- The investigations are increasing tensions between the EU and China
- Probe will set the tone for the upcoming bilateral talks
- China’s electric vehicle market share in Europe has been growing
- Analysts warn of retaliatory measures from China if the EU imposes tariffs
- China says EU probe is protectionist
SHANGHAI/BEIJING, Sept 14 (Portal) – Beijing on Thursday described the European Commission’s launch of an investigation into China’s electric vehicle (EV) subsidies as protectionist, warning it would hurt economic and trade ties as stocks of Chinese manufacturers fell of electric vehicles crashed.
European Commission President Ursula von der Leyen announced the investigation on Wednesday, accusing China of flooding global markets with electric cars whose prices were artificially low due to huge government subsidies.
The investigation, which could lead to punitive tariffs, has led to warnings from analysts of retaliation from Beijing and pushback from Chinese industrial executives who say the sector’s competitive advantage does not come from subsidies.
The investigation “is a pure protectionist act that will seriously disrupt and distort the global automotive industry and supply chain, including the EU, and negatively impact China-EU economic and trade relations,” China’s Commerce Ministry said in a statement .
“China will pay close attention to the EU’s protectionist tendencies and follow-up actions, and resolutely protect the legitimate rights and interests of Chinese companies,” it said.
Analysts at Eurasian Group warned that if Brussels ultimately imposes tariffs on subsidized Chinese electric vehicles, Beijing would likely take countermeasures to hurt European industry.
Other analysts said the investigation could slow Chinese battery suppliers’ capacity expansion, although the move is unlikely to pose a major risk to Chinese electric vehicle makers as they could turn to other growth markets such as Southeast Asia.
Still, it could hurt the perception of Chinese electric vehicle makers if they expand abroad, Bernstein analysts said in a note to clients.
Manufacturers have accelerated export efforts as slowing consumer demand in China exacerbates manufacturing overcapacity.
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Hong Kong-listed shares of Chinese electric vehicle makers pared early losses, with market leader BYD closing down 1.2%. Smaller rivals Geely Auto (0175.HK) and Nio (9866.HK) fell 0.5% and 0.9%, respectively. Xpeng (9868.HK) erased losses, rising 0.4%.
Shanghai-listed shares of state-owned auto giant SAIC (600104.SS), whose MG brand is the best-selling Chinese-made brand in Europe, fell as much as 3.4% before closing down 0.3%.
Nio and Geely declined to comment on the EU investigation, while BYD, Xpeng and SAIC did not respond to requests for comment.
Shenzhen-listed shares of battery maker CATL (300750.SZ) fell 0.8%. CATL did not immediately respond to a request for comment.
[1/5]The NIO EP9 sports car is presented at NIO House, the showroom of Chinese premium smart electric vehicle manufacturer NIO Inc. in Berlin, Germany, on August 17, 2023. Portal/Annegret Hilse acquires license rights
Shares of European automakers were also among the biggest losers in the euro zone stock index (.STOXXE50) in early trading. BMW (BMWG.DE), Volkswagen (VOWG_p.DE), Mercedes (MBGn.DE) and Stellantis (STLAM.MI) fell between 1.1% and 2.2% at 07:20 GMT.
Strained relationships
The anti-subsidy investigation, unusually launched by the European Commission rather than an industry complaint, comes amid broader diplomatic tensions between the EU and China.
Relations have been strained because of Beijing’s ties with Moscow after Russian troops invaded Ukraine and the EU’s efforts to rely less on the world’s second-largest economy, which is also its top trading partner.
The EV investigation will set the agenda and tone for bilateral talks ahead of the annual China-EU summit, due to take place before the end of the year, with the focus again on the EU’s demands for wider access to the Chinese market and a The realignment of trade will lie in a relationship that Brussels describes as “unbalanced”.
Cui Dongshu, the general secretary of the China Passenger Car Association, said on his personal WeChat account on Thursday that he was personally “strongly opposed” to the review and called on the EU to look at the industry’s development objectively and not “arbitrarily approve it.” to use”. Economic or trading instruments.
The price of Chinese-made cars exported to Europe is generally almost double the price at which they are sold in China, he added.
Volkswagen (VOWG_p.DE) highlights the challenges that established European car manufacturers face in the fight against growing competition from China. It is considering workforce cuts at its all-electric factory in eastern Germany due to lower-than-expected demand for electric vehicles, the dpa news agency reported on Wednesday.
GROWING MARKET SHARE
EU officials expect Chinese electric vehicles to undercut prices of local models in the European market by about 20%, increasing pressure on European automakers to produce lower-cost electric vehicles.
The European Commission said China’s share of electric vehicles sold in Europe has risen to 8% and could reach 15% in 2025.
According to the US think tank Center for Strategic and Internal Studies (CSIS), 35% of all electric cars exported came from China in 2022, up 10 percentage points from the previous year.
Most vehicles and the batteries that power them are destined for Europe, where 16% of batteries and vehicles sold in 2022 will be made in China, it said.
The largest single exporter from China is US giant Tesla (TSLA.O), CSIS data showed. Between January and April 2023, it accounted for 40.25% of electric car exports from China.
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Reporting by Donny Kwok in Hong Kong, Brenda Goh in Shanghai and Ryan Woo in Beijing, writing by Anne Marie Roantree; Edited by Tom Hogue, Jamie Freed and Mark Potter
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