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Europe Launches Investigation into Chinese Electric Vehicle Subsidies: No Assumptions About Outcome, Says EU Trade Head

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Europe Launches Investigation into Chinese Electric Vehicle Subsidies

Europe has initiated an investigation into government subsidies for electric vehicle (EV) makers in China. The probe, focusing on subsidies for EV production, will be conducted in accordance with EU and World Trade Organization rules. Valdis Dombrovskis, executive vice president and trade commissioner of the European Commission, stated that the investigation will involve engagement with Chinese authorities and businesses. It is important not to pre-judge the outcome of the investigation, as it will be fact-based.

China’s Growing Electric Car Exports and EU Market Share

China’s electric car exports have surged in recent months, already surpassing Germany’s and on track to surpass Japan’s this year as the largest car exporter globally. Nio, Xpeng, and BYD, among others, have started expanding to Europe, but in relatively small numbers. More than two-thirds of China’s electric car exports to Europe come from Tesla and other international brands manufacturing in China. The share of Chinese EV brands in the EU market has increased from less than 1% to 8% in the last two or three years. This trend has significant consequences for the business sector.

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The EU’s Subsidy Probe and Risk of Injury for the European Auto Industry

The EU’s subsidy probe into Chinese EV subsidies also considers the “risk of injury” for the European auto industry. European giants like Volkswagen rely heavily on sales in China but have struggled to penetrate the competitive electric car market. Earlier this year, VW and Xpeng announced a strategic partnership to jointly develop cars for the Chinese market. China’s Ministry of Commerce criticized the EU investigation, calling it a “blatantly protectionist act” that would distort the global auto industry.

China’s Electric Vehicle Ambitions and Subsidies

China’s electric vehicle ambitions began over a decade ago with a national strategy for developing new energy vehicles and battery technology. The central government spent billions of yuan in subsidies between 2009 and 2015. However, there were instances of companies cheating the system. Recent subsidies have focused on tax breaks for consumers, as electric cars are seen as a driver of advanced manufacturing, retail sales, and exports in China’s economy.

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