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By Nick Carey, European Autos Correspondent

Greetings from London!

This was always going to be a big week for news for the auto industry.

The European Union looks set any day now to unveil tariffs for Chinese electric vehicles that Europe’s automakers – especially the Germans – say they don’t want and the Chinese say won’t deflect them.

Meanwhile, Tesla’s shareholders will finally vote whether or not to confirm a pay package for Elon Musk roughly the size of Qatar’s state budget (more on that below).

But before the week even began, the far right made significant gains in EU elections, triggering a snap election in France as President Emmanuel Macron seeks to reestablish authority.  

A motley crew of nationalist, populist and eurosceptic parties are on course to win around a quarter of the seats in the European parliament, reflecting voter discontent over inflation, migration and the cost of the green transition.

Now those parties will seek to influence EU policy, with some calling to soften the bloc’s Green Deal.

Transportation makes up a significant chunk of that deal, with an effective ban on fossil-fuel vehicles in place for 2035. Far right politicians from different countries across the EU have a poor track record of working together, but there could be yet another wild ride ahead for an auto industry already laboring with the transition to electric.

What could possibly go wrong?  

Which brings us to today’s Auto File…

• The fight for Chinese car plants in Europe
• Biden goes easy on polluting hybrids
• Musk taps the little guy on pay

Coming soon to a factory near you

Even as the EU gets ready to roll out tariffs on Chinese EVs, my colleague Giulio Piovaccari reports that European governments are dangling incentives for Chinese automakers in the hopes of landing new factories and the high-paying manufacturing jobs they bring.

Unlike the United States with a federal government that can decide, as it did last month, to roll out steep tariffs on EVs, many of the EU’s 27 members are eager to engage with Chinese automakers.

We’ve been here before, of course. There was fierce competition for Japanese automakers’ plants in Europe in the 1980s and 1990s.

Spain, Italy, Hungary and Poland, to name but a few , have programs in place to woo auto investments today.

China’s BYD announced an EV plant in Hungary in December and Spain, Europe’s second largest car-making country after Germany, secured an investment from Chery in April.

These investments and others could bring China additional allies in the EU.

During a visit to Budapest in May, Chinese President Xi Jinping said the two countries will embark on a “golden voyage“. And earlier this month, Beijing made clear it is courting Spain to push the EU on EV tariffs.

Do you have one in blue?

The Biden administration’s decision early this year to lower its EV target and allow automakers to comply by producing more gas-electric hybrids means will result in substantially more pollution than originally expected my colleague Chris Kirkham reports.

The administration backed off its target of converting two-thirds of new vehicles to EVs by 2032 back in February.

The U.S. rule change comes as automakers have struggled to get consumers to buy as many pure EVs as expected and are instead focusing more on hybrids that are an easier sell because they still have a gasoline engine and do not raise concerns over range.

The rule change delays stricter emissions limits for years and retains an outdated formula for plug-in hybrids that the U.S. Environmental Protection Agency concedes underestimates their real-world pollution.

Plug-ins had previously fallen out of favour with regulators, particularly in Europe, because research people don’t charge them enough and rely instead on the polluting fossil-fuel engine.

Using the EPA projections, Reuters calculated the rules allow the average-per-mile carbon emissions of light-duty vehicles to be 14% higher between 2027 and 2032 than originally proposed.

But the U.S. government stuck with the old formula after some automakers argued a more restrictive version would stifle plug-in innovation.

Looking for a lift from small Tesla shareholders 

As Tesla’s shareholder vote nears on CEO Elon Musk’s proposed $56 billion pay package, some more big-name investors including Norway’s $1.6 trillion wealth fund and the California State Teachers’ Retirement System have said they will vote against.

With big investors divided, my colleague Ross Kerber reports that Tesla has developed an outreach campaign targeting small shareholders that includes a website, engagement with online influencers, and factory tours for a few of those who vote.

The compensation, set and approved in 2018 by shareholders, rewards based on Tesla’s market value and operational milestones. But a Delaware judge voided it in January, prompting Tesla to seek to move its state of incorporation to Texas.

Experts in corporate vote campaigns say the size and CEO-friendly nature of many individual investors at Tesla make them an obvious target and Musk himself said on X at the weekend that around 90% of retail investors had voted in favour of the pay deal.

Meanwhile, Tesla’s real world challenges continue. A California judge on Monday rejected Tesla’s bid to dismiss claims by a top state regulator accusing the automaker of overstating its vehicles’ self-driving capabilities.

And Musk said at the weekend that Tesla will not launch a refreshed Model Y this year. Tesla has been slow to refresh its ageing models while rivals in China are rolling out cheaper models.

An independent federal monitor is investigating UAW leader Shawn Fain over allegations he has retaliated against other leaders in the union. The monitor was appointed in 2021 following a corruption scandal that landed two former presidents in prison. Fain said he encouraged the investigation, saying adding that “sometimes you have to rock the boat, and that upsets some people who want to keep the status quo.”

The Senate Finance Committee is expanding its probe into German automaker BMW’s use of electronic components from a banned Chinese supplier, the committee’s chair said.

Chinese EV maker Nio has won approval to build a third factory in China that would boost its total approved production capacity to 1 million cars, almost at par with Tesla’s massive Shanghai plant, according to three people with knowledge of the matter. Nio said it expects its second-quarter sales to more than double.

A U.S. regulator said owners of about 463,000 Kia vehicles should park outside and away from structures until they get a recall repair for fire risks completed.

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