The win for the U.S. mogul comes amid fraught relations with the EU.

Musk’s U.S. company is by far the biggest exporter of electric vehicles from China to Europe. | FC CHS China/EFE via EPA

Billionaire Elon Musk scored a win in his tempestuous relationship with Brussels on Tuesday, securing a lower, individual duty on the cars his company Tesla makes in China and sells to the European Union.

The European Commission announced final duties on imports of made-in-China electric vehicles following a probe into unfair Chinese state subsidies. While EV-makers will face duties of up to 36.3 percent, Tesla will only be charged 9 percent after the company secured individual treatment.

The tech mogul’s relationship with Brussels could hardly be thornier. Just last week, Musk insulted the EU’s top digital enforcer Thierry Breton, who had warned the X owner about the EU’s rules on promoting hate speech ahead of Musk’s livestreamed conversation with Donald Trump. Within hours, Breton faced accusations of meddling in American politics.

Then, there’s the EU’s gambit to compete with Musk’s Starlink global satellite network as it struggles with cost overruns and project delays.

Musk is also firmly in the back pocket of China — where the self-declared free speech absolutist’s social media platform is blocked. The mercurial leader has heaped praise on the authoritarian country and met frequently with high-ranking officials as he looks to maintain Tesla’s foothold in the country and win approval for its self-driving technology.

Tuesday’s announcement represents another coup for Musk: Not only was he able to establish operations in China without having to team up with a local partner, but the Tesla tariff reflects a Commission view that it has not benefited as much from state aid as its Chinese competitors.

“We are fairly convinced that we have an accurate picture of the subsidies that [Tesla] receives in China,” said a Commission official, pointing to the company’s simpler structure compared to the other investigated groups and its financing sources outside of China. The official was granted anonymity because they were not authorized to speak publicly.

Both ends against the middle

Musk’s U.S. company is by far the biggest exporter of electric vehicles from China to Europe, but the EU executive initially did not select it for visits. The company therefore applied to receive individual treatment and had that request granted, receiving inspectors at its Chinese production facilities in June. Only individually verified companies receive their own duty.

With a 9 percent tariff, Tesla will face lower import costs than Europe’s own car brands. Volkswagen’s joint venture with Chinese brand JAC, for example, created its electric SUV the Cupra Tuvascan specifically for the European market. Those models — which will enter the EU market later this year — will now be hit with a 21 percent tariff.

BYD will face duties of 17 percent, SAIC 36.3 percent and Geely 19.3 percent. Cooperating companies will be hit with duties of 21.3 percent. The duties are close to the provisional ones announced by the Commission last month.

Brussels and Beijing have been seeking a negotiated solution to their trade dispute, but Beijing earlier this month escalated the row, suing the EU at the World Trade Organization.

The EU’s move will “exacerbate trade tensions between China and the EU, sending a profoundly negative signal to global cooperation and green development,” the Chinese Chamber of Commerce to the EU said in a statement.

EU countries will vote on cementing the duties for five years by Oct. 30, when the EU’s investigation is set to be completed. An initial, non-binding vote revealed mid-July that capitals were broadly supportive of the duties. Interested parties now have 10 days — until Aug. 30 — to submit comments on the duties.

Cozying up to Beijing 

Since the 1980s, foreign automakers have been required to enter into joint ventures with domestic automakers to build up China’s supply chains and automotive sector.

Yet Tesla was allowed to build its Gigafactory in Shanghai — in a designated free-trade zone — without such a partnership. The factory opened in 2020, sparking a surge in other EV companies, helping create the very industry that has prompted the Commission to open its investigation last October.

“That was an intentional move by Tesla to not just sell in China, which they can do with that factory, but to get the benefit of the Chinese supply chain working for the global system,” said Bill Russo, an automotive expert based in Shanghai.

And it didn’t do it alone. Tesla has long pursued markets that offer subsidies, and China is no exception.

“Tesla’s story is a story of grabbing as much government support as possible … you don’t disrupt an industry that has 100-plus years in history without a lot of government support,” Russo added.