The European Union (EU) is urging an investigation into the substantial subsidies provided by China to its electric vehicle (EV) industry. European Commission President Ursula von der Leyen emphasized the need for fair competition, stating that the massive subsidies in China create an uneven playing field for EU companies. In response, the commission initiated an anti-subsidy probe, which could result in tariffs on Chinese-made EV imports and potential retaliation from Beijing.
The EU’s concerns about trade ties with China extend beyond industry competition. They also encompass supply chain and national security risks. However, Beijing has labeled the proposed tariffs as “a naked act of protectionism.” If implemented, China may respond by restricting access to its market, which would significantly impact German automakers that are heavily reliant on Chinese sales.
Valdis Dombrovskis, the EU’s trade chief, is scheduled to address pressing issues, including the EV subsidies, during his visit to China. This investigation represents the EU’s efforts to address rival state support for green technologies. Over the past year, numerous countries, such as the US, China, the UK, and Europe, have provided substantial subsidies to their EV industries.
The EU’s probe into Chinese subsidies is part of a broader strategy to manage its relationship with China without completely decoupling. Measures taken by the EU include imposing restrictions on sales of high-end semiconductors, implementing export controls related to quantum computing and artificial intelligence, and developing new instruments to address China’s coercive practices.
The potential consequences of confronting China are not without risk, especially for major German automakers like Volkswagen AG, BMW AG, and Porsche. Volkswagen, in particular, relies heavily on the Chinese market. However, the EU remains firm in its position, stating that it does not accept such state support for Chinese companies and will investigate subsidies provided to the EV industry in China.