The EU has launched an investigation into subsidizing the production of electric vehicles in China

The European Union officially launched an anti-subsidy investigation into Chinese electric vehicles on October 4, which will take up to 13 months. According to the notice published in the EU’s official journal, it will concern new battery-powered vehicles (BEVs) and the subsidies that the Chinese state may have provided to their manufacturers.

“Given the sensitivity of the electric vehicle sector and its strategic importance for the EU economy <...> [Европейская] The commission collected market information from various independent sources. This information indicates the existence of subsidies from the PRC, which negatively affects the state of the EU industry,” it says.

Chronologically, the investigation covers the last year – from September 30, 2022 to October 1, 2023. According to Bloomberg, the EU’s attention will be drawn not only to Chinese brands, but also to other electric vehicles produced in China, including Tesla.

The European Commission is confident that Chinese automakers were able to quickly increase their share of the European market thanks to government subsidies. It is alleged that they were provided in the form of various grants, loans, export credits, lines of credit and bonds guaranteed by Chinese state-owned banks and institutions. It is also noted that the Chinese government is reducing income tax for electric vehicle manufacturers, exempting them from tax on dividends, and simply providing raw materials and other necessary components.

European Commission representative Olaf Gill, commenting on the investigation at a briefing for journalists, said that within nine months the EU may introduce temporary measures against Chinese electric vehicles during the investigation, including import duties. “The investigation will determine whether the manufacturers of these cars receive illegal subsidies and whether these subsidies could harm European electric vehicle manufacturers,” he noted. If both facts are confirmed, then Brussels wants to establish the likely consequences for importers and consumers of electric vehicles in the European Union.

At the same time, Gill promised that the investigation would be carried out within the framework of the rules of both the EU and the World Trade Organization (WTO). Brussels will allow all interested parties, including the Chinese authorities, to express their arguments. According to TASS, a Chinese journalist asked Gill what is meant by the concept of “illegal subsidies” and why such a term is not used by the EU towards the United States. The difference, according to the EC spokesman, is that in the case of Chinese electric vehicles there was an “unexpected increase in imports over a short period of time.”

The reaction of the PRC to the European investigation turned out to be very sharp, they have already expressed their “extreme dissatisfaction.” As stated in a statement from the Ministry of Commerce of the People’s Republic of China, which was distributed by the Xinhua news agency, the case is based “on subjective assumptions about so-called subsidies.” Beijing believes that no real evidence was provided to support the need for such an investigation and that it violates WTO rules. The Ministry of Commerce also recalled that they had previously called such actions a “protectionist act” during the visit of EC Vice-Chairman Valdis Dombrovskis to the PRC in September.

China also called on the EU to take a “reasonable approach” in its use of protective measures and not destabilize global auto supply chains. Finally, Beijing promised to firmly protect the rights and interests of Chinese manufacturers. Officially, the Chinese government directly subsidized buyers of electric vehicles until 2023.

For the first time, European Commission President Ursula von der Leyen spoke about the upcoming EU investigation on September 13. In her opinion, the price of Chinese electric vehicles is “artificially kept low by huge government subsidies,” which distorts the European market.

According to The Guardian, the share of Chinese electric vehicles in the European market has doubled over the past two years, currently reaching 8.2%. In the first seven months of 2023, Chinese manufacturers were able to sell as much to Europe as they did in all of 2022 (86,000 battery-powered). According to JATO Dynamics, the average retail price of an electric vehicle imported from China in Germany is still 29% lower than the average price of a non-Chinese electric vehicle. This is the reason for the high demand for Chinese electric cars. As a result, for example, in the first quarter of 2023, the share of cars imported from China in the German electric vehicle market was 28.2%, compared to 7.8% in the same period in 2022. China now accounts for up to 60% of the global market. from all electric vehicles sold.

The European Union needs an investigation against China, first of all, to support the multibillion-dollar investments of European manufacturers in far from the most successful developments in light vehicles, says automotive industry expert Sergei Burgazliev. It is logical that in the current situation, the investigation is intended, in essence, to close the market and support local manufacturers, since the Chinese are now, the expert adds, “half a head higher” in a number of technical characteristics, safety and design. Due to the boom of Chinese electric vehicles on the market, leading car manufacturing countries in the EU may suffer losses of hundreds of billions of euros. The strategic efforts of the EU that Brussels used for its manufacturers – this is both powerful PR and the same subsidies – did not lead to the desired results, although some of the support measures, for example for the unprofitable production of the BMW i3, can be considered protectionist, Burgazliev is sure. For China, the European market is not considered a priority, since Chinese manufacturers receive much more profit from the sale of electric vehicles in their macroregion and are preparing to enter new markets.