The European Commission has launched an anti-subsidy inquiry into Chinese electric vehicles due to concerns about the unfair advantage provided by state aid to Chinese companies. The probe, initiated by the Commission without a formal complaint from the industry, aims to determine if the assistance provided to Chinese car makers could cause harm to the EU industry. The investigation is based on a potential threat of disruption in the future that could lead to heavy losses for European companies, as Chinese BEVs are on average 20% cheaper than their European counterparts. If the Commission concludes that the threat of injury is high enough, additional tariffs will be imposed on imports of China-made BEVs.
The EU is legally obligated to reduce greenhouse gas emissions by at least 55% by 2030 under the Green Deal, with the transport sector playing a significant role. Member states and the European Parliament have agreed to ban new sales of combustion-engine vehicles as of 2035, leading to a surge in the sales of Battery Electric Vehicles (BEVs) in the bloc. In parallel, the Chinese economy has entered a slowdown, prompting Chinese companies to export their electric cars to compensate for weak domestic demand. Chinese BEVs from brands like BYD, Geely, and SAIC have become increasingly popular in the EU due to their lower prices compared to European brands.
Commission officials have been collecting data about the Chinese market and have determined that Beijing is using a range of subsidy measures to support its car-making industry and produce BEVs with artificially lower prices. If the threat of injury is deemed high enough, tariffs will be imposed on China-made BEVs. The deadline for provisional measures ends in early July, and the Commission plans to announce a decision shortly after the June elections to the European Parliament. The tariffs are expected to be in the range of 15% to 30%, with specific rates for different Chinese companies.
China has threatened to retaliate if tariffs are imposed by the EU, warning that it would firmly safeguard its lawful rights and interests. Vehicles and agricultural products are particularly vulnerable to Chinese reprisals, and Beijing may also target sales of French brandy. The Commission’s actions are aimed at restoring a level playing field and ensuring fair competition according to World Trade Organization rules. The imposition of permanent tariffs in November would require approval from member states, with some countries expressing support for the plan while others have reservations.
EU-China relations are strained due to various disagreements, including unfair trade practices, intellectual property theft, and forced labor, in addition to geopolitical tensions. The anti-subsidy inquiry into Chinese BEVs comes at a time of heightened trade and political friction between the two entities. The European Commission sees the inquiry as a way to defend against unfair practices and ensure fair competition, while also guarding against a potential race to the bottom in trade relations. The decision on whether to impose tariffs on China-made BEVs will depend on the findings of the investigation and the reactions of EU member states.
