The EU launches an investigation over Chinese EV subsidies

14 September 2023

In a move reminiscent of a high-stakes poker game, European Commission President Ursula von der Leyen announced a formal investigation into Chinese subsidies for electric vehicles. The subsidies are alleged to be artificially deflating prices and flooding the global market with aggressively priced Chinese cars, making it hard for European manufacturers to compete as they don't get such subsidies.

China has been a hotbed for EV development. Government incentives for buyers and manufacturers have seen a surge in companies like BYD, MG, and Nio. These automakers are gearing up to expand their European footprint, potentially giving established giants like Stellantis and Volkswagen a run for their money.

Now, juxtapose that with the EU's Green Deal plan, which essentially bans combustion engine cars by 2035. This aggressive transition to greener technologies, paired with the review of state aid rules to counter massive subsidies from nations like China, makes the EU's new investigation a bit less surprising.

EU officials, like German Economy Minister Robert Habeck, emphasize that the issue isn't about keeping efficient cheap cars out. Rather, it's about ensuring fair competition.

But why the push into Europe by Chinese EV manufacturers? As domestic price wars intensify and profits remain elusive, Europe offers a more lucrative market. Especially when one considers the EU's forthcoming ban on combustion engines.

This move, however, isn't without its detractors. Stellantis CEO Carlos Tavares suggests that the EU should support its local manufacturers who are struggling to keep up. Conversely, automakers heavily reliant on Chinese sales, like Volkswagen, BMW, and Mercedes, tread cautiously. A strained trade relationship could be detrimental.

As the EU probe unfolds, the commission will be busy collecting evidence to determine if anti-subsidy rules have been breached. Should they find discrepancies, measures like imposing preliminary duties on Chinese EV imports could be on the horizon.

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