Europe Looks Into China’s Incentives For Electric Vehicles As Imports Increase

In response to growing imports of electric vehicle manufacturers‘ automobiles fueling concerns for the future of European automakers, the European Union has opened an investigation into China’s official backing for their manufacturers. Ursula von der Leyen, president of the European Commission, said in a speech to the European Parliament on Wednesday that while Europe was open to competition, it was “not for a race to the bottom.”

According to von der Leyen, “global markets are now swamped with more affordable electric vehicles, and their prices [are] artificially kept low by significant state subsidies.” So I’m able to say that the commission is starting an inquiry into Chinese-made electric vehicles that may have received anti-subsidy practices.

On automobiles imported from China, Europe imposes a 10% levy. That contrasts with a tariff of 27.5% in the US, and Chinese manufacturers have profited from this to establish a substantial and quickly expanding foothold in the European market.

According to data from the China Passenger Car Association, Chinese companies exported more electric vehicles (EVs) to nine European countries in the first half of the year than they did in the entire year of 2022. And imports of Chinese autos into the EU have doubled during the past five years.

According to a recent projection by UBS, Chinese automakers could see their market share treble from 17% to 33% by 2030, with European companies suffering the greatest market share losses.

The top Chinese EV businesses’ equities that are listed on the Hong Kong Stock Exchange were startled by von der Leyen’s declaration that the European Commission probe may result in the implementation of tariffs on Chinese EV imports. BYD, a company supported by Warren Buffett, finished the day down 2.8%, Xpeng was down 2.5%, and Nio was down 0.9%.

The probe was met with “high concern and strong dissatisfaction” by China’s Commerce Ministry on Thursday.

According to a ministry spokeswoman, “China feels that the investigative measures requested by the EU are essentially to safeguard its own industry in the name of “fair competition.”

Competition That Is Unfair

The European Automobile Manufacturers‘ Association (ACEA) estimates that 13 million people in Europe are employed by the auto sector, or around 7% of the total labor force. Brands like Volkswagen, Audi, BMW, and Mercedes are at the center of Germany’s economy, which is the largest in Europe.

According to Reuters, German Economy Minister Robert Habeck welcomed the inquiry by the European Commission.

This is about unfair competition, not preventing affordable, effective cars from entering the European market, he claimed.

According to research firm Jato Dynamics, senior German and French industry leaders have recently raised the alarm about the growing danger posed by Chinese EVs, which are about 30% less expensive than EU or US equivalents.

Oliver Zipse, CEO of BMW, has cautioned that the EU’s prohibition on new conventional vehicles beginning in 2035 and increasing competition from China may drive European automakers out of the mass-market automobile industry. Chinese competitors, according to Renault CEO Luca de Meo, “are a generation ahead of us.”

The declaration made by von der Leyen on Wednesday was greeted favorably by ACEA Director-General Sigrid de Vries as “a positive signal that the European Commission is recognizing the increasingly asymmetric situation our industry is facing, and is urgently considering the distorted competition in our sector.”