The European Commission launched an investigation on Wednesday into whether to impose punitive tariffs to protect European Union producers against cheaper Chinese electric vehicle (EV) imports it says are benefiting from state subsidies.
“Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies,” European Commission President Ursula von der Leyen said in her annual address to the bloc’s parliament, seen by many in Brussels as a pitch for her re-appointment for a second term.
The Commission will have up to 13 months to assess whether to impose tariffs above the standard 10% EU rate for cars in its highest profile case against China since an EU probe into Chinese solar panels narrowly avoided a trade war a decade ago.
The anti-subsidy investigation covers battery-powered cars from China, so also includes non-Chinese brands made there, such as Tesla (TSLA.O), Renault (RENA.PA) and BMW (BMWG.DE). It is also unusual in that it is brought by the European Commission itself, rather than in response to an industry complaint.
The Chinese Chamber of Commerce to the EU said it was very concerned and opposed to the investigation’s launch and that the sector’s competitive advantage was not due to subsidies. It urged the EU to look at Chinese electric vehicles objectively.
Tensions between China and the EU have been growing, partly due to Beijing’s closer ties with Moscow after Russia’s invasion of Ukraine. The EU is seeking to reduce its reliance on the world’s second-largest economy, particularly for materials and products needed for its green transition.
European carmakers have realised they have a fight on their hands to produce lower-cost electric vehicles and erase China’s lead in developing cheaper models.
Chinese EV makers, from market-leader BYD (002594.SZ) to smaller rivals Xpeng (9868.HK) and Nio (9866.HK), are stepping up efforts to expand overseas as competition intensifies at home and domestic growth eases. China’s auto exports surged 31% in August, China Passenger Car Association (CPCA) data showed.
The European Commission said China’s share of EVs sold in Europe has risen to 8% and could reach 15% in 2025, noting prices are typically 20% below EU-made models. Popular Chinese models exported to Europe include SAIC’s MG and Geely’s Volvo.
