MUNICH (Reuters) -Volkswagen's Spanish SEAT division is in constructive talks with Brussels about possibly freeing an electric car it produces in China from stiff EU import tariffs, its chief executive told Reuters.

The CUPRA Tavascan SUV coupe - which is made in China and exported to Europe - has been subject to an additional 20.7% tariff on top of an existing 10% duty since the EU imposed fresh duties on Chinese-made EVs last year.

Markus Haupt, interim CEO of Volkswagen's SEAT SA division that includes the SEAT and CUPRA brands, said talks with the European Commission about an exemption had been going on for several months and had entered the home stretch.

"We are confident that we will soon see a positive outcome for us," Haupt said at the IAA auto show in Munich, describing the talks as "very good".

Haupt said that while CUPRA Tavascan was made in China, it is designed in Spain and developed in Europe, where even some of the components come from, so it should not be affected by EU tariffs.

SEAT/CUPRA, which accounted for around 7% of vehicle sales at the Volkswagen group last year, reported a 91% drop in its operating profit in the first half of 2025, partly due to the stiff tariffs.

SEAT, which has been fully absorbing the tariffs on the CUPRA Tavascan, in February warned that around 1,500 of its workers were at risk should tariffs remain at current levels.

Haupt also said that a decision to enter the U.S. market with the CUPRA brand by 2030 had been postponed until a later stage in light of local tariffs.

Instead, CUPRA is currently looking at potentially launching in the Middle East, Haupt said.

"There are a lot of young people there, a lot of wealthy young people," Haupt said, adding CUPRA was appealing to the youngest customers in the Volkswagen group.

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