Volkswagen Group: EU tariffs on Chinese cars 'potentially dangerous'

Volkswagen Group CEO Oliver Blume has said imposing tariffs on Chinese cars in Europe would stifle competition and could risk retaliatory action in China. Speaking at the company's annual press conference, he opined that making it more difficult for Chinese firms to sell cars in Europe would ultimately threaten the ability of European firms to compete at a global level. "We're in favour of free world trade and fair world trade as well. All economic operators must follow the same rules. So it works both ways," Blume said. "What is potentially dangerous is that if you engage in protectionist practices on one side, you will cause this type of opposite protectionism on the other side." China is the Volkswagen Group's largest single market globally. Including both imports and cars produced there by its Chinese joint venture partners, the German giant sold 3.2 million vehicles there last year - a 1.6% year-on-year uptick and sufficient for a huge 14.5% market share. The Volkswagen ID 3 was China's best-selling compact car in the fourth quarter of the year, while the larger Volkswagen ID 4 was one of the top five compact SUVs in the market. China also accounts for a significant proportion of Audi's and Porsche's global sales and is home to the production of a huge variety of Group models, both for local sale and export. In addition, the Volkswagen Group has signed important strategic partnerships with Chinese firms including Xpeng (with Volkswagen) and SAIC (Audi), as well as technology outfits including Horizon Robotics and Thundersoft, and recently established the dedicated Volkswagen China Technology Company as a standalone division to develop "intelligent, fully connected vehicles". The EU introducing tariffs on Chinese-made cars – as has been proposed by its lawmakers – could prompt China to introduce tariffs on European-made cars, which would have severe implications for the Volkswagen Group's performance there. "When it comes to trade agreements, international trade agreements, we have to do just the same. Let's be balanced and have a level playing field. It's not only true for the interaction between Europe and China but also other parts of the world," Blume said. "Duties and taxes should be reasonable and balanced. I want to be very clear about this: we're not in favour of protectionism. We are for an equal balance among different trading regions of the world." Blume's comments echo those of his counterpart at Mercedes-Benz, Ola Källenius, who earlier this week questioned the EU's decision to investigate whether Chinese car makers are competing fairly in Europe. "We as companies aren't asking for protection," he said, "and I believe the best Chinese companies aren't asking for protection. They want to compete in the world like everybody else. “Don’t raise tariffs. I’m a contrarian. I think go the other way around: take the tariffs that we have and reduce them.” So too has Renault Group CEO Luca de Meo previously welcomed the prospect of Chinese brands operating freely in the European market, saying: "There's no reason why we shouldn't allow people who do good stuff for the European consumer to enter the market, to offer people what they want." That's in contrast to Stellantis CEO Carlos Tavares, who has long campaigned for the EU to safeguard its automotive industry by limiting the ability of Chinese firms to substantially undercut their European rivals on price. "Conditions here are easier for Chinese car makers to compete than for Western car makers in China,” he previously said. “The EU is wide open, and it isn't acceptable. Don’t support Chinese companies in Europe with easier rules than we’re getting there.” In addition to the legislative and commercial implications, Blume said that imposing restrictions on Chinese firms would be counterproductive from a competition standpoint, because it would disincentivise innovation and investment by European firms. "Genuinely, I can say that competition is a very positive thing. Competition spurs you to be better than others – like in sports, really. If your competitors are running with you, you are going to be more innovative. And this extra innovation is beneficial to all of us, including our customers. "That's the best situation. The best way to prevail is to be better than the others."