In a significant move aimed at safeguarding its electric vehicle (EV) market, the European Commission has initiated an investigation into whether punitive tariffs should be imposed on Chinese electric cars that are benefiting from substantial state subsidies. This development comes as global markets witness an influx of competitively priced EVs, with their artificially low prices primarily attributed to generous government support.
European Commission President Ursula von der Leyen, in her annual address to the European Parliament, voiced concerns about the prevalence of affordable Chinese electric cars in international markets.
"Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies," she emphasized.
European automakers have become acutely aware of the need to compete in the lower-cost EV segment to challenge China's dominance in producing affordable and consumer-friendly electric vehicles. As domestic competition in China intensifies and domestic growth moderates, Chinese EV manufacturers have been actively seeking opportunities to expand into overseas markets. According to the China Passenger Car Association (CPCA), China's auto exports surged by 31% in August, following a 63% increase in July.
A noticeable trend in Europe has been the growing market share of Chinese EV brands. Inovev, an automotive consultancy, reported that Chinese automakers accounted for 8% of new EV sales in Europe this year, up from 6% in the previous year and 4% in 2021.
Following the announcement of the EU investigation, shares of Chinese EV producers experienced fluctuations. BYD shares initially surged by 4.5% before closing down 2.8%, while Nio (9866.HK) saw a 1% drop, and Xpeng (9868. HK) recorded a 2.5% decline.
In April, the founder of Nio had already cautioned that Chinese EV manufacturers should prepare for potential protectionist policies by foreign governments, given the cost advantages they enjoyed due to China's influence over the supply chain and access to raw materials. The estimated cost advantage was reported to be around 20% when compared to competitors like Tesla.
Von der Leyen underscored the significance of electric vehicles in achieving the EU's ambitious environmental goals.
"So I can announce today that the Commission is launching an anti-subsidy investigation into electric vehicles coming from China. Europe is open to competition. Not for a race to the bottom," she asserted.
The investigation by the European Commission signifies a growing concern among EU leaders regarding the impact of state-sponsored subsidies on fair competition in the EV market. As the EV industry continues to evolve, it remains to be seen how this investigation will impact the dynamics between Chinese and European electric car manufacturers.
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