Tesla is at the center of an EU anti-subsidy investigation into electric vehicles imported from China, according to sources familiar with the matter, reports Bloomberg.
The probe aims to assess the extent to which China has subsidized Tesla and other domestic manufacturers like BYD Co., SAIC Motor Corp., and Nio Inc. The investigation could lead to countervailing measures to level the playing field for the EU’s automotive industry.
Following the announcement of the investigation, Tesla’s stock traded down 2% at the opening in New York. Other companies like Nio, BYD, and SAIC also experienced declines in their stock values.
The investigation, made public by European Commission President Ursula von der Leyen on September 13, has the potential to alter the competitive landscape in the world’s second-largest EV market after China.
Tesla began exporting Model 3 sedans from its Shanghai factory in late 2020 and referred to the facility as its primary vehicle export hub by July 2021. Approximately 47% of Tesla’s total deliveries in Western Europe were made-in-China vehicles, according to Schmidt Automotive Research.
Tesla has received various forms of support in China, including tax breaks, cheap loans, and the state’s approval to wholly own its domestic operations. These benefits are now under EU investigation, along with other forms of support that China provides to its domestic manufacturers, such as credits from state-owned banks and capital provisions from state investment funds.
The EU’s car industry, which provides almost 14 million direct and indirect jobs, is under pressure to electrify as part of the bloc’s Green Deal initiatives. There is growing concern within Europe that its companies are lagging behind Tesla and Chinese firms in EV and battery technology.
European businesses are wary of potential retaliation from China, including restricted access to its massive market or limitations on exports of critical raw materials. The issue was a key topic during the EU trade chief’s recent trip to China, where efforts were made to stabilize the relationship and limit fallout from the investigation.
The EU is currently consulting with relevant authorities, including those in China, to determine the extent to which subsidies may be affecting EU producers.
