"The intention was to protect the European car industry but for us, it's having the opposite effect .... We need to find a solution," Cupra's CEO said.
Proposed EU tariffs on Chinese electric vehicles (EVs) are intended to protect local car companies, but for one Volkswagen brand, the effect is the exact opposite.
Wayne Griffiths, CEO of Volkswagen's Cupra brand, told Reuters that the brand's Tavascan electric SUV (sport utility vehicle) made in China and designed in Spain would be "wiped out" if the European Commission follows through with a planned 21.3 percent import tariff.
In the current European economic environment, raising the price of the Tavascan that sells for about 52,000 euros ($57,500) to cover costs is not an option, Griffiths said, according to a Reuters report yesterday.
Cupra, a sub-brand of Volkswagen's Seat brand, unveiled the Tavascan concept in 2019 based on Volkswagen's MEB (modular electric drive matrix) platform.
At the end of December last year, Volkswagen Anhui, Volkswagen's majority-owned joint venture in China, began production of its first model, the Cupra Tavascan, for export to the European market.
Volkswagen Anhui, a joint venture between Volkswagen and Anhui Jianghuai Automobile Group (JAC) established in 2017, is the German automaker's first joint venture in China focused on EVs.
Initially called Jianghuai Volkswagen Automobile Co Ltd, Volkswagen increased its stake in the company to 75 percent at the end of 2020 and had the company renamed Volkswagen Anhui.
Before Cupra could capitalize on China's supply chain to gain a foothold in the EV market, it was threatened with EU tariffs.
The European Commission announced new proposed tariffs on EVs from China on August 20, with different carmakers facing different rates, and 21.3 percent of carmakers cooperating with its investigation.
Tesla (NASDAQ: TSLA) got the lowest rate of 9 percent after an "individual examination".
The Tavascan, like BMW's electric Mini, was initially slapped with a 38.1 percent tariff in the Brussels plan, prompting protests from both companies, the Reuters report noted yesterday.
Last month, tariffs on both cars were reduced to 21.3 percent, and were added to the list of companies cooperating with the EU investigation, according to the report.
The EU's 27 member countries will vote on the proposed tariffs in October, and if passed, the provisional tariffs will become a five-year policy.
Cupra has invested in building capacity at Volkswagen's Anhui plant, and moving production to another location is not an option, Griffiths said.
Without the expected sales of the Tavascan, Cupra would miss EU-mandated CO2 reduction targets next year, and will therefore face heavy fines, forcing it to cut production and potentially affecting employment at its Spanish base, Griffiths said.
"It puts the whole financial future of the company at risk," Griffiths said. "The intention was to protect the European car industry but for us, it's having the opposite effect .... We need to find a solution."
EU unveils new proposed tariffs for EVs from China, 9% for Tesla
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