Beijing | Thu, September 14, 2023

A European Commission investigation into Chinese electric vehicles believed to have benefited from state subsidies will have a “negative” impact on economic and trade ties, China’s commerce ministry warned on Thursday.

It will be determined by the probe, which was started on Wednesday, if harsh duties are necessary to shield EU companies against what European Commission President Ursula von der Leyen called a “flood” of less expensive Chinese EV imports.

In a statement, the trade ministry stated that China “believes the investigative measures proposed by the European Union are in reality to protect its own industry in the name of ‘fair competition’.”

“It is a blatantly protectionist act that will severely disrupt and distort the global automotive industry and supply chain, including the EU, and will have a detrimental effect on China-EU economic and trade relations,” said one expert.

The investigation, which was started by the European Commission and not in response to a complaint from the industry, would exacerbate an already delicate relationship with China that is already strained by trade and investment imbalances.

Chinese customs figures show that in 2022, China’s exports to the EU increased 8.6% to $562 billion. However, because of weakening Chinese demand, imports from the EU fell 7.9% to $285 billion, substantially widening the EU’s trade deficit with China for the second year.

Chinese EU Chamber strongly opposes probe

On Wednesday, the Chinese Chamber of Commerce in the EU retaliated against the action, claiming it was against the investigation and that the sector’s competitive edge was not the result of subsidies.

The China Passenger Car Association’s secretary general, Cui Dongshu, posted on his personal WeChat account on Thursday said he was “strongly against” the review personally and encouraged the EU to take a dispassionate look at the growth of the sector rather than “arbitrarily use” trade or economic tools.

He continued by saying that the cost of cars built in China that are shipped to Europe is typically approximately twice what they are sold for there.

Chinese EVs, according to EU authorities, undercut domestic models’ prices in the European market by approximately 20%, putting additional pressure on European automakers to create more affordable electric vehicles.

According to the European Commission, China now accounts for 8% of EVs sold in Europe and might account for 15% by 2025.

According to US think tank Center for Strategic and Internal Studies (CSIS), 35% of all exported electric automobiles in 2022 came from China, an increase of 10% from the previous year.

According to the report, the majority of the vehicles and the batteries that power them were destined for Europe, where 16% of the batteries and automobiles sold in 2022 were built in China.

Tesla, a major US company, is China’s single greatest exporter, according to CSIS data. It increased from 36.5% in 2022 to slightly over 40% of China’s EV exports between January and April 2023.

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