Europe has initiated an investigation into Chinese electric vehicle (EV) subsidies, but the head of trade for the European Commission emphasized that the outcome cannot be pre-judged. The probe specifically targets subsidies for EV production and will adhere to EU and World Trade Organization regulations. The investigation will involve engagement with Chinese authorities and businesses. China’s EV exports have surged in recent months and are on track to surpass Germany and Japan as the largest car exporter globally this year. However, the EU’s subsidies probe raises concerns about the future consequences for Chinese EV companies, as the EU plans to phase out sales of internal combustion engine cars by 2035.
The European auto industry faces a risk of injury due to the strong presence of Chinese EV brands in the EU market, which has increased from less than 1% to 8% in the past few years. European auto giants, such as Volkswagen, have struggled to penetrate the highly competitive Chinese electric car market. China’s Ministry of Commerce criticized the EU investigation, labeling it a “blatantly protectionist act” that distorts the global auto industry. At the same time, head of the China Passenger Car Association, Cui Dongshu, attributes China’s growing EV exports to a competitive domestic supply chain and market environment. The EU’s probe into EV subsidies was a prominent topic of discussion during meetings between EU and Chinese officials.
China’s push for electric vehicles started over a decade ago with the implementation of a national strategy for developing new energy vehicles and battery technology. The central government provided significant subsidies for EV development between 2009 and 2015. However, there were cases of misuse and fraud. More recent subsidies in China have focused on tax breaks for consumers, as electric cars are seen as key drivers of the country’s advanced manufacturing, retail sales, and exports.