The European Commission, the executive branch of the European Union (EU), announced on Wednesday an investigation into state subsidies provided to electric vehicle (EV) manufacturers in China. The announcement was made by Ursula von der Leyen, President of the European Commission, during her annual State of the Union address at the European Parliament in Strasbourg, reports CNBC.
“Europe is open to competition but not for a race to the bottom,” von der Leyen stated, highlighting concerns over the impact of Chinese subsidies on the European EV market. She pointed out that the global market is now inundated with cheaper Chinese electric cars, whose prices are artificially lowered by significant state subsidies. “This is distorting our market, and as we do not accept this distortion from inside our market, we do not accept this from the outside,” she added.
According to the Commission, any anti-subsidy measures must be imposed within 13 months from the initiation of the investigation. Provisional measures are to be set no later than nine months into the investigation, followed by definitive measures within four months if legally warranted.
The investigation marks a new challenge in EU-China relations, coming on the heels of a May agreement between the U.S. and Europe to reduce dependency on Beijing. Von der Leyen emphasized the need for the EU to defend against unfair practices while maintaining open communication lines with China. “De-risk, not decouple. This will be my approach at the EU-China summit later this year,” she said.
European auto stocks remained flat following the announcement, erasing earlier gains. Earlier this month, major European car manufacturers expressed concerns over the competitive threat from new Chinese companies in the EV sector. Volkswagen CEO Oliver Blume revealed that the company has formulated a new China strategy this year, focusing on technologies tailored to Chinese demand.
The probe comes as both the solar and automotive industries in Europe face stiff competition from Chinese companies, raising concerns about the long-term impact on these sectors.