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Europe Probes China’s Electric Car Subsidies as Imports Soar

The European Union is launching an investigation into China’s state support for makers of electric vehicles as soaring imports of their cars stoke fears for the future of European auto manufacturers.

Speaking to the European Parliament Wednesday, European Commission President Ursula von der Leyen said Europe was open to competition but “not for a race to the bottom.”

“Global markets are now flooded with cheaper electric cars and their prices [are] kept artificially low by huge state subsidies,” von der Leyen said. “So I can announce today that the commission is launching an anti-subsidy investigation into electric vehicles coming from China.”

Europe levies a duty of 10% on cars imported from China. That compares with duty of 27.5% in the United States, and China’s manufacturers have taken advantage to carve out a significant and rapidly growing foothold in the European market.

Chinese companies exported nearly 350,000 EVs to nine European countries in the first half of the year, more than they exported in all of 2022, according to data from the China Passenger Car Association. And in the last five years, EU imports of Chinese cars have quadrupled.

By 2030, Chinese carmakers could see their share of the global market double from 17% to 33%, with European firms suffering the biggest loss of market share, according to a recent estimate by UBS.

The European Commission investigation could lead to the imposition of tariffs on Chinese EV imports, and von der Leyen’s announcement rattled the stocks of China’s biggest EV companies listed in Hong Kong. BYD, which is backed by Warren Buffett, closed down 2.8%, Xpeng fell 2.5%, while Nio slipped 0.9%.

BYD, China’s largest EV manufacturer, is aiming to double the number of its dealer partners in Europe to 200 this year, Li Yunfei, a BYD spokesman, told reporters last week. The company is planning to increase overseas sales to 250,000 vehicles in 2023, compared with 55,916 in 2022.

Europe’s auto industry provides jobs for about 13 million people, accounting for about 7% of all employment, according to the European Automobile Manufacturers’ Association (ACEA). In Germany, brands such as Volkswagen, Audi, BMW and Mercedes sit at the heart of Europe’s biggest economy.

German economy minister Robert Habeck welcomed the European Commission’s investigation, Reuters reported.

“This is about unfair competition, it’s not about keeping efficient cheap cars out of the European market,” he said.

Senior German and French industry executives have recently sounded the alarm about the growing threat posed by Chinese EVs, which are roughly 30% cheaper than EU or US equivalents, according to research firm Jato Dynamics.

BMW CEO Oliver Zipse has warned that the EU ban on new conventional vehicles from 2035, and growing competition from China, could push European automakers out of the production of mass-market cars. Renault CEO Luca de Meo, meanwhile, has said Chinese rivals “are a generation ahead of us.”

ACEA director-general Sigrid de Vries welcomed von der Leyen’s announcement Wednesday as a “positive signal that the European Commission is recognizing the increasingly asymmetric situation our industry is faced with, and is giving urgent consideration to distorted competition in our sector.”

“Free and fair trade has been essential to the creation of a successful European automotive sector, and a foundation of its global success… However, the principle of ‘free and fair’ trade requires a level playing field between all competitors, with reciprocal trade and market entry rules. It is essential that this be respected by all players in the market,” she said in a statement.

Source : CNN Business