EU to investigate 'flood' of Chinese electric cars, weigh tariffs

The European Commission on Wednesday launched an investigation into whether to impose punitive tariffs to protect EU producers from cheap Chinese electric vehicle (EV) imports that they say are vulnerable to state subsidies. Are benefiting.

“Global markets are now flooded with cheap electric cars. And their prices have been kept artificially low because of heavy government subsidies,” European Commission President Ursula von der Leyen said in her annual address to the bloc’s parliament. His reappointment for a second term.

The Commission will have 13 months to assess whether to impose tariffs above the standard 10% EU rate for cars in its highest-profile case against China since an EU investigation into Chinese solar panels a decade ago hampered trade. The war was narrowly avoided.

The anti-subsidy investigation covers cars powered by batteries from China, so it also includes non-Chinese brands such as Tesla, Renault and BMW. It is also unusual in that it is brought by the European Commission itself, rather than in response to an industry complaint.

Tensions have been rising between China and the EU, partly due to Beijing’s closer ties with Moscow following Russia’s invasion of Ukraine. The European Union is trying to reduce its dependence on the world’s number one company. 2 The economy, especially for the materials and products needed for the green transition.

European carmakers have realized they face a struggle to erase China’s lead in making low-cost electric vehicles and developing cheaper models.

Chinese EV makers, from market leader BYD (002594.SZ) to smaller rivals Development has become easy. China’s auto exports rose 31% in August after a 63% surge in July, data from the China Passenger Car Association (CPCA) showed.

According to Jato Dynamics, the average retail price of a Chinese brand electric car in Germany was 29% lower than the average for a non-Chinese EV model, not counting incentives or rebates, while in France it was 32% lower and 38% lower in . UK.

The European Commission said China’s share of EVs sold in Europe has risen to 8% and could reach 15% in 2025, noting that prices are typically 20% lower than EU-made models. Popular Chinese models exported to Europe include SAIC’s MG and Geely’s Volvo.

Shares of Chinese EV producers fell after the EU announcement. BYD shares, which were trading 4.5% higher before the news, closed 2.8% lower, while Nio fell 1% and Xpeng fell 2.5%.

Shares of Europe’s car makers Volkswagen (VOWG_p.DE), BMW (BMWG.DE) and Mercedes-Benz (MBGn.DE) and Stellantis (STLAM.MI) got a brief, initial boost on the news before erasing most of their gains. At 1115 GMT, VW was up 0.3% while Stellantis was down 0.4%.

Gear grinding

The influx of cheap Chinese electric vehicles has already prompted some European carmakers to take action. Renault (RENA.PA) announced in July that it aimed to reduce the production costs of its electric models by 40%.

Like other EV makers, France’s Renault faces increasing pressure from U.S. rival Tesla (TSLA.O), which has cut prices several times this year, even as its margins There has also been a decrease.

But Germany’s VDA auto association said the EU should take into account China’s potential reaction to such an investigation.

The VDA said policymakers should focus on creating the conditions for European players to succeed in their sector – from lowering electricity prices to reducing bureaucratic barriers.

Germany’s car industry depends on China for a large share of its sales revenue and has long advocated keeping trade doors open.

Von der Leyen also stressed the importance of electric vehicles for the EU’s ambitious environmental objectives.

“Europe is open to competition. Not to a race to the bottom,” he told the European Parliament. He said the EU does not want to repeat the experience of its solar panel industry, which was destroyed due to cheap Chinese imports.

“This is the beginning of a long journey,” said Simone Tagliapietra, an analyst at the think tank Bruegel. “This may eventually work, but it must run parallel to an active industrial policy to ensure that EU industry rapidly develops its competitiveness.”

According to consulting firm AlixPartners, Chinese state subsidies for electric and hybrid vehicles were worth $57 billion from 2016-2022, helping China become the world’s largest EV producer and surpassing Japan as the largest auto exporter in the first quarter of this year. It helped to leave it behind.

China ended a generous 11-year subsidy scheme for EV purchases in 2022, but some local authorities have continued to offer subsidies for consumers, along with handouts or tax breaks to attract investment.

Nio’s founder warned in April that Chinese EV makers should prepare for the possibility that foreign governments would impose protectionist policies.

He estimated that China’s hold on the supply chain and raw materials gave his company and Chinese counterparts a 20% cost advantage over rivals like Tesla.

Kingsmill Bond, senior principal of the strategy team at the Rocky Mountain Institute, said Chinese producers benefited from EV battery prices of $130 per kilowatt hour in 2022, compared with the global price of $151.

Source: Reuters