EU probes Chinese BEVs and their pre-allocated subsidies

1. The substantial state support funnelled into China’s burgeoning electric vehicle industry, which stands as a testament to Beijing’s ambitious green initiatives.
2. A surge in the export of low-priced Chinese BEVs to Europe, offering budget-friendly options for European consumers but at the potential expense of local manufacturers.
3. Concerning signs of over-capacity in China’s BEV manufacturing sector, which could lead to an even greater flood of exports, affecting market dynamics.

A centerpiece in this investigation is the intricate system of pre-allocated subsidies. These subsidies are financial aids earmarked for specific firms ahead of time, signalling a direct intervention by the Beijing government in favour of chosen market players. Such preferential treatment not only highlights the extent of governmental interference in the market but also raises concerns about the competitive landscape and the sustainability of such practices.

BYD, a front-runner in China’s BEV market, has benefited significantly from this subsidy system. However, it’s not just domestic companies reaping the rewards. International auto giants such as Tesla and Volkswagen, through its collaborations with Chinese companies SAIC and FAW, have also been on the receiving end. Between 2020 and 2022, Tesla amassed subsidies worth RMB 1.24 billion (USD 192 million), while Volkswagen’s joint ventures accrued RMB 0.58 billion (USD 79 million).

The data unveils a startling growth trajectory of Chinese BEV exports. Their global share skyrocketed from a mere 4% in 2020 to an impressive 21% in 2022. Notably, many BEVs reaching European shores under the ‘Made in China’ label belong to renowned international brands. Tesla, Renault, and BMW are among the prominent names in the list of top exporters. For instance, Renault’s Dacia Spring, manufactured in Hubei, China, was the tenth best-selling BEV model in Europe in the first half of 2022.

The European Commission’s current course of action is a deliberate and strategic one. By initiating an investigation at this stage, the Commission aims to proactively shield Europe’s budding BEV industry from potential threats. This move is a lesson learned from the EU’s earlier experience with the solar photovoltaic (PV) sector, where state-backed Chinese firms had a significant market impact. The Commission’s strategy signals a shift from a reactive approach to one that anticipates and counters potential market disturbances.

In conclusion, as the world pivots towards more sustainable transportation options, the electric vehicle industry’s landscape is rapidly evolving. The European Commission’s investigation into China’s BEVs and their subsidy structures will undoubtedly shape the course of future trade and industry dynamics. Both trade experts and industry stakeholders will keenly watch the outcome, as it has the potential to set a precedent for future trade defense measures across various sectors.

Source: The EU’s Electric Vehicle Probe and What Comes Next | Rhodium Group