The issue of Chinese electric vehicles caught a global controversy after the European Union started an anti-subsidy investigation into Chinese electric vehicle (EV) imports. China has described the action as biased, showing a protectionist tendency. European Commission President Ursula von der Leyen recently made an announcement about the probe into Chinese EVs, claiming the prices of imported Chinese vehicles are being kept "artificially low by huge state subsidies."
Chinese observers claimed that they were not surprised at all by the EU move, which reflects its biased mindset towards Chinese manufactured products. Observers did not rule out the adverse impact of the development on China-EU cooperation in green technologies. According to Chinese observers, the issue of anti-subsidy was triggered by the fact that China was set to overtake Japan in vehicle export and the growing demand for new energy vehicles (NEVs).
Contrary to China’s claims, the European Union (EU) belief is that China was subsidising these cars to give them an unfair advantage in the European market. The EU is concerned that this could lead to the collapse of the European electric car industry.
The EU move came because China was poised to overtake Japan to become the world's top vehicle exporter for the first time this year, fuelled by solid demand for new energy vehicles (NEVs). The EU’s investigation revolves around the following points: Providing cheap loans to Chinese electric car makers, Giving tax breaks to Chinese electric car buyers, Forcing state-owned companies to buy Chinese electric cars and Dumping Chinese electric vehicles on the European market at below-cost prices.
The EU is also concerned about the quality of Chinese electric cars. There have been reports of Chinese electric cars catching fire or breaking down. The EU is worried that these problems could damage the reputation of electric vehicles in general. Experts said the EU's decision to probe into cheap Chinese electric cars was belated. According to an article in the Financial Times, President Ursula von der Leyen's announcement of a months-long probe could lead to higher tariffs.
“We have been denouncing this risk for years,” said Matteo Salvini, Italy’s transport minister and leader of the hard-right League. “Europe is waking up only now: were they distracted, incompetent or complicit?” While the probe deals with imported Chinese-built cars, it will
not address the more significant issue of European carmakers’ reliance on Chinese battery technology, which is why China dominates the region’s nascent battery scene. The world’s top auto executives at a recent Munich auto show expressed concern over the threat from the Chinese brands whose glitzy stands dominated the trade show.
While carmakers often complain that Chinese brands will use lower labour and energy costs and hefty subsidies to undercut Europeans, it has yet to be borne out in the market. According to data group Jato Dynamics, the average price of a Chinese EV sold in the EU was €48,581 in the first half of 2023, compared with a cost of €67,607 for non-Chinese brands.
Meanwhile, The China Passenger Car Association, which represents automakers, clarified stating that the nation's booming EV exports are not because the industry received large subsidies, but because China's supply chain is highly competitive. Only now that Chinese companies pose a competitive threat Western nations are starting to react.
Cui Dongshu, secretary general of the PCA, said on his personal WeChat account that the price of China-made cars exported to Europe is generally almost double the price they sell for in China.
The European electric car industry still needs to be stronger than the Chinese. In 2022, the EU produced about 1.3 million electric cars, while China produced about 4.5 million. The EU market for electric vehicles is also growing, but it is growing more slowly than the Chinese market.
However, the EV probe has set the agenda and tone for bilateral talks ahead of the annual China-EU Summit scheduled to occur before year-end. It focuses on returning to EU demands for broader access to the Chinese market and rebalancing a trade relationship Brussels describes as "imbalanced."
It may also be mentioned that Chinese solar energy products have been probed. There have been several investigations into Chinese solar panels and other solar energy components over the past few years. For example 2012, the United States imposed anti-dumping duties on Chinese solar panels. This was after the US government found that Chinese solar panel manufacturers were selling their products in the US at below fair market value.
In 2018, the European Union also imposed anti-dumping duties on Chinese solar panels. This was after the EU found that Chinese solar panel manufacturers were using subsidies to sell their products below fair market value.
In addition to anti-dumping investigations, there have been investigations into Chinese solar energy products for other reasons, such as concerns about using forced labour to produce solar panels. For example, in 2020, the US government announced it would investigate whether Chinese solar panels were made with forced labour. This investigation is still ongoing.
Xi Lao is a freelance journalist based in Taiwan.
