The European Union has launched an anti-subsidies investigation into electric vehicles made in China, setting in motion a one-year investigation that could result in provisional measures such as countervailing duties imposed in the next nine months.
The investigation, which was first announced by European Commission President Ursula von der Leyen last month, will focus on new battery-powered electric vehicles (BEVs) and alleged subsidies granted by the Chinese state, a legal notice in the EU’s official journal said on Wednesday.
Though narrow in scope, the investigation focuses on a major global industry that has seen a massive rise in exports from China in recent years. Despite concerns in various sectors that Beijing could retaliate, the EU wants to act now given the precedent in other subsidised industries such as solar panels.
The notice says that the commission has gathered enough evidence to show that the carmakers have benefited from subsidies granted by the Chinese government. “Those subsidies have allowed the subsidised imports to rapidly increase their market share in the EU to the detriment of the Union industry,” it adds.
The support includes the direct transfer of funds, government revenue that has not been collected,and government provision of goods or services for less than adequate remuneration.
The notice highlights evidence of “various grants, provision of loans, export credits and credit lines provided by state-owned banks or bonds underwritten by state-owned banks and other financial institutions at preferential terms”.
It also mentions income tax reductions and exemptions, as well as “dividend tax exemption, import and export tax rebates; VAT exemptions and rebates; and government provision of goods (such as raw and input materials as well as components)”.
The investigation will focus on new BEVs designed to carry nine people or less, including the driver. The notice does not name specific producers, but the probe will focus on all manufacturers in China that export to the EU, including Tesla and major Chinese brands such as BYD, SAIC and Nio.
China described the investigation as solely based on assumption and lacking sufficient evidence, according to a statement from the Ministry of Commerce on Wednesday.
Beijing expressed strong dissatisfaction with the move, which it said will seriously disrupt the global automotive supply chain and have a negative impact on China-EU economic relations.
The probe covers the period from Oct 1, 2022 to Sept 30, 2023 and the assessment of injury and countervailing measures will cover the period from Jan 1, 2020 until the end of the investigation.
Any countervailing measures would depend on the level of subsidisation that is determined and the extent to which that has undercut manufacturers in Europe. In recent probes of other sectors such as e-bikes and fibre-optic cables, the EU discovered subsidy margins ranging from 4% to 17%, Bloomberg previously reported.