The European Commission officially opened an investigation into China’s electric vehicle sector, saying it was “already in possession of sufficient evidence” that Beijing has provided subsidies that risk damaging EU industry. A statement published in the Official Journal of the European Union said that based on public information, the subsidies “pose an imminent threat of injury to an already vulnerable EU industry”. Depending on the evidence uncovered, and majority support garnered among EU member states, the union could slap import duties on vehicles coming from China.
Beijing hit back immediately. A Chinese Ministry of Commerce statement slammed the investigation as “naked protectionist behavior that will seriously disrupt and distort the supply chain of the global automotive industry chain, including the EU”. “China expresses strong dissatisfaction with this. The European side requested the Chinese side to conduct consultations within a very short period of time and failed to provide effective consultation materials, which seriously jeopardized the rights of the Chinese side,” the statement continued.
An EU Spokesman said the Commission offered China consultations before the investigation was initiated. “In essence: a formal meeting took place, the Commission took note of China’s views on the matter, there was no mutually agreed solution and therefore the Commission decided to initiate the investigation,” said Spokesman Olof Gill. “The government of China and industry representatives in China will have the possibility to intervene and make their case in the following stages of the proceeding,” he added. However, speaking in the European Parliament, Trade Commissioner Valdis Dombrovskis said the investigation “has to be fact-based and we also need to give an opportunity for the Chinese authorities and Chinese companies to provide evidence”.
The investigation has also caused a stir within the EU. It will not only look for support given to Chinese brands, but also European and other international brands with a presence in China. This means Tesla, Volkswagen and BMW models made in China could all be subject to import duties – indeed, discriminating on the basis of brand nationality would go against World Trade Organization (WTO) rules. It also leaves Germany, whose automotive industry is highly exposed to China, vulnerable to retaliation. While the investigation was instigated by the European Commission, it was informally requested by French industry and government figures, while Germany has strongly opposed the probe.
While German Economy Minister Robert Habeck offered personal support for the inquiry, he admitted that German industry feared retaliation. “The German automotive industry is afraid, rightly so, we would have to fear counteraction,” Habeck said at an event last month. Nonetheless, Brussels is determined to go forward with the investigation, which will last up to a year and cover the 12-month period to September 30, 2023. It will look for government subsidies in the form of direct transfers of funds, tax breaks and state provisions of discounted goods and services. Beijing said it would “pay close attention to the follow-up investigation procedures of the European side and firmly safeguard the legitimate rights and interests of Chinese enterprises”.
The Chinese Foreign Ministry’s top official for Europe, Wang Lutong, wrote on X: “The move violates #WTO rules, and seriously hurts China’s interests and #China-#EU relations. History proves that those who engage in protectionism will eventually find their own interests hurt,” Wang tweeted. While Chinese models account for a small portion of the current EU car market, the share is growing. In the first seven months of 2023, Chinese electric vehicle shipments to the EU soared to USD7.9 billion, an increase of 113% from the same period a year earlier and up 78,900% compared to the first seven months of 2019. According to an EU official, Chinese brands accounted for 8% of the EU’s electric vehicle market share in 2022, while market prices for Chinese brands were 20% cheaper than those of European competitors, the South China Morning Post reports.
