BYD Seal U electric sports utility vehicle is on European debut during the International Motor Show … [+]
China said the EU’s move to investigate whether its sales of electric cars to Europe might require anti-dumping action were “protectionist” while Germany and France backed the investigation with varying degrees of enthusiasm, and some analysts said this reflected Chinese efficiency rather than unfair trading.
The reactions came after European Commission President Ursula von der Leyen’s announcement Wednesday of an investigation into possible Chinese subsidies for electric vehicles sold in the EU.
“Their (Chinese electric car importers) price is kept artificially low by huge state subsidies. This is distorting our market. And as we do not accept this distortion from the inside of our market, we do not accept this from the outside,” von der Leyen said in a speech to the European Parliament.
The Commission will take just over a year to assess whether there is a case for China to answer. The Commission has said China’s share of EVs sold in Europe has risen to 8% and could reach 15% in 2025. Schmidt Automotive Research said by 2030, sales of Chinese battery electric vehicles in Western Europe will hit 1.2 million or 9% of electric car sales.
Investment researcher Evercore ISI didn’t think there was a case for China to answer.
“We hate to say it, but this sounds like more EU sore losing, as we’ve warned. China’s lead in low-cost EVs is likely frightening EU governments and manufacturers,” Evercore ISI said in a research note.
Evercore pointed to the little BYD Seagull electric city car priced in China at close to $10,000.
“We encourage the EU to innovate versus regulate for success,” Evercore ISI said.
BYD Seagull small electric car. (Photo by VCG/VCG via Getty Images)
Investment bank UBS said it wasn’t in a position to predict the outcome of the EU investigation, but wanted to point out what it called a few relevant facts.
1) China’s direct EV subsidy is zero in 2023, compared to €5,000 ($5,300) in France, €4,500 in Germany and $7,500 in the U.S.
2) EVs still enjoy purchase tax exemption in China compared to the 10% levied on gasoline cars, but this is for domestic sales only.
3) Carmakers still receive some government subsidies related to new plants or R&D, which amounted to 0.4% revenue for BYD in 2022, 1.2% for Nio and 0.9% for CATL.
4) Tesla Shanghai accounted for about 40% of China’s EV exports in the first half of 2023, of which the majority goes to Europe. “In our view, it is hard to be categorical that the net effect of these policies is to subsidize a U.S. firm that would then have a pronounced impact on the EU market,” UBS said in a research note.
UBS said the probe’s conclusion might be that price competitiveness is actual competitiveness rather than the effect of subsidies.
In a recent report UBS said this.
“We estimate BYD’s cost is 30% lower than those of western incumbents, allowing it to offer a competitive price in Europe even with tariffs, shipping costs and/or more costly local production,” UBS said.
Other Chinese competitors will have similar advantages.
Meanwhile, Germany’s Economy minister Robert Habeck welcomed the EU probe, saying it wasn’t about keeping efficient and cheap cars out of the EU. German companies like BMW, VW and Mercedes have big businesses in China which could suffer from reprisals if China retaliated against any EU action.
France also welcomed the investigation. Automotive News quoted its Minister for Europe Laurence Boone saying France wouldn’t allow its market to be flooded by over-subsidized EVs. France has much smaller auto investments in China, and its manufacturers operate in the section of the European market most impacted by China’s EVs.
China described the EU’s move as a “naked protectionist act” which would damage economic and trade relations.
