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Europe is about to crack down on Chinese electric cars

By Zeyi Yang | MIT Technology Review | September 26, 2023

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The boom has finally been lowered on Chinese electric-vehicle companies. On September 13, European Commission president Ursula von der Leyen used her State of the Union speech to announce that the organization is launching an “anti-subsidy investigation into electric vehicles coming from China.”  The move—which could have serious ramifications for global automakers—has long been in the making. 

No matter how it shakes out, an official inquiry could hurt the expansion of the Chinese EV business at a critical moment. Even in just the first 24 hours after von der Leyen’s speech, SAIC and BYD—the two Chinese auto companies that have performed the best in Europe—saw their stock prices drop by more than 3%. 

The driving concern behind the investigation is the impact of Chinese EVs on Europe’s economy, particularly its world-leading auto industry.  Traditionally, Europe has exported many more cars to China than it has imported, but that trade surplus turned negative for the first time in December 2022. Beyond competition, the investigation is also about politics.

Given China’s pretty large head start in the EV auto trade, it seems unlikely that European automakers can quickly catch up on the technological front, so China’s advantage will likely only grow.   In the long term, it could get to a point where BYD will be able to sell its cars profitably in Europe while still keeping the price lower than the cost of production for European auto companies.  The threat from Chinese competitors feels so urgent that observers say this could be a life-or-death moment for well-known European brands like Volkswagen, the world’s largest automaker.

The burden will be on China to demonstrate that the price of Chinese EVs is not subsidized. That will be a hard lift, since it’s well known that continued state support has been a big factor in the success of China’s EV industry. 

European automakers would, broadly speaking, benefit from weaker Chinese competition, but targeting Chinese companies could also backfire in some ways; many European brands have significant investment in China or collaborate with Chinese brands.   Half the EVs exported by China are actually made by foreign companies or joint ventures.  

The different levels of exposure are important because if the European Commission ultimately institutes tariffs, it’s almost certain that China will retaliate with some kind of countermeasures—which would in turn hurt European brands that have a deeper relationship with the Chinese market.

Nevertheless, Europe hasn’t shut its doors to China to the same extent the US has, at least not yet—meaning the anti-subsidy investigation could lead Chinese companies down two very different paths. If geopolitical tensions between Europe and China continue to grow, Chinese EV brands may simply be pushed away from investing in Europe, just as they have refrained from entering the US market for now.  On the other hand, investigations like this one can actually be seen as an invitation for Chinese companies to set up shop in European countries.

3 key takeaways from the article

1. The boom has finally been lowered on Chinese electric-vehicle companies. On September 13, European Commission president announced that the organization is launching an “anti-subsidy investigation into electric vehicles coming from China.” The burden will be on China to demonstrate that the price of Chinese EVs is not subsidized.  The move—which could have serious ramifications for global automakers—has long been in the making. 
2. Beyond competition, the investigation is also about politics.
3. The anti-subsidy investigation could lead Chinese companies down two very different paths. If geopolitical tensions between Europe and China continue to grow, Chinese EV brands may simply be pushed away from investing in Europe, just as they have refrained from entering the US market for now.  On the other hand, investigations like this one can actually be seen as an invitation for Chinese companies to set up shop in European countries.

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Topics:  Electric Vehicles, China, Europe, Employment