By Victoria Waldersee
BERLIN (Reuters) - Volkswagen (ETR:VOWG_p)’s SEAT, the Spanish subsidiary of Europe’s largest carmaker, will be forced to cut output and lay off around 1,500 workers if the EU does not lower its tariff on the brand’s China-made electric car by the end of March, its CEO told Reuters.
Since October, when the European Union slapped tariffs on all China-made EVs sold in Europe, SEAT S.A. - which makes cars under the SEAT and CUPRA brands - is paying an additional 20.7% charge on top of an existing 10% tariff on its CUPRA Tavascan produced at VW Group’s majority-owned plant in Anhui, China.
Executives at several European carmakers say the additional tariffs on their China-made vehicles are causing collateral damage to domestic companies and jobs, contrary to the intention of protecting them.
SEAT CEO Wayne Griffiths said the charge, levied on a car selling at around 50,000-60,000 euros, caused the subsidiary to miss its financial targets last year and will cost it hundreds of millions of euros in 2025.
"We don’t have much time. We need to get to a solution within the first quarter," Griffiths said in an interview with Reuters.
The European Commission declined to comment.
CUT OUTPUT, START LAYOFFS
SEAT and VW Group executives have held regular meetings with EU officials on the Tavascan’s fate, the latest on Thursday, while Spain’s Prime Minister Pedro Sanchez has also appealed to Commission President Ursula von der Leyen to solve the issue and avert major job losses, a SEAT spokesperson said.
Griffiths declined to say what level of tariff the carmaker could afford but said it needed to be "as close as possible" to the original 10%.
If the additional tariff is not reduced or removed in the first quarter, SEAT will be forced to cut the loss-making vehicle from its line-up, Griffiths said.
That will present the subsidiary with another problem: how to bring down average fleet emissions to meet EU targets without the Tavascan.
Carmakers can either buy carbon credits from EV makers, known as "pooling", or cut production of combustion engine cars to lower their average emissions.
The Volkswagen Group has so far refrained from joining a pool, saying in December that it hoped to close its emissions gap through EV sales.
"We can’t fix that overnight," Griffiths said. "So what do you do? Reduce combustion engine output and start firing people. That’s what’s going to happen if we can’t get a fix."
Tesla (NASDAQ:TSLA), BMW, Mercedes-Benz and a number of Chinese EV makers have filed challenges to the new tariffs in Europe’s Court of Justice. However, these cases take on average 18 months and can be appealed.
SEAT cannot rule out legal action, its CEO said, but it also cannot afford to wait.
"CUPRA is our game-changer - it’s what made us profitable as a company," Griffiths said. "If CUPRA is at risk, SEAT is at risk."