The European Commission has launched a probe into China’s electric vehicle (EV) subsidies, accusing China of flooding global markets with EVs at artificially low prices due to state subsidies. This move has sparked a backlash from China, who has criticized the investigation as a “naked protectionist act” and warned that it would damage economic relations.
Chinese industry executives argue that the sector’s competitive advantage is not solely due to subsidies, but rather the result of technological advancements and efficient production processes. However, analysts caution that if the EU ultimately levies duties against Chinese EVs, Beijing is likely to impose countermeasures to hurt European industries.
The imposition of tariffs by the EU will depend on the degree of unity within the bloc. While France has been calling for an investigation for months, other EU countries also see China as a rival and agree that the bloc should be more assertive. However, Germany’s car industry remains cautious due to fears that a trade war could impact its business in China. Automakers such as Mercedes Benz and Bosch have expressed concerns over protectionist measures and the potential for punitive tariffs and trade barriers.
Some analysts believe that the probe should not pose a significant risk for Chinese EV makers as they can turn to other growing markets, such as Southeast Asia. Despite initially falling, shares of Chinese EV makers, including BYD, Geely Auto, and Nio, later recovered. On the other hand, European carmakers, including BMW, Volkswagen, Mercedes, and Stellantis, saw their shares decline.
The anti-subsidy probe comes at a time of strained relations between the EU and China. The EU’s efforts to rely less on China, the world’s second-largest economy, have been met with resistance from Beijing. Additionally, China’s ties with Moscow have further contributed to the tension.
EU officials claim that Chinese EVs are undercutting prices of local models by about 20% in the European market, putting pressure on European automakers to produce lower-cost EVs. The probe is expected to set the tone for talks ahead of the annual China-EU Summit, with the EU pushing for a rebalancing of trade.
In 2022, 35% of all exported electric cars were from China, with most destined for Europe. This statistic highlights the growing dominance of Chinese EV makers in the global market, making it crucial for the EU to address issues related to subsidies and fair competition.
As the probe unfolds, it remains to be seen how the EU will respond and whether it will impose tariffs on Chinese EVs. The outcomes of these investigations will have significant implications for the future of the EV industry and the trade relationship between the EU and China.
