Investigation into Subsidies for Electric Cars in China
Non-Chinese brands of electric cars, such as Tesla and BMW, are under scrutiny as part of an ongoing investigation into subsidies in China initiated by the European Union (EU). The investigation, which began earlier this month, aims to address significant distortions in the European market caused by cheaper electric vehicles from China.
Valdis Dombrovskis, executive vice president of the European Commission, stated that the scope of the investigation is still being determined through consultations with Chinese authorities. He clarified that the investigation does not solely target Chinese brand electric vehicles.
EU Probe into Chinese Subsidies
The EU launched the probe after gathering evidence of unfair subsidies provided by China to electric vehicle manufacturers. This has led to increased competition for European-made vehicles, which face lower-priced alternatives from China. Chinese authorities have criticized the investigation as protectionist.
Dombrovskis emphasized that the exact scope of the investigation is yet to be decided but confirmed that it could cover other electric vehicle producers besides Chinese brands. The investigation is expected to continue for up to 13 months.
Dombrovskis recently visited China, where he discussed the EU investigation with Chinese officials in Shanghai and Beijing. He assured the Chinese authorities that the investigation would be conducted in compliance with EU and World Trade Organization (WTO) principles and based on factual evidence. He highlighted the opportunity for engagement with Chinese authorities throughout the process.
European officials estimate that the share of China-made cars sold in Europe has already reached 8% this year and could rise to 15% by 2025.
Geopolitical Context and Trade Deficits
Dombrovskis acknowledged the challenging geopolitical context during his trip to China and emphasized the importance of mutually beneficial relations based on open, fair trade, and investment. He warned that choosing a path of increased separation could weaken the shared benefits enjoyed by both economies.
European officials expressed concern over the significant trade deficit of nearly 400 billion euros that the EU had with China in 2022.
Eurozone’s De-risking Strategy
The EU has been adopting a de-risking policy to reduce dependencies on China and safeguard strategic interests. Dombrovskis clarified that de-risking involves minimizing strategic dependencies on select products while maintaining open strategic autonomy.
During his visit, Dombrovskis aimed to reassure Chinese counterparts that the subsidy investigation seeks to establish fair trading practices and does not intend to sever ties with Beijing.
