Autos

'Blatantly protectionist': China sharply rebukes EU probe on Chinese EV subsidies

Key Points
  • The European Commission, the executive arm of the European Union, unexpectedly launched an investigation Wednesday on the level of state subsidies that benefits China's electric vehicle makers.
  • "China's new energy vehicles exports are seeing stronger volumes not due to huge state subsidies, but because of the highly competitive China industrial supply chain from strong market competition domestically," Cui Dongshu, secretary-general of the China Passenger Car Association, said Thursday in comments on his personal WeChat account, in a CNBC translation.
  • He added that Chinese cars exported to Europe are generally retailing at nearly double of its prices in mainland Chinese markets.
Employees work on the assembly line of C11 electric SUV at a factory of Chinese EV startup Leapmotor on April 26, 2023 in Jinhua, Zhejiang Province of China.
Vcg | Visual China Group | Getty Images

China has accused the European Union of "blatant protectionism" after its executive arm unexpectedly launched an "anti-subsidy" investigation into China's electric vehicle makers.

The Chinese Commerce Ministry urged dialogue to safeguard the interests of Chinese companies and commit to global efforts to address climate change and achieve carbon neutrality.

"China believes the investigations announced by the European Union in the name of 'fair competition' are actually aimed at protecting its own industries," the ministry said at a regular press conferences Thursday, according to a CNBC translation.

"It's a blatantly protectionist act that will seriously disrupt and distort the global — inclusive of the EU —automotive industry and supply chain and will have a negative impact on China-EU economic and trade relations," the ministry said.

If the EU finds harm from Chinese subsidies, Brussels is likely to impose tariffs on Chinese EVs despite the risk of political and economic backlash from Beijing.
Eurasia Group

The EU's announcement Wednesday marked another escalation in EU-China relations and echoes the impact of robust competition from Chinese companies in Europe's solar industry.

In late May, the U.S. and Europe agreed to reduce their dependency on Beijing — but rather than completely cut ties, they agreed to a broader "derisking" move.

"Europe is open to competition but not for a race to the bottom," European Commission President Ursula von der Leyen said Wednesday in her annual State of the Union address at the European Parliament in Strasbourg, while confirming the probe.

The commission says an anti-subsidy investigation must impose measures within 13 months from initiation. It also says that provisional measures must be imposed no later than nine months, followed by four months to impose definitive measures if legally warranted.

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"Brussels's willingness to go after a key Chinese export underscores growing protectionist tendencies in Europe, as the EU seeks to compete with China and the US on the green and digital transitions," Eurasia Group analysts wrote in a note on Wednesday.

"The EU will largely use trade defenses, given its limited scope to unleash more subsidies and the uneven scope for state aid among EU members," they said. "If the EU finds harm from Chinese subsidies, Brussels is likely to impose tariffs on Chinese EVs despite the risk of political and economic backlash from Beijing."

EU members are demanding the regional bloc shield European carmakers from Chinese EVs that they say are heavily subsidized by the Chinese government.

China's auto industry body's top official said Thursday that Chinese electric vehicle exported to Europe are generally retailing at nearly double the prices in mainland Chinese markets.

"China's new energy vehicles exports are seeing stronger volumes not due to huge state subsidies, but because of the highly competitive China industrial supply chain from strong market competition domestically," Cui Dongshu, secretary-general of the China Passenger Car Association, said in comments on his personal WeChat account, according to a CNBC translation.

"The EU should view the development of China's electric vehicle industry objectively, rather than arbitrarily employing unilateral economic and trade tools to restrict the development or increase operating costs of China's electric vehicle products in Europe," he added.