Europe Launches Investigation into Chinese Electric Vehicle Subsidies: What Could It Mean for the EV Market?

Europe Launches Investigation into Chinese Electric Vehicle Subsidies

Europe has initiated an investigation into government subsidies for electric vehicle (EV) makers in China. The European Commission announced this probe about two weeks ago, focusing on subsidies for EV production. Valdis Dombrovskis, the executive vice president and trade commissioner of the European Commission, stated that the investigation would be fact-based and carried out in accordance with EU and World Trade Organization rules.

Rising Chinese Electric Car Exports

China’s electric car exports have recently experienced significant growth. Moody’s reports that when considering exports of all car types, China has already surpassed Germany and is on track to surpass Japan as the largest car exporter globally. However, Chinese electric car companies such as Nio, Xpeng, and BYD have only made limited expansions into Europe so far. The majority of China’s electric car exports to Europe are from Tesla and other international brands manufacturing in China.

The EU’s Subsidy Probe and Future Consequences

The European Union (EU) plans to phase out sales of internal combustion engine cars by 2035. Dombrovskis highlighted that the share of Chinese EV brands in the EU market has risen from less than 1% to 8% in the past two or three years. The EU’s subsidy investigation also aims to address the “risk of injury” for the European auto industry. European auto giants like Volkswagen have faced challenges in penetrating the highly competitive electric car market in China.

Criticism and Reactions

China’s Ministry of Commerce criticized the EU investigation, calling it a “blatantly protectionist act” that would distort the global auto industry. Cui Dongshu, head of the China Passenger Car Association, attributed China’s growing new energy vehicle exports to its competitive domestic supply chain and market environment.

China’s Electric Vehicle Ambitions

China’s efforts in the electric vehicle sector began over a decade ago with a national strategy developed by former Audi engineer Wan Gang, who became China’s Minister of Science and Technology in 2007. The central government invested billions of yuan in subsidies for EV development between 2009 and 2015. Recent subsidies have focused on tax breaks for consumers as electric cars are seen as a driver of advanced manufacturing, retail sales, and exports.

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