- EU launches anti-subsidy investigation into Chinese electric vehicles
- The investigation lasts up to 13 months
- China’s share of European electric vehicle market rises to 8% this year
BRUSSELS, Sept 13 (Portal) – The European Commission opened an investigation on Wednesday into whether to impose punitive tariffs to protect European Union manufacturers from cheaper electric vehicle (EV) imports from China, which their In my opinion, benefit from government subsidies.
“Global markets are now flooded with cheaper electric cars. And their prices are kept artificially low by huge government subsidies,” European Commission President Ursula von der Leyen said in her annual address to the EU Parliament, which was seen by many in Brussels as an advertisement for her reappointment for a second Term.
The Commission will have up to 13 months during its anti-subsidy investigation to assess whether to impose tariffs above the EU standard rate of 10% on cars.
Political and trade tensions between China and the EU have increased recently, and many EU members have sought to reduce their dependence on the world’s second-largest economy.
European automakers have recognized that they are struggling to produce lower-cost electric vehicles, chipping away at China’s lead in developing cheaper, more consumer-friendly models.
Chinese electric vehicle makers, from market leader BYD (002594.SZ) to smaller rivals Xpeng (9868.HK) and Nio (9866.HK), are stepping up efforts to expand into overseas markets as domestic competition intensifies Domestic growth is slowing. According to the China Passenger Car Association (CPCA), China’s car exports rose 31% in August after rising 63% in July.
According to Jato Dynamics, the average retail price of a Chinese brand electric car in Germany was 29% lower than the average of non-Chinese electric car models (excluding incentives or discounts), falling to 32% in France and 38% in the UNITED KINGDOM.
According to automotive consultancy Inovev, 8% of new electric vehicles sold in Europe this year were from Chinese brands, up from 6% last year and 4% in 2021. Popular Chinese models exported to Europe include the MG from SAIC and the Volvo brand from Geely.
Shares of Chinese electric vehicle makers fell after the EU announcement. BYD shares, which traded 4.5% higher before the news, closed down 2.8%, while Nio fell 1% and Xpeng fell 2.5%.
Shares of European automakers – Volkswagen (VOWG_p.DE), BMW (BMWG.DE) and Mercedes Benz (MBGn.DE) and Stellantis (STLAM.MI) – got a brief, early boost from the news before erasing most of their gains made. VW rose 0.3% while Stellantis fell 0.5% at 10:50 GMT.
GRINDING GEAR
The influx of cheaper Chinese electric vehicles has already prompted some European automakers to take action, such as Renault’s (RENA.PA) announcement in July that it would cut production costs for its electric models by 40%.
Like other electric vehicle makers, French maker Renault is facing increasing pressure from U.S. rival Tesla (TSLA.O), which has cut prices several times this year even as this has eaten into its margins.
However, the German automobile association VDA said the EU must take into account possible backlash from China to such an investigation and that policymakers should focus on creating the conditions for European players to succeed in their own fields – from cutting electricity prices to Removing bureaucratic hurdles.
The German automotive industry relies on China for a large portion of its sales and has long been committed to keeping trade doors open.
Von der Leyen emphasized the importance of electric vehicles for the EU’s ambitious environmental goals.
“Europe is open to competition. Not for a race to the bottom,” she told the European Parliament.
Von der Leyen said the EU does not want to repeat the experience of its solar panel industry, which was decimated by cheaper Chinese imports about a decade ago.
“This is the beginning of a long journey,” said analyst Simone Tagliapietra from the Bruegel think tank. “Ultimately it could work, but this must be accompanied by an active industrial policy to ensure that EU industry develops its competitiveness quickly.”
According to consulting firm AlixPartners, China’s government subsidies for electric and hybrid vehicles totaled $57 billion from 2016 to 2022, helping China become the world’s largest electric vehicle maker in the first quarter of this year and Japan as the largest auto exporter overtaken.
China ended a generous 11-year subsidy program for electric vehicle purchases in 2022, but some local authorities continue to offer aid or tax rebates to attract investment, as well as subsidies for consumers.
Nio’s founder warned in April that Chinese electric vehicle makers should brace for the possibility that foreign governments would impose protectionist measures.
He estimated that his company and its Chinese rivals had a cost advantage of up to 20% over rivals such as Tesla (TSLA.O) thanks to China’s control over the supply chain and raw materials.
Kingsmill Bond, senior director in the Rocky Mountain Institute’s strategy team, said Chinese manufacturers benefited from electric vehicle battery prices of $130 per kilowatt-hour, compared to a global price of $151 in 2022.
Reporting by Foo Yun Chee and Philip Blenkinsop; additional reporting by Kim Miyoung, Brenda Goh, Anne Marie Roantree, Nick Carey, Kate Abnett; Edited by Gabriela Baczynska and Louise Heavens
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