, France's PFA car association said it was good EU

members had backed duties, adding it was in favour of free

trade, as long as it was fair.

Stellantis ( STLA ) said it supported free and fair competition and

that the sector was under pressure from ambitious carbon

reduction plans and "the Chinese global commercial offensive".

HARDENED STANCE

The EU's stance towards Beijing has hardened in the last

five years. It views China as a potential partner in some

issues, but also as a competitor and a systemic rival.

The Commission says China's spare production capacity of

three million EVs per year, which needed to be exported, is

twice the size of the EU market. Given 100% tariffs in the

United States and Canada, the most obvious outlet for those EVs

is Europe.

As part of continued negotiations with China, the Commission

could re-examine a price undertaking - involving a minimum

import price and typically a volume cap.

A case in point is Volvo Cars, which is majority owned by Geely.

The company hopes to avoid hefty tariffs when importing its

China-made EVs by reaching an agreement on pricing.

The EU tariffs range from 7.8% for Tesla to 35.3% for

SAIC and other companies deemed not to have

cooperated with the EU investigation. These tariffs are on top

of the EU's standard 10% import duty for cars.