China could cut its export VAT rebate on electric cars, a weapon in the EU dispute. BYD and MG could get pricier in Europe

China has a new weapon in its car tariff dispute with the European Union: the export VAT rebate. Beijing is already scrapping these rebates for solar panels and batteries and could extend the move to electric cars, Reuters Breakingviews writes. It would ease relations with Brussels, but make Chinese cars more expensive in Europe.

This is an opinion column, not an official decision: the Chinese government hasn't announced anything.

What the rebate is and what has already changed

When a Chinese carmaker exports a car, it gets back the VAT paid in China, at a rate of 13% for passenger cars. For other products, Beijing has already started cutting:

• solar panels: the rebate was scrapped on April 1, 2026;
• batteries: the rate fell from 9% to 6% in April and disappears on January 1, 2027.

There have been signals for cars too. On August 24, three Chinese ministries urged carmakers to avoid price wars abroad, and on September 3 the trade magazine Auto Business Review published a proposal to cut the rebate to 9%, then to zero, starting with EVs.

Why it matters in the EU dispute

Since October 2024, EVs imported from China have paid countervailing duties in the EU on top of the 10% customs duty: 17% for BYD, 18.8% for Geely and 35.3% for SAIC, the group that owns MG. In February 2026, the Commission accepted its first minimum price undertaking, for the Cupra Tavascan that Volkswagen builds in China: it avoids the duty if it sells above a price floor, in limited volumes.

Without the rebate, exporting costs more, and Brussels gets what it actually wants: less pressure from cheap Chinese cars. And Beijing would keep money in its budget that now ends up, through discounts, with foreign buyers.

What it means for prices

Breakingviews notes that the move would squeeze carmakers' margins, but that big groups such as BYD can afford to absorb the cost or pass it on to buyers. The price rise wouldn't be 13%: the rebate covers VAT on parts and materials bought from suppliers, so a carmaker that makes its own batteries and motors is less exposed.

For buyers in Romania, where BYD, MG and other Chinese brands are on sale, that could mean higher prices or smaller discounts. The UK could also bring in similar tariffs.