EU Launches Investigations Into Chinese Electric Vehicles Subsidies

It was the big surprise of the State of the Union speech: the European Union is launching a trade inquiry into Chinese electric vehicles.

"Competition is only true as long as it is fair," said Ursula von der Leyen, the president of the European Commission. "We have to be clear-eyed about the risks we face."
This was von der Leyen's unexpected announcement of a formal anti-subsidy investigation into Chinese-made electric vehicles entering the European market on Wednesday, which drew applause from MEPs in the Strasbourg hemicycle.

"Global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies. This is distorting our market," she said. "And as we do not accept this distortion from the inside in our market, we do not accept this from the outside."
Following the announcement, shares of Chinese EV manufacturers fell, Bloomberg reported.

The investigation was launched in an effort to protect domestic automakers while also highlighting growing competition between Europe and China. Traditional European automakers such as Volkswagen (VOW), Mercedes-Benz (MBG), BMW (BMWYY), and Stellantis (STLA) have faced increased competition in recent years from Chinese EV manufacturers, who have benefited from massive state subsidies for electric vehicles.

According to Al-Jazeera, Chinese car registrations in the EU increased 130% year on year in the seven months to July, while European car registrations increased only 36%. The investigation will most likely take up to 15 months.  The European Commission will decide whether to levy anti-subsidy duties on Chinese EVs.

China, for the record, is the world's largest EV market. To encourage the use of clean energy vehicles, the Chinese government has been providing subsidies to domestic EV manufacturers. The EU, on the other hand, has accused China of providing unfair subsidies to its EV manufacturers. They argue that this gives them an unfair advantage over European brands.

Chinese automakers already produce reasonably priced electric vehicles. If Chinese government-subsidized brands flood the European market with their products, European brands may find it difficult to compete. This will eliminate the health competition that the EU is working hard to preserve.

Whatever the outcome, the EU's investigation into Chinese EV subsidies is an attempt to shield European brands from unfair competition. It also aims to prevent a flood of cheap Chinese EV imports into the EU market.

The investigation will look into whether China is providing unfair subsidies to its EV manufacturers, and whether this is distorting the EU market. The investigation's findings could have far-reaching consequences for both Chinese and European EV manufacturers, as well as European consumers.