EU-China Trade Tensions Rise Over EV Subsidies

The European Union (EU) has initiated an investigation to understand the reliance on government subsidies by Chinese electric vehicle (EV) manufacturers. Concerns were raised about the possibility of these manufacturers entering the EU market with price points that could pose challenges to the profitability of European-made vehicles.

EU regulatory authorities have expressed concerns regarding the increasing presence of Chinese EVs in the EU market. A recent estimate by UBS suggests that by 2030, Chinese automakers could witness a substantial rise in their global market share from 17% to 33%, with European automakers anticipated to receive the biggest loss in market share.

This investigation is anticipated to span a duration of up to 13 months, and its outcome remains uncertain, with regard to whether the EU will impose additional tariffs beyond its existing 10% duty.

Nevertheless, the possibility of punitive tariffs is being contemplated as a preemptive measure to prevent the influx of Chinese EV imports into the EU market, as indicated by President Ursula von der Leyen of the EU.

EU's move follows the impact made by Chinese EV brands during the Munich auto show challenging Europe's traditional automakers. This development appears to be more than mere coincidence, as European industry leaders, including Stellantis CEO Carlos Tavares, have been voicing concerns for months about the surging exports from Chinese EV manufacturers.

BMW CEO Oliver Zipse has warned that the EU's impending ban on new traditional vehicles by 2035, coupled with the intensifying competition from China, may force European automakers to reconsider their involvement in mass-market car production.

The investigation into EVs is set to establish the framework for bilateral discussions leading up to the annual China-EU Summit, scheduled to occur before the end of the year. These discussions will likely focus on EU demands for the Chinese market’s access and a reevaluation of what Brussels has described as an "imbalanced" trade relationship.

The dynamics between the EU and Chinese EV manufacturers will continue to evolve, making it a central point of interest within the global automotive industry.