Explainer: EU's Technical difficulties for price undertaking in EV deal

Dr. Weinian Hu on why the European Commission may be unwilling to accommodate Beijing's proposal to replace tariffs with price undertaking

The EU imposed the definitive anti-subsidy countervailing duties on Chinese battery electric vehicle imports on 29 October 2024. Nonetheless, China’s Ministry of Commerce announced in April 2025 that Beijing and Brussels would immediately (re)initiate negotiations on price undertaking (as a potential alternative to the duties). Two months later, the electric vehicle case was still a topic of discussion between the two sides during a video call, according to Beijing.

Since then, there have been no public updates on the price undertaking negotiations.

What are the prospects for a price undertaking agreement? And, what is the basis for this assessment?

The author is Dr. Weinian Hu. Her research interests include EU-China trade relations and multilateral EU-Asia relations, with a focus on industrial subsidy, public procurement, investment, patent, geographical indications, and trade-related sustainable development.

Introduction

Price undertaking is an alternative to imposing anti-dumping/anti-subsidy countervailing duties (CVDs).

The European Commission imposed definitive CVDs on Chinese battery electric vehicle (BEV) imports in October 2024, after having rejected the price undertaking offers presented by the exporting producers. It nevertheless keeps the door open for further price undertaking negotiations with China. But empirical research suggests that price undertaking is unlikely to succeed in replacing the CVDs, due to a lack of legal, economic, and political justification. The Commission’s market for technology suggestion is incompatible with WTO rules and thus not credible.

The context

The anti-subsidy investigation against the Chinese BEV imports was arguably motivated by geopolitics. From the outset, the Commission acted as both complainant and judge, thereby breaching the principle of nemo iudex in causa sua. This conflict exists regardless of its entitlement to launch ex officio investigations.

Despite the CVDs, as prescribed by Recital 1422 of the Regulation Implementing the Definitive CVDs, the Commission remains open to negotiating price undertakings with China. It justifies this position by citing the rapidly evolving and transitional nature of the BEV market, product complexity, and ‘exceptional circumstances’ which are unspecified. That said, this openness does not indicate an inevitable price undertaking for the following reasons.

Absence of legal justification

The Commission’s legal reasoning for rejecting the price undertaking offers in 2024 – presented by the Chinese BEV producers individually and as a group (Recitals 1360-1) – had merit. Notably, it is consistent with the precedent established by the Commission when rejecting price undertaking applications for products of similar characteristics. The same reasoning is therefore expected to inform the 2025 (and future) negotiations.

Criteria for granting a price undertaking

Price adequacy (to offset the injurious effect of the subsidies) and practicality (for monitoring the undertaking enforcement) are the two criteria upon which the Commission decides whether or not to grant a price undertaking (Articles 13.1 & 3, ASTDI). Additionally, the Commission retains a margin of discretion when taking its decision (e.g. WTO DS234, ECJ C240-84).

When exercising its discretion toreject a price undertaking offer, the Commission typically cites considerations such as: a lack of effective monitoring mechanisms, the risk of circumvention, the involvement of many different product types, high product price volatility, the potential for cross-compensation, a lack of full cooperation during the investigation period, and a history of exporters’ breaching previous undertakings (Recital 72). The Commission has a tendency of favouring the interests of the EU industry over those of the consumer, too.

BEV characteristics appear to inhibit price undertakings

In 2024, the Commission’s objection against the Chinese BEV producers’ undertaking offers stemmed from the characteristics of the BEV product. Its argument is twofold. Firstly, BEV is not a homogeneous product, resulting in substantial price differences between product types and models. Secondly, the high number of the different product types, combined with the complexity of producers’ corporate structure and their multiple global sales channels, entails a high risk of cross-compensation.

According to the Commission, all these factors would render monitoring problematic and thus impractical for undertaking enforcement purposes. Furthermore, the Commission singled out SAIC and Geely for not being fully cooperative during the investigation period. Their respective offers were thus cast in doubts as far as effective undertaking monitoring was concerned (Recitals 1363-1420).

The above illustrates that the weaknesses of the undertaking offers were product-inherent and structural – rather than numerical or administrative – which are beyond the purview of the BEV exporting producers. Their 2025 offers are, therefore, unlikely to provide an adequate remedy to warrant the Commission’s acceptance.

Absence of economic advantage

Economic logic favours CVDs over price undertakings. The former generates tax revenue while the latter foregoes it.

The CVDs imposed on the Chinese BEV imports, ranging from 7.8 % to 35.3 %, could yield about two billion euro per year. Should the Commission decide to replace CVDs with price undertakings, it would result in a substantive annual monetary loss for both the importing Member States – which can retain 25 % of the CVDs for administrative expenses – and the EU budget. For Chinese BEV exporters, the economic advantage that the CVDs bring make successful undertaking negotiations doubtful.

Price undertaking: a countervailing measure for the past?

Price undertaking was a popular alternative to CVDs in the 1980s. Its use has been in decline since then. Based on the statistics, from 2018 to 2024, the Commission only granted one undertaking (Argentina Biodiesel, in 2019).

Would the Commission deviate from its practice regarding price undertakings for the Chinese BEV imports? It looks improbable, especially given the abovementioned legal and economic reasons.

Investment and technology transfer – a sine qua non for price undertakings?

There are suggestions of ‘market for technology’ for those Chinese BEV producers to invest in the EU in order to avoid paying the CVDs and to improve relations with the EU. The EU should be mindful of not resorting to such ‘barter treatment’, which is prohibited by the WTO. Technology transfer should also be voluntary and fair; the opposite of which amounts to ‘forced technology transfer’. The EU must avoid engaging in the very (mal)practice it has long alleged against China.

Conclusion

In summary, the legal reasoning and economic logic do not favour price undertaking, which is a countervailing measure less relevant today after all. Politically, since China has not yielded to the EU’s demand in terms of its interaction with Putin’s war in Ukraine, the overall EU-China relationship continues to be strained, without a conducive ambiance for identifying price undertakings that are effective and enforceable.. As a result, as of now, the prospects for a price undertaking agreement between the EU and China look dim.