Global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies
In an effort to protect Europe’s EV industry from unjustified trade competition, the European Commission (EU) chief has now told the media that Brussels will now carefully scrutinize China’s state subsidies for electric vehicles. The investigation is a sigh of relief for France because it has highlighted concerns that Europe will fall behind the green transformation if China’s subsidies and incentives are not carefully monitored.
Berlin, an EU member state, does not want to engage in a trade war with China because the former has an amicable trade relationship with the latter. But, the fact is Germany has also welcomed the investigation move. Ursula von der Leyen, the EU President has urged to carry out the investigation to defend the region’s EV manufacturer.
At the European parliament in Strasbourg, von der Leyen said, “Global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies. Europe is open for competition but not for a race to the bottom." According to the experts, the investigation could lead to higher import duties on those vehicles, which are sold at lower price in an unfair competition.
In a social media platform, the EU has been charged with “protectionism” by a Chinese official. Wang Lutong, director-general of the Chinese foreign ministry's department of European affairs said, "many EU members subsidize their electric vehicle industries. In what position is the commission to launch an anti-subsidy investigation into electric vehicles from China? This is nothing but sheer protectionism."
Now, depending upon the manufacturer’s emissions output, Prais has also assured to provide subsidies for new electric vehicles. This could be more challenging for the Chinese EV industry as the manufacturing completely relies on coal powered electricity. Throughout the European regions, there are anxieties about how much they depend on Chinese products. Analysts have also highlighted that towards the end of 2023, China has the possibility to become the globe’s biggest car manufacturer by defeating Japan.
Therefore, the EU regions have also started offering ample subsidies for new electric cars. The US , on the other hand, has unleashed the Inflation Reduction Act, which offers a subsidy of $370 billion for the country’s energy transition, including reduced tax for in-house manufactured electric cars and batteries.
In spite of urging to carry out the investigation, von der Leyen stated that it was imperative for Europe to maintain courteous communication and dialogue with China. "Because there are also topics, where we can and have to cooperate. De-risk, not decouple – this will be my approach with the Chinese leadership at the EU-China Summit later this year," she added.
