SHANGHAI/BEIJING (Reuters) – Beijing yesterday blasted the launch of a probe by the European Commission into China’s electric vehicle (EV) subsidies as protectionist and warned it would damage economic relations, a concern shared by Germany’s car industry.
European Commission President Ursula von der Leyen announced the investigation yesterday, accusing China of flooding global markets with electric cars that had artificially low prices because of huge state subsidies.
The probe, which could result in punitive tariffs, has prompted analyst warnings of retaliatory action from Beijing and complaints from Chinese industry executives who say the sector’s competitive advantage was not due to subsidies.
The investigation “is a naked protectionist act that will seriously disrupt and distort the global automotive industry and supply chain, including the EU, and will have a negative impact on China-EU economic and trade relations,” China’s Ministry of Commerce said in a statement.
“China will pay close attention to the EU’s protectionist tendencies and follow-up actions, and firmly safeguard the legitimate rights and interests of Chinese companies,” it added.
Eurasian Group analysts warned that should Brussels ultimately levy duties against subsidized Chinese EVs, Beijing would likely impose countermeasures to hurt European industries.
The EU’s imposition of tariffs will depend on the degree of unity within the European Union. A decade ago Germany, wary of retaliation, opposed tariffs on Chinese solar panel imports, paving the way for a compromise with Beijing.
By contrast, German Economy Minister Robert Habeck said on Wednesday he welcomed the EU’s action.
Germany’s car industry, conscious that a trade war could hit its business in China, was more circumspect.
Mercedes Benz MBGn.DE said protectionist measures were counterproductive and Bosch, the world’s largest automotive supplier, said a race for punitive tariffs and trade barriers would only have losers.
“Chinese distortions of competition are a particular problem that Europe should tackle, but if possible not with excessive subsidies or new punitive tariffs at the end of a lengthy process,” said Volker Treier, head of trade at the German Chamber of Commerce and Industry (DIHK)
Some analysts said the probe should not pose a big risk for Chinese EV makers because they could turn to other growing markets like Southeast Asia.
The manufacturers have been accelerating export efforts as slowing consumer demand in China exacerbates production overcapacity.
Hong Kong-listed shares of Chinese EV makers pared initial losses, with market leader BYD 1211.HK closing down 1.2%. Smaller rivals Geely Auto 0175.HK and Nio 9866.HK fell 0.5% and 0.9%, respectively. Xpeng 9868.HK reversed losses to rise 0.4%.
Shanghai-listed shares of state-owned car giant SAIC 600104.SS, whose MG brand is the best-selling China-made brand in Europe, closed down 0.3%.
Nio and Geely declined to comment on the EU probe, while BYD, Xpeng and SAIC did not respond to requests for comment.
