Tesla faces special customs duties on its electric cars made in China and imported to Europe after the European Union decided to impose higher customs duties on Chinese electric cars of up to 38%.

Valdis Dombrovskis, the EU Trade Commissioner, told CNBC that Tesla was defending the lower tariff rates the commission was considering.

The European Commission explained that in the final phase of imposing the tariffs, that is, four months after the temporary duties enter into force, Tesla may receive an individually calculated tariff rate.

The European Commission finds that Tesla has received government subsidies in China,which may give it an unfair advantage over its European competitors.

Shanghai is home to one of Tesla’s largest factories, delivering 947,000 cars in 2023, of which 600,000 went to the Chinese market and the rest were exported.

These temporary fees will come into effect on July 4 if the European Union does not reach a solution with the Chinese authorities.