RTL Today – “Unfair state support”: why are Chinese electric cars in the EU’s sights?

The European Union will impose additional provisional duties of up to 38% on Chinese electric cars from Friday, after concluding that Chinese manufacturers benefit from unfair state support.

Here’s why China’s electric vehicle market is drawing the ire of European policymakers — and what impact the move could have:

– How did China’s electric vehicle sector become so strong? –

China has launched a targeted industrial strategy to boost its electric vehicle sector, injecting significant public funds into domestic companies as well as research and development.

Between 2014 and the end of 2022, the Chinese government said it spent more than 200 billion yuan ($28 billion) on subsidies and tax breaks for electric vehicle purchases alone.

This approach has given Chinese companies a crucial advantage in the race to supply cheaper, more efficient electric vehicles over major European automakers, which have not always benefited from such state largesse.

They have also been boosted by strong domestic demand: of all new electric vehicles sold worldwide in December last year, 69% were in China, according to research firm Rystad Energy.

Exports are booming. According to the Atlantic Council, Chinese overseas sales of electric vehicles are expected to increase by 70% in 2023, reaching $34.1 billion.

Nearly 40% of Chinese electric vehicles were delivered to the European Union, the main recipient of these vehicles.

According to the European Automobile Manufacturers’ Association, the market share of Chinese-made electric vehicles in the EU has increased from around 3% to more than 20% over the past three years.

– Who are the key players? –

The undisputed leader in the Chinese market is BYD, which this year posted record annual profits for 2023 and says it wants to be among the top five European carmakers.

Last year, it became the first manufacturer to pass the milestone of five million hybrid and fully electric vehicles produced in total, crowning itself the “world’s leading new energy vehicle manufacturer.”

Other major Chinese electric vehicle makers exporting to Europe include SAIC, MG Motor and Polestar – owned by Volvo and its Chinese parent company Geely – according to state media.

– Why is the EU worried? –

The increase in exports has allowed Chinese companies to rapidly increase their share of the European electric vehicle market.

The EU has now concluded that Chinese carmakers have benefited from “unfair subsidies, which pose a threat of economic harm” to European carmakers.

But there is also dissension within the EU: Germany, a major trading partner whose car market relies heavily on China, has warned that tariffs could hurt German companies.

The EU will now impose provisional duties of between 20 and 38 percent on top of the current 10 percent tariff on Chinese electric cars.

The final duties will come into force in November for a period of five years, pending a vote by the 27 EU states.

– How did Beijing react? –

Beijing has yet to respond, but a Chinese business group has condemned the bloc’s “protectionism.”

China, however, has already shown its teeth by launching an anti-dumping investigation into pork imports from the EU, threatening Spanish exports.

In January, China launched an anti-dumping investigation into brandy imported from the EU, a move seen as targeting France, which had lobbied the Commission to open an inquiry.

Beijing said in June that it “reserved the right” to lodge a complaint with the World Trade Organization over EU tariffs.

– How did the car manufacturers react? –

Since the EU measure will impact all electric cars made in China, Tesla’s Model 3, Mini Electric and Volvo EX40 are also among the vehicles that will face higher tariffs.

A Tesla spokesperson said prices for the Model 3 – the number three selling electric car in Europe – were expected to increase “in the short term”.

Chinese electric carmakers Nio and XPeng told AFP they had no plans to leave the European market following the announcement.

At the same time, MG France indicated that it had already imported 2,600 electric vehicles from China which had passed customs.

– What impact will customs tariffs have? –

The German Kiel Institute for the World Economy, together with Austrian institutes, predicts that the higher taxes will reduce vehicle imports from China by 42 percent.

Prices of electric cars could increase by an average of 0.3-0.9% in the EU, they added.

Cui Dongshu, secretary-general of the China Passenger Vehicle Association, said costs for Chinese EV exporters and EU consumers would increase, and the tariffs would also undermine the bloc’s energy conservation and green development goals.

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