Why Europe wants to raise the price of electric cars using China as an excuse

Less than a month after announcing that it was opening an investigation into unfair competition, the European Union is already providing proof of the illegal aid provided by China to its national manufacturers. The price of Chinese electric cars would be artificially too low.

No sooner said than done. Everything seems to be moving quickly in the affair between Europe and China regarding the sale of electric vehicles on the Old Continent, and more specifically the subsidies they benefit from which would illegally lower their price. And less than a month after the opening of an investigation, the conditional is no longer appropriate!

Indeed, in a document published this October 4, 2023 in the Official Journal of the European Union, the latter provides proof that cars produced in China which arrive here do indeed benefit from subsidies which constitute unfair competition with the models produced in Europe, most of them sold more expensively. Besides, the title of the article couldn’t be clearer: “Notice of initiation of anti-subsidy proceedings concerning imports of new battery electric vehicles designed for the transport of people originating in the People’s Republic of China”.

A barely hidden arsenal of subsidies

In her speech on September 13, the President of the European Commission, Ursula van der Leyen, explained that if Europe is “open to competition”, this could not be done at any price. And precisely, it is the price which is at the heart of this battle, because on the European side, we do not understand that electric cars produced in China are offered at such inexpensive prices here compared to those practiced by our own automobile industry.

This is where the problem lies since in its recently published document, the EU explains that it “ there is sufficient evidence demonstrating that imports of the product under investigation originating in the People’s Republic of China benefit from countervailable subsidies granted by the government of the People’s Republic of China“. Subsidies which have allowed Chinese brands to sell well on our continent, to the detriment of our own industry.

What is this evidence then? They are detailed a little further down in the text. And it seems that a veritable arsenal of public aid has been put in place, taking various and varied forms: transfers of funds, abandoned or uncollected public revenue, granting of loans and export credits provided by public banks, import and export tax rebates, VAT exemptions and rebates, tax exemptions… Among others!

Unfair competition

All these subsidies granted are direct or indirect contributions from the public authorities of the People’s Republic of China which promote both the production and the sale of the products concerned, in this case Chinese electric cars.

The EU protested, explaining that because of this, the prices charged by Chinese manufacturers here are lower than those charged by our industry, which has the effect of “ to lower prices or prevent price increases which would otherwise have occurred and, therefore, to exert significant pressure on Union sales, market shares and profit margins“. And all this obviously in a context of high investments in the Old Continent to push the automobile industry to switch to electric.

An investigation is therefore opened to determine to what extent these subsidies from China to its manufacturers constitute unfair competition. The survey covers the period (already past) from October 1, 2022 to September 30, 2023.

Tesla Model 3 Highland

What consequences?

For now, it is still a little early to know exactly what the European Union will decide to do as a result. But one of them could be to see the prices of a certain number of cars sold here increase. How ? Quite simply by artificially inflating the prices of these models produced in China here, just as they had been artificially lowered thanks to subsidies. In particular by raising customs duties.

This was explained a few weeks ago by Thierry Breton, European Commissioner responsible for the Internal Market, who said that this type of investigation in the past had generally had the effect of increasing by 10 to 20% the rights of customs, currently 10% for what comes from China.

The price of the Tesla Model 3, MG4 and other Volvo EX30 could therefore soon increase. Especially since they could also be deprived of 2024 bonuses!

However, this investigation and these conclusions must be qualified, since many Chinese electric cars sold in Europe are marketed more expensive than European or American competitors. But it is true that Tesla’s main competitor, BYD, manages to produce its electric cars 15% cheaper than its American competitor.

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