EU Starts Investigating Chinese EV Subsidies as Imports Skyrocket

September 19, 2023 12:55:15

European Union authorities are launching a probe into China’s government support for local electric makers amid a surge in European imports of Chinese electric cars. A global race to electrification is well underway ,and China seems to be winning. The East Asian nation represents the largest electric vehicle market on the globe and is home to some of the world’s best-selling EV companies.

During a recent European parliament meeting, European Commission President Ursula Von der Leyen said that China has used massive state subsidies to artificially lower EV prices and flood the global EV market with “cheaper electric cars.” Coupled with surging global demand for electric cars, strong auto demand in Russia allowed China to eclipse Japan as the largest vehicle exporter on the globe.

President von der Leyen announced that the European commission would launch an “anti-subsidy investigation” into EV imports from China, stating that while the region was eager to compete in the EV space, it isn’t open for a “race to the bottom.” Chinese manufacturers have been especially interested in exporting to the EU as the regional bloc only charges a 10% duty on auto imports from China, compared to 27.5% in the United States.

In the first half of the year, China exported close to 350,000 electric cars to nine European countries, more electric cars than the country sold in all of 2022, according to the China Passenger Car Association. Furthermore, car exports from China to the EU have quadrupled in the past five years. With a plethora of electric vehicle manufacturers and massive state support, China’s electric vehicle industry is growing larger by the day.

Financial services firm UBS predicts that Chinese automakers could double their global market share from 17% to 30% by 2030 and that European car makers will suffer the largest loss of market as a result. With the U.S. working to limit its reliance on China for electric vehicles and renewable energy, European leaders are also keen on building an EV market independent of China.

Depending on how the European commission investigation goes, the EU may begin imposing additional tariffs on Chinese electric vehicle imports to raise their prices. This would reduce pressure on European automakers to lower their prices and give them a better chance of securing a reasonable market share in the EU.

Chinese automakers saw their stocks go down in the wake of van der Leyen’s announcement. Warren Buffett-backed BYD fell by 2.8%, Xpeng went down by 2.5% and Nio saw its shares slip by 0.9%.

Electric vehicle companies such as Cenntro Electric Group Ltd. (NASDAQ: CENN) will be watching the developments in Europe closely because the outcome of the subsidies investigation could trigger similar steps in other markets and countermeasures from China.

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