Daily Management Review

EU's Investigation Into EV Subsidies Is "Selective", Says Chinese Official


EU's Investigation Into EV Subsidies Is "Selective", Says Chinese Official
In an exclusive interview with CNBC, a Chinese official said that Europe's investigation of Chinese electric cars was extremely selective, to the point where the findings are not reliable.
Last week, the European Commission declared that, beginning of July 4, imports of Chinese electric vehicles will be subject to duties. The interim ruling came after a lengthy investigation into the role played by government subsidies in Chinese electric vehicles.
China's electric vehicle market is booming after over a decade of growth. Domestically, it has increased rivalry between established manufacturers and startups over automotive tech features and pricing, putting pressure on both Tesla and them. Chinese electric vehicle manufacturers have been prompted by the country's slowing economy to intensify their marketing campaigns in Southeast Asia, the Middle East, and Europe.
China has openly denounced the EU's action and refuted similar claims, notably those made by the US, that industrial overcapacity threatens to force foreign enterprises to close their doors and lay off employees.
The head of the Academy of Macroeconomic Research, a research organisation directly under the National Development and Reform Commission, Jin Ruiting, stated that the EU anti-subsidy investigation only focused on Chinese firms rather than enterprises with the highest export volume. He did not name the specific exporters.
Jin stated in Mandarin that the sample selection was "very selective," which CNBC translated. That was against World Trade Organisation regulations, he said.
The WTO opted not to respond.
“In line with rules applicable, the final selection of the sample was based on the largest representative volume of production, sales or exports to the Union that can reasonably be investigated within the time available,” Olof Gill, the European Commission’s spokesperson for trade and agriculture, said in a statement to CNBC.
Gill clarified that the Commission considered output and the volume of domestic sales in addition to the biggest export volume. "In this regard, the Commission believes that the sample was chosen in compliance with the relevant EU legislation and WTO regulations," he stated.
Leading German automakers, who have local partnerships and get a large portion of their sales from China, quickly expressed their opposition to the proposed taxes by the EU.
According to a statement from Volkswagen Group, "the timing of the EU Commission's decision is detrimental to the current weak demand for BEV vehicles in Germany and Europe" and the company rejects "countervailing duties."
“The Volkswagen Group confidently accepts the growing international competition, including from China, and sees this as an opportunity. This also benefits our customers,” the German automaker said.
Volkswagen sent more passenger vehicles to China in 2018 than it did to Western Europe, which included the United Kingdom, with 3.1 million deliveries. Additionally, the BMW Group sent more vehicles to China in 2018 than to continental Europe.
“Protectionism risks starting a spiral: Tariffs lead to new tariffs, to isolation rather than cooperation,” Oliver Zipse, CEO of the BMW Group, said in a statement. “From the BMW Group’s point of view, protectionist measures, such as the introduction of import duties, do not contribute to successfully compete on international markets.”
Included in the EU investigation was Tesla, which in 2019 established a plant in Shanghai and sells some automobiles built in China to other countries. The Commission stated that a special tariff may be applied to Elon Musk's carmaker.
Jin of the NDRC continued, "It doesn't seem like an industry or business complaint is the basis for the EU anti-subsidy probe."
“There is a problem with [the EU’s] sample selection, and I think there’s a big problem with the conclusion,” he said in Mandarin, translated by CNBC. “So I think the investigation process is not transparent, and the results are not credible.”
According to EU's Gill, the Commission can launch an inquiry without needing to receive a complaint from the industry according to a provision within the bloc.
Chinese-made battery-electric vehicles profit from "unfair subsidisation, which is causing a threat of economic injury to EU BEV producers," the Commission stated last week after concluding its investigation.
"As a result, the Commission has contacted Chinese authorities to go over these results and investigate potential solutions to address the concerns found in a WTO-compliant manner," the EU statement read.
The proposed levies vary from 17.4% for BYD automobiles to 38.1% for SAIC, the state-owned automaker's electric vehicles.
In an analysis published in April, experts at Rhodium Group predicted that in order to "make the European market unattractive for Chinese EV exporters," levies on BYD would probably need to rise to 40% to 50%, if not more.
In May, the Biden administration said that import duties on Chinese electric vehicles will increase from 25% to 100%. The additional tariffs were justified, according to a senior administration official, by "rapidly growing exports" and "excess capacity."
ICE vs. EV vehicles According to Jin, BYD and some new energy vehicle firms in China had 100% or even higher capacity utilisation than traditional fuel-powered vehicle companies, which only had 70% to 80% of their capacity used.
Additionally, he cited an International Energy Agency assessment that indicates a significant need for electric vehicles if net zero emissions are to be achieved globally in the next several decades. Jin claimed that Chinese automakers are only now beginning to meet this demand.
According to the IEA, sales of electric cars must make up around 65% of all automobile sales worldwide by 2030 in order to attain net-zero emissions by 2050. That means that sales must increase by an average of 23% annually till then. The agency said that 2023 saw a nearly 35% increase in sales of electric cars over 2022.
Jin said that the existence of global commerce was due to surplus supply, and if China was manufacturing too many electric vehicles, other nations would dominate the world market for exports of high-end electronics, agricultural products, and liquefied natural gas.
Ultimately, Jin emphasised that, in spite of what he called the short-term gains for certain politicians, global collaboration is required rather than de-risking.
China has often requested that the Biden administration lift limitations on American advanced semiconductor shipments to China.