The European Commission has launched an anti-subsidy investigation into the import of battery electric vehicles from China. «Competition is only real as long as it is fair – stated the president Ursula von der Leyen announcing the measure last Wednesday in Strasbourg –. We must be aware of the risks we face. Now global markets are flooded with these cheaper vehicles.” The EU takes action, “declaring war” on Chinese industry. Over the years, Beijing has implemented a series of measures to encourage the expansion of its green market as much as possible. The price of electric cars is so low thanks to state subsidies, which the Chinese government provides to its industries. With these generous subsidies, assembly costs are significantly reduced and the company can sell its product at a lower price.
The risks for European businesses
Subsidies put European companies at a great disadvantage as they do not receive the same level of support from their national governments and have two choices: either sell their cars at a lower price and risk losing money, or sell their produce goods at a higher price but risk losing customers. All this “is distorting our market,” Von der Leyen said. As the executive branch, the European Commission has exclusive competence to define the EU’s common commercial policy and regularly launches investigations into foreign imports that could damage the single market.
Beijing has made “new energy vehicles” one of its priorities in the five-year economic plan (2021-2015), providing the offending state subsidies to allow companies to achieve the established objectives. But China is helped by another factor: the ease of obtaining resources. Nickel, cobalt, lithium, manganese are the raw materials needed to build a battery and are easily available in East Asia. Consequently, Beijing also controls supplies and can, in most cases, fluctuate the cost of the various components. According to the European Commission, this has resulted in a significant difference in the list prices of green vehicles on the market, with an average of 20%. Furthermore, the EU market is currently the most attractive, after the gradual ban on the combustion engine and the introduction of the 10% duty on all imported cars.
Von der Leyen: «No race to the bottom»
“China has its eyes on us, with the potential to radically change the face of European industries as we know them,” said Sigrid de Vries, director general of the European Automobile Manufacturers Association, in a blog post. published last month. The risk is clear: dozens of European companies risk being outclassed by the Chinese giant. «Europe is open to competition, but not to a race to the bottom. We must defend ourselves against unfair practices,” said Von der Leyen.
An emergency that the German Foreign Minister Annalena Baerbock he has long denounced: «Being too tied to China can put us in danger – he underlined -. It was necessary to reduce our dependence on a country like Russia, which invaded Ukraine, and now we must also do so towards China.”
Demonstrating the seriousness of the threat, the Commission launched the investigation on its own initiative, rather than waiting for a Member State to submit a formal complaint, as is usually the case in such cases. Once the investigation is notified in the EU Official Journal, the clock will start to tick: the Commission will have a maximum of 13 months to decide on commercial tariffs on Chinese electric cars or close the investigation without taking further steps.
The no from the German Transport Minister
The investigation is a much discussed measure in Strasbourg and among those against it is the German Transport Minister, Volker Wissing: «In principle I am not much for the construction of barriers on the market – he explained in an interview with Augsbuger Allgemeine –. We must ensure that we produce our electric vehicles competitively. Today cars are sanctioned, tomorrow chemicals, and every single step will make the world poorer.”