The European Commission has launched an anti-subsidy investigation to figure out whether it should impose punitive tariffs on cheaper Chinese electric vehicles in an attempt to guard European carmakers, according to a news report published by Reuters on September 13.
Several China-based EV makers such as Nio, BYD, SAIC, XPeng, Geely and FAW, among others, have been lately expanding their presence across Europe by setting up retail stores. The commission estimates that Chinese EVs are cheaper compared to the EVs produced by European carmakers as they benefited from state subsidies.
“Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies. Europe is open to competition. Not for a race to the bottom,” the report said, citing European Commission President Ursula von der Leyen.
Furthermore, the report said that the commission will have up to 13 months to study and evaluate the impact of cheaper EVs imported into Europe from China, and whether it should levy tariffs in addition to the standard 10% EU rate for cars. It can be recalled that the commission had launched a similar investigation against Chinese companies exporting solar panels to Europe a decade ago.
Interestingly, the anti-subsidy investigation covers battery-electric vehicles (BEVs) produced in China, including non-Chinese brands such as Tesla, Renault and BMW.
Significance: The European Commission estimates that the share of Chinese EVs sold in Europe has risen to 8% and could reach 15% by 2025. The commission has noted that the prices of these EVs are typically 20% below the EU-made models.
In response to the announcement from the commission, the Chinese Chamber of Commerce to the EU said it was concerned and opposed to the said investigation. The report added that the Chinese Chamber of Commerce has objected to EU’s unfair protectionism and said that the emerging EV sector's competitive advantage was not due to the subsidies.
Further, Germany's VDA auto association has raised concern on a possible rebound from China, which could spiral into a new trade war between the two regions. Instead, the association has advised the commission to focus on creating a conducive environment for European players to succeed, ranging from lowering electricity tariffs to reducing bureaucratic hurdles.
It is to be noted that Germany's car industry heavily relies on the Chinese market for a significant proportion of its sales. The auto industry has long advocated keeping the trade doors open with China, the Reuters report stated.
It is known that China had terminated its generous 11-year subsidy scheme for EV purchases in 2022, but some local authorities have continued to offer aid or tax rebates to attract more investments.
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