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EU Trade Chief Urges Fairness in China EV Probe, Avoids Prejudgment

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EU Launches Investigation into Chinese EV Subsidies: Outcome Remains Uncertain

The European Union (EU) has initiated an investigation into Chinese electric vehicle (EV) subsidies, but the head of trade for the EU's executive branch urges caution in predicting the probe's outcome. The investigation, announced by the European Commission two weeks ago, focuses on subsidies for EV production and will adhere to EU and World Trade Organization rules. Valdis Dombrovskis, the executive vice president and trade commissioner of the European Commission, emphasized that the investigation will be based on facts and involve engagement with Chinese authorities and businesses. It is important not to prejudge the outcome, Dombrovskis stated.

Surging Chinese EV Exports and Future Implications

China's electric car exports have experienced significant growth, surpassing Germany and on track to outpace Japan as the largest car exporter globally, according to Moody's. While Chinese EV companies like Nio, Xpeng, and BYD have started expanding into Europe, the majority of electric car exports to Europe still come from international brands manufacturing in China, including Tesla. The EU's plan to phase out sales of internal combustion engine cars by 2035 has driven the share of Chinese EV brands in the EU market from less than 1% to 8% in recent years. The investigation also considers the potential risk of injury to the European auto industry.

Challenges for European Auto Giants and Chinese Criticisms

European auto giants, such as Volkswagen, heavily rely on sales in China but struggle to penetrate the highly competitive Chinese electric car market. To address this, Volkswagen and EV startup Xpeng announced a strategic partnership earlier this year to jointly develop cars for the Chinese market. However, China's Ministry of Commerce criticized the EU investigation, labeling it a "blatantly protectionist act" that distorts the global auto industry. Cui Dongshu, head of the China Passenger Car Association, attributed China's growing new energy vehicle exports to a competitive domestic supply chain and market environment. On Tuesday, Dombrovskis revealed that the EU probe into EV subsidies was discussed in nearly every meeting with his Chinese counterparts. China's electric vehicle ambitions began over a decade ago when former Audi engineer Wan Gang convinced the central government to implement a national strategy for developing new energy vehicles and battery technology. The Chinese government has invested billions of yuan in EV subsidies, although some instances of fraud were discovered. Recent subsidies have focused on tax breaks for consumers, as electric cars are seen as a bright spot in China's slowing economy, driving advanced manufacturing, retail sales, and exports.

EU's Probe into Chinese EV Subsidies: Potential Impact on New Business Ventures

The European Union's (EU) ongoing investigation into Chinese electric vehicle (EV) subsidies could have significant implications for new businesses looking to enter the EV market. The probe, led by Valdis Dombrovskis, executive vice president and trade commissioner of the European Commission, is scrutinizing the subsidies provided to Chinese EV manufacturers. The outcome of this investigation remains uncertain, but its results could reshape the competitive landscape in the global EV market.

Chinese EV Exports Surge: A Challenge for New Entrants?

China's EV exports are booming, with Chinese EV companies like Nio, Xpeng, and BYD expanding their footprint in Europe. Interestingly, the majority of EV exports to Europe are from international brands manufacturing in China, such as Tesla. This surge in Chinese EV exports, coupled with the EU's plan to phase out internal combustion engine cars by 2035, could pose a significant challenge for new businesses entering the EV space.

European Auto Giants Struggle: A Warning for New Businesses?

European auto giants like Volkswagen, despite their significant sales in China, have struggled to penetrate the Chinese EV market. This struggle, despite strategic partnerships with Chinese EV startups, suggests a highly competitive market. This could serve as a cautionary tale for new businesses planning to enter the EV market.
Chinese Criticisms and EV Ambitions
The EU's investigation has drawn criticism from China's Ministry of Commerce, which has labeled it a "blatantly protectionist act." China's aggressive push into the EV market, driven by a national strategy for developing new energy vehicles and battery technology, has been fueled by billions of yuan in subsidies. This government-backed push, along with the competitive domestic supply chain, could make it challenging for new businesses to compete in the EV market. In short, the EU's probe into Chinese EV subsidies and the competitive dynamics of the EV market underscore the challenges new businesses may face when entering this rapidly evolving sector.
Story First Published at: https://www.cnbc.com/2023/09/26/eu-trade-chief-says-the-outcome-of-china-ev-probe-cannot-be-prejudged.html
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