• EU probes tariffs on subsidized Chinese EVs.
• European carmakers challenged by affordable Chinese EVs.
• China’s EV companies go global amid local competition.

The European Commission launched a probe on Wednesday to determine whether to impose tariffs to defend the European Union (EU) against Chinese EV imports that are subsidized by the government.

“Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies,” European Commission President Ursula von der Leyen said in her annual address to the bloc’s parliament.

European car manufacturers are facing tough competition in the race to produce affordable electric vehicles (EVs) and catch up to China’s lead in developing cost-effective and consumer-friendly EV models.

Chinese EV companies are increasingly focusing on expanding into international markets as competition in China intensifies and domestic growth slows. According to the China Passenger Car Association (CPCA), China’s auto exports saw a 31% increase in August following a 63% rise in July.

In Europe, Chinese brands accounted for 8% of new EVs sold this year, up from 6% last year and 4% in 2021, as reported by automotive consultancy Inovev. This growth has raised concerns among European automakers.

Following an announcement by the European Union, shares of Chinese EV producers experienced fluctuations. Before the news, BYD shares were trading 4.5% higher but closed down 2.8%. Nio fell by 1%, and Xpeng dropped 2.5%.

In April, the founder of Nio warned that Chinese EV manufacturers should prepare for the possibility of protectionist measures from foreign governments as they leverage their cost advantages to expand their exports.

He estimated that Chinese EV companies, including his own, had a cost advantage of approximately 20% compared to competitors like Tesla, thanks to China’s control over the supply chain and access to raw materials.

Ursula von der Leyen, President of the European Commission, emphasized the significance of electric vehicles in achieving the EU’s ambitious environmental goals.

“So I can announce today that the Commission is launching an anti-subsidy investigation into electric vehicles coming from China. Europe is open to competition. Not for a race to the bottom,” she told the European Parliament.

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