Wall Street Times

Europe Launches Probe into China’s EV Subsidies Amid Rising Imports

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The European Union’s Concerns

The European Union Initiates an Inquiry

The European Union is setting its sights on China’s robust support for electric vehicle manufacturers. This move comes as a surge in electric vehicle imports from China raises concerns about the future of European auto manufacturers.

Ursula von der Leyen’s Address

President Ursula von der Leyen’s Perspective

Speaking before the European Parliament, European Commission President Ursula von der Leyen emphasized Europe’s stance on competition while warning against a “race to the bottom.”

The Impact of State Subsidies

Effects of Massive State Subsidies

Von der Leyen highlighted the inundation of global markets with cost-effective electric cars, with their prices artificially suppressed by substantial state subsidies. Consequently, she announced a pivotal development – the European Commission’s initiation of an anti-subsidy investigation targeting electric vehicles from China.

Tariffs and Import Statistics

Comparative Duties and Soaring Chinese Exports

Europe imposes a 10% duty on cars imported from China, a stark contrast to the United States’ 27.5% duty. This duty difference has allowed Chinese manufacturers to gain a considerable foothold in the European market. Data from the China Passenger Car Association reveals that Chinese companies exported nearly 350,000 electric vehicles to nine European countries in the first half of the year, surpassing their 2022 total. In the last five years, EU imports of Chinese cars have quadrupled.

Future Market Share Estimates

Chinese Car Makers on the Rise

A recent estimate by UBS suggests that by 2030, Chinese carmakers could double their share of the global market from 17% to 33%. European firms are expected to experience the most significant loss of market share.

Potential Tariffs and Market Reactions

The Consequences of the European Commission’s Investigation

The European Commission’s investigation could potentially lead to the imposition of tariffs on Chinese electric vehicle imports. This announcement sent shockwaves through the stock market, particularly affecting China’s largest electric vehicle companies listed in Hong Kong. BYD, backed by Warren Buffett, closed down 2.8%, Xpeng fell 2.5%, and Nio slipped 0.9%.

China’s Response

China’s Perspective on the Investigation

China’s Commerce Ministry expressed “high concern and strong dissatisfaction” with the investigation, viewing it as a protectionist measure disguised as “fair competition.” The ministry believes that this move will disrupt and distort the global automotive industry chain and supply chain, potentially harming China-EU economic and trade relations.

Expansion Plans of Chinese EV Manufacturers

BYD’s Ambitious Expansion

BYD, China’s largest electric vehicle manufacturer, is planning to double its number of dealer partners in Europe to 200 this year. They aim to increase overseas sales to 250,000 vehicles in 2023, a substantial rise from the 55,916 sold in 2022.

The Impact on Europe’s Auto Industry

European Auto Industry and Its Significance

Europe’s auto industry plays a crucial role, providing employment for approximately 13 million people, accounting for about 7% of total employment. German brands, including Volkswagen, Audi, BMW, and Mercedes, are at the core of Europe’s largest economy.

German Economy Minister’s Perspective

German Economy Minister’s Support

German Economy Minister Robert Habeck welcomes the European Commission’s investigation, emphasizing that it’s about addressing unfair competition rather than keeping efficient, affordable cars out of the European market.

Concerns Over Chinese EV Prices

Growing Concerns Among Industry Executives

Prominent German and French industry executives have raised alarms regarding the increasing threat posed by Chinese electric vehicles, which are approximately 30% cheaper than their EU or US counterparts, as reported by research firm Jato Dynamics.

Challenges Ahead for European Automakers

Warnings From Industry Leaders

BMW CEO Oliver Zipse warns that the EU’s ban on new conventional vehicles from 2035, coupled with growing competition from China, could potentially drive European automakers out of mass-market car production. Renault CEO Luca de Meo echoes this sentiment, stating that Chinese rivals are “a generation ahead of us.”

ACEA’s Response

ACEA’s Positive Reception

The European Automobile Manufacturers’ Association (ACEA) director-general Sigrid de Vries welcomes Ursula von der Leyen’s announcement as a “positive signal.” She emphasizes the importance of maintaining a level playing field in the automotive sector through reciprocal trade and market entry rules.

The Call for Fair Competition

Promoting Fair Competition

De Vries highlights that free and fair trade has been instrumental in creating a successful European automotive sector. However, she stresses that fairness requires equal rules for all competitors, ensuring a level playing field.