China Blasts EU Probe Into EV Subsidies, Describes It As “Protectionist”

Analysts warn of retaliation from Beijing if tariffs are imposed, a concern shared by Germany’s car industry.

Sep 15, 2023 at 2:59am ET

The Chinese Ministry of Commerce blasted the European Union’s decision to open an investigation into the state subsidies that allow Chinese-made EVs to be sold at “artificially low” prices on the Old Continent, which could lead to the EU imposing tariffs on battery-powered vehicle imports.

Beijing described the probe as “protectionist” and said that the Chinese EV sector’s competitive advantage is not due to subsidies, according to Reuters, which published a statement from the Ministry:

"(The investigation) is a naked protectionist act that will seriously disrupt and distort the global automotive industry and supply chain, including the EU, and will have a negative impact on China-EU economic and trade relations," China's Ministry of Commerce said.

"China will pay close attention to the EU's protectionist tendencies and follow-up actions, and firmly safeguard the legitimate rights and interests of Chinese companies," it added.

While some EU member states, such as France, have called for such an investigation for several months, representatives of Germany’s immense car industry are not certain the measure will lead to positive results.

Mercedes-Benz, which has a joint venture with Chinese automaker Geely to produce Smart-branded EVs, said that protectionist measures are counterproductive, while Bosch, which is the world’s largest automotive supplier, added that a race for punitive tariffs and trade barriers would only have losers, writes Reuters. At the same time, Stellantis said it welcomed fair competition which drives innovation and performance.

In the first seven months of this year, Chinese brands almost doubled their European EV market share, going from 3.4 percent in the January to July 2022 period to 6.7 percent this year. While growing, Chinese EV makers are still lagging behind South Korean automakers, which have an 8.2 percent share of the European market (down from 12.7 percent in the same period last year), US-based brands, with 20.2 percent (up from 14 percent), and European manufacturers, which dominate the EV market with a 61.8 percent share (down from 67.2 percent last year).

With this being said, EU officials believe that Chinese-made battery-powered cars are undercutting the price of local EVs by about 20 percent, putting pressure on European brands to build more affordable electric cars, with companies like Citroen planning to bring several small and affordable EVs to market in the coming years.

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