Daily Management Review

China Criticises The 'Protectionist' EU Investigation While China's EV Stocks Decline


China Criticises The 'Protectionist' EU Investigation While China's EV Stocks Decline
As shares in Chinese EV manufacturers fell, Beijing criticised the European Commission's decision to open an investigation into China's electric vehicle (EV) subsidies as protectionist and warned that it would harm economic and trade relations.
Ursula von der Leyen, president of the European Commission, announced the probe on Wednesday and accused China of flooding the world market with electric vehicles that were artificially priced cheap due to significant state subsidies.
Analysts have warned that Beijing may retaliate in response to the investigation, which might result in harsh tariffs. Chinese business executives have also pushed back, claiming that the sector's competitive advantage was not the consequence of subsidies.
The probe "is a naked protectionist act that will seriously disrupt and distort the global automotive industry and supply chain, including the EU, and will have a negative impact on China-EU economic and trade relations," the Chinese Ministry of Commerce said in a statement.
"China will pay close attention to the EU's protectionist tendencies and follow-up actions, and firmly safeguard the legitimate rights and interests of Chinese companies," it added.
Eurasian Group researchers cautioned that Beijing would likely enact retaliatory steps to harm European businesses should Brussels ultimately levy levies against subsidised Chinese EVs.
While the investigation shouldn't pose a significant concern to Chinese EV manufacturers because they might turn to other expanding markets like Southeast Asia, other analysts said that it could hinder capacity expansion by China's battery suppliers.
However, if Chinese EV manufacturers expand internationally, it might harm their reputations, according to Bernstein analysts in a client note.
Manufacturers have been stepping up their export efforts as China's consumer demand slowdown worsens the situation of industrial overcapacity.
Chinese EV maker shares traded in Hong Kong pared early losses, with market leader BYD finishing down 1.2%. Geely Auto and Nio, two smaller rivals, decreased by 0.5% and 0.9%, respectively. Xpeng recovered its losses to increase by 0.4%.
Shares of state-owned automaker SAIC, whose MG brand is the best-selling China-made brand in Europe, were listed on the Shanghai Stock Exchange and plummeted as much as 3.4% before closing down 0.3%.
BYD, Xpeng, and SAIC did not answer to demands for comment, while Nio and Geely declined to comment on the EU investigation.
Battery manufacturer CATL's shares, traded in Shenzhen, decreased 0.8%. An inquiry for comments was not immediately answered by CATL.
Early trading on the euro zone stock index saw the largest decliners include shares of European automakers. At 7:20 GMT, losses for BMW, Volkswagen, Mercedes, and Stellantis ranged from 1.1% to 2.2%.
The European Commission's extraordinary decision to launch the anti-subsidy investigation without any sector complaints as the catalyst coincides with larger political tensions between the EU and China.
Due to Beijing's links to Moscow following the invasion of Ukraine by Russian forces and the EU's effort to rely less on the second-largest economy in the world, which is also its top trading partner, relations have deteriorated.
Prior to the annual China-EU Summit, which is scheduled to take place before the end of the year, the EV inquiry will set the agenda and tone for bilateral discussions, with the EU's demands for greater access to the Chinese market and a rebalancing of a trade relationship that Brussels views as "imbalanced" once again taking centre stage.
The China Passenger Car Association's secretary general, Cui Dongshu, posted on his personal WeChat account on Thursday said he was "strongly against" the review personally and encouraged the EU to take a dispassionate look at the growth of the sector rather than "arbitrarily use" trade or economic tools.
He continued by saying that the cost of cars built in China that are shipped to Europe is typically approximately twice what they are sold for there.
Volkswagen is considering job reductions at its all-electric facility in eastern Germany due to weaker than anticipated demand for EVs, according to the dpa news agency on Wednesday, underscoring the difficulties faced by established European manufacturers as they fight increased competition from China.
According to EU authorities, Chinese EV pricing in the European market are around 20% lower than those of domestic models, putting pressure on European manufacturers to produce more affordable EVs.
According to the European Commission, China now accounts for 8% of EVs sold in Europe and might account for 15% by 2025.
According to the Centre for Strategic and Internal Studies (CSIS), a U.S. think tank, 35% of all exported electric automobiles in 2022 came from China, an increase of 10% from the previous year.
According to the report, the majority of the vehicles and the batteries that power them were destined for Europe, where 16% of the batteries and automobiles sold in 2022 were built in China.
Tesla, a major American company, is the only exporter from China, according to CSIS data. Between January and April 2023, it made up 40.25 percent of all EV shipments from China.