Electric vehicles from China: the EU’s anti subsidy duties and the emerging pathway for price undertakings
After several years of growth in Chinese production capacity and declining battery prices, the European Union (“EU”) is now facing the resulting market effects at its borders. The European Commission’s past investigation into support for battery electric vehicles (“BEV”) resulted in countervailing duties designed to restore a level playing field. Recent developments, however, open a tightly controlled alternative to such duties: price undertakings that comply with strict pricing rules and are capable of real-time traceability and compliance monitoring.
This Law-Now outlines the Commission’s anti-subsidy measures to date and focuses on the emerging guidance on price-undertaking offers.
How we got here: EU anti‑subsidy measures
The European Commission launched its anti‑subsidy investigation on its own initiative in October 2023. The investigation concluded that China’s BEV value chain benefits from unfair, distortive subsidies which was injurious to the EU BEV industry. As measures to remedy the injury on EU producers, the Commission adopted provisional measures in July 2024, then definitive countervailing duties applicable from 30 October 2024.
Such measures cover new BEVs designed primarily for the transport of up to nine persons, propelled solely by one or more electric motors, including range‑extender configurations[1]. Hybrids and internal‑combustion vehicles are out of scope.
Duties apply for five years (subject to review) and are set at company level, ranging between 7.8% to 35.3%, in addition to the EU’s standard 10% MFN import tariff on passenger cars. The Commission has signalled throughout that any alternative must be enforceable and at least as effective as duties in eliminating injurious subsidisation, consistent with WTO rules.
Price undertakings: pathway and requirements
In December 2025, the Commission opened a partial interim review to assess the first proposed alternative to duties in eliminating injurious subsidisation in relation to a specific China‑built model. The proposed undertaking consists of imposing a minimum import price (“MIP”) and an annual import quota, and if accepted and formalised by regulation, duties would be suspended for the imports of the exporting producer covered by the undertaking. The Commission’s 12 January 2026 Guidance Document[2] explains how it will assess undertaking offers – including this first offer – as a possible alternative to the duties, on an objective and non‑discriminatory basis and in line with WTO rules. It is not a deal, but a framework for carmakers to submit offers.
The key elements of the Commission’s approach to assessing price undertakings are:
- The equivalence test: any undertaking must “eliminate the injurious effects of the subsidies and provide equivalent effect to duties.” This is the anchor for all other elements and informs pricing, monitoring, and enforcement design.
- Pricing mechanics: Given the wide variation in models and configurations, the Commission indicates undertakings should set minimum import prices for each model and configuration option. The reference point is the customer‑facing net sales price to the first independent consumer in the EU rather for importers or dealers. For calculating minimum import prices, the Commission outlines two indicative methods: (i) building from the exporter’s own shipping prices – including the cost of goods, insurance and freight – during the investigation period plus the applicable duty margin, or (ii) benchmarking against the EU sales price of a comparable unsubsidised BEV. Both approaches are intended to be auditable and to meet the equivalence standard.
- Control against cross-compensation: any undertaking must be technically practicable for monitoring and enforcement, such that there may be vehicle-level traceability from export through to final EU sale and monitoring subsequent reductions in the net sales price. The Guidance Document cautions that undertakings from exporters selling other vehicles (for example, hybrids) may be harder to accept due to elevated circumvention risks. However, volume commitments (e.g. annual caps),limited duration for the price undertaking or internal reorganisation (e.g. creation of internal workflows and documentation schemes to facilitate vehicle-specific tracking from export to sale) can be used as risk mitigation.
- EU investment commitments: the Commission may consider clearly defined EU investment commitments when assessing offers, provided they have specific scope, timelines, and financial magnitude with verifiable milestones. Non‑compliance with such commitments may be treated as a breach that could trigger withdrawal and retroactive duty collection.
The Commission emphasises that all offers will be assessed under the same legal criteria, objectively and without discrimination, consistent with WTO rules.
Negotiations and global context
The issuance of this Guidance Document follows months of dialogue between the EU and China.
Initially, contacts between the EU and China were limited after the EU duties were imposed. However, negotiations between the EU and China have resumed as part of a wider context of global trade frictions, following the US tariffs put in place in 2025 against both the EU and China affecting a wide range of sectors, including cars.
Chinese BEV makers are facing multiple challenges, from overcapacity and a slower market in China, in addition to being closed off from the US market where they have subject to 100% tariffs even prior to the US’ 2025 tariffs increases. In this context, Europe remains the key available market for Chinese BEVs exports. This provides the EU with potentially more leverage in its dialogue with China.
Global trade frictions do not alleviate the concerns for European BEV carmakers facing competition from Chinese BEVs benefitting from unfair subsidies that prompted the imposition of these tariffs. Thus, discussions have been focused on the exploration price undertakings compatible with WTO rules rather than abandoning duties altogether.
Market responses and outlook
The risk of cross-compensation by carmakers offering both BEVs and other vehicles (meaning that they could offset the measure with products falling outside its scope) highlighted in the Guidance Document can be explained by the sharp increase in imports of hybrid vehicles (not impacted by the EU duties) since these duties came into force. In the meantime, there has been a decline in registrations of Chinese brands BEVs in Europe.
One of the key implications following the publication of this Guidance Document is the practical feasibility, in particular to monitor this risk.
The partial interim review will take from 12 months up to 15 months. If an undertaking is accepted, countervailing duties would not apply to the transactions covered by the undertaking.
Conclusion
The publication of the Guidance Document by the Commission and the opening of the partial interim review mark a key first step in the potential easing of EU duties imposed on Chinese BEVs in the EU, provided that that the relevant carmakers are able to offer price undertakings equivalent to the duties and capable of offsetting the Chinese subsidies they benefit from.
For further information, please contact the authors or your usual CMS contacts.
[1] Such motors are currently classified under CN code ex 8703 80 10 (TARIC 8703 80 10 10 10).
[2] This Guidance Document is available here: https://tron.trade.ec.europa.eu/investigations/case-history?caseId=2684#AS689
