EU and China reach important milestone on EV price undertakings

After months of deadlock, Brussels and Beijing have finally inched toward a truce in their electric vehicle (EV) trade spat.

On January 12, the European Commission and China’s commerce ministry (MofCom) announced they have reached an initial agreement on price undertakings (PUs) for Chinese EV imports into the EU.

ICYMI: Beijing and Brussels have been negotiating since late 2024 over a PU framework that would replace existing EU tariffs on Chinese EVs. But major disagreements over the framework's design have stalled negotiations.

The Commission issued guidance instructing Chinese automakers on how to submit PU proposals for case-by-case review.

• Firms must set price floors for each model, at levels high enough to “eliminate the injurious effects of subsidies and achieve an effect equivalent to duties.”
• OEMs are encouraged to include plans to invest in EU manufacturing capacity and commit to annual export volume caps – add-ons that could improve approval odds and potentially allow for lower price floors.
• The guidance also hints that proposals from companies like BYD – who export tariff-exempt hybrids to offset weaker EV revenues – may have a tougher time gaining approval.

Get smart: EV tariffs are arguably the single biggest fault line in the Sino-EU trade relationship.

• If implemented in a way both sides can live with, a PU deal could become the anchor for broader trade de-escalation.

Get smarter: With every major Chinese OEM racing to secure a foothold in the EU market, the Commission will need to strike a careful balance.

• The goal is to protect European automakers enough to keep them competitive, but without setting volume limits so tight that EU OEMs don't have to compete at all.