Brussels Formally Starts Chinese EV Subsidy Probe

October 10, 2023 14:33:03

Weeks after European authorities announced that they would begin investigating the surge of cheap electric cars flooding into the European Union, Brussels has launched a probe into Chinese electric vehicle subsidies. With China’s billion-plus population representing the largest EV market globally, Chinese authorities have invested heavily in building out EV and public-charging infrastructure domestically and internationally.

China’s government has invested heavily in local EV companies via massive subsidies, allowing Chinese automakers to sell electric cars at much lower price points compared to other carmakers. Domestically produced and affordable EVs have swept up a large swathe of the Chinese market and put immense pressure on Tesla, leading to a price discount war that attracted the attention of Chinese authorities.

Electric vehicle companies from China are now looking to expand outside the nation’s borders. They have set their eyes on the European market, one of the largest global markets for electric cars alongside China and the United States. These companies have delivered massive numbers of affordable electric cars to Europe in recent months, prompting concerns that Chinese automakers could price out European competitors and essentially take over Europe’s nascent electric vehicle sector.

As such, the European Commission has officially launched an anti-subsidy probe into China-made electric cars. Initiated by the commission, the investigation functions as an “ex-officio investigation” because it wasn’t triggered by a formal complaint from the EU’s electric vehicle industry. European Commission President Ursula von der Leyen first announced the investigation last month when she issued a warning about Chinese EVs “flooding” the global market.

Brussels will begin the probe by investigating new battery electric vehicle (BEV) imports from China even if their brands are European or Chinese. The commission will determine whether China offered state subsidies to local EV makers during a certain period and whether the subsidies have the potential to harm the development of the EU’s electric car segment.

Von der Leyen noted that while the EU was open to competition from Chinese companies, China was keeping prices for domestically produced EVs “artificially low” via huge EV subsidies and distorting the EU’s electric car market. As China already plays a dominant role in the manufacturing of EV batteries, EU officials aren’t keen on granting the Asian nation another monopoly in electric vehicle production.

The French government was especially insistent on an investigation into Chinese EVs and is currently pushing for the EU to strengthen its industrial sectors against China’s fast-growing electric vehicle industry. However, France’s concerns about China dominating the EU electric car sector increased fears of retaliation by Beijing, especially in Germany, which is especially reliant on Chinese technology for its EV market.

EV makers in North America such as Rivian Automotive Inc. (NASDAQ: RIVN) and those from the EU are likely to watch the developments in Brussels closely since they could send reverberations throughout the nascent industry.

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