AutoBeta(AutoBeta.net)09/14 Report--

On September 13, local time, European Commission President Ursula von der Leyen said in his fourth "State of the Union Address" at the European Parliament that he would launch a countervailing investigation into Chinese electric vehicles. The reason for the investigation is that the European Union is worried that Chinese car companies will produce low-cost electric vehicles through large government subsidies, and these electric vehicles will threaten the development of European electric vehicles after entering the EU market.

"The global electric vehicle market is flooded with cheap Chinese cars that are cheap because of huge state subsidies, which are distorting the EU market." Europe is open to competition, but not to competition to the end. The EU must protect itself from unfair practices, but the EU will maintain open communication with China. What the EU needs to do is de-risk, not decouple." Mr von der Leyen said.‍

European Commission President von der Leyen

It is understood that the so-called "countervailing investigation" is the main means of adopting trade sanctions, which refers to the necessary restrictive measures taken by a government or the international community against subsidies in order to protect the healthy development of its economy, maintain the order of fair competition, or for the free development of international trade, including temporary measures and commitments to levy countervailing duties. Countervailing measures must be implemented within 13 months of initiation, interim measures must be implemented no later than nine months, and final measures will be implemented within the following four months if permitted by law.

In other words, the investigation could take up to 13 months to complete, and Chinese electric vehicle exports to Europe could be affected by the investigation. However, at present, this incident only stays in the start-up investigation stage, and there are still many uncertain factors whether relevant measures will be implemented.

The incident quickly sparked heated debate in the industry after it was exposed online. The European Union China Chamber of Commerce also immediately issued a statement on the EU's announcement of a countervailing investigation into electric vehicles in China. The statement said it would urge the EU to view the development of China's electric vehicle industry objectively, rather than arbitrarily using unilateral economic and trade tools to prevent or increase the development and operating costs of Chinese electric vehicle products in Europe. Moreover, the opening of European markets should be reflected in concrete actions and a fair, equitable and non-discriminatory business environment should be provided for foreign enterprises. Market exclusions based solely on the origin of a product would violate EU WTO commitments.

On September 14, a spokesman for the Ministry of Commerce said that China expressed high concern and strong dissatisfaction with this. China believes that the investigation measures proposed by the EU are to protect its own industry in the name of "fair competition" and are naked protectionist acts, which will seriously disrupt and distort the global automobile industry chain including the EU and will have a negative impact on China-EU economic and trade relations.

Foreign media reports pointed out in the report that China has a large number of electric vehicle manufacturers and has received a lot of policy and financial support, but most of the emerging enterprises have not yet achieved profitability. Chinese automakers, including BYD and NIO, are planning to launch price-competitive electric vehicles in Europe to boost sales, but the move could hit traditional local automakers such as Volkswagen Group and Stellantis Group.

Although European car companies have begun the electric transformation in the past few years, most are still in the test stage. On the other hand, with the expansion of the new energy automobile market, China's electric vehicle market is growing rapidly, which also makes European automobile enterprises feel unprecedented pressure.

According to the data, BYD ranked first among domestic passenger car enterprises with sales volume of 1.805 million vehicles in 2022, ending the 40-year dominance of joint ventures such as North-South Volkswagen. In the first half of this year, FAW-Volkswagen (838,700 vehicles) still lags behind BYD (1,154,600 vehicles). In addition, the share of German-Japanese mainstream joint venture brands in the Chinese market has gradually declined, which is undoubtedly a dangerous signal for European automobile enterprises.

At the just-concluded Munich Auto Show, German Chancellor Scholz's remarks at the opening speech have caused anxiety among German and even European car companies. Scholz said German car companies "should be encouraged, not intimidated" by competition from Chinese electric vehicles. At the same time, Scholz also announced an incentive program worth 110 billion euros to support the development of the German electric vehicle industry.

As one of the world's top five auto shows and one of Europe's largest international auto shows, Munich Auto Show plays a key role in the development of the global automotive industry. Looking back at this auto show, although Mercedes-Benz, BMW, Audi, Volkswagen and other German local automobile enterprises are still the protagonists, the position of non-local automobile enterprises including Toyota, Honda, Nissan, GM, enterprises and other traditional automobile giants has been replaced by Chinese automobile enterprises.

According to statistics, about 40% of the exhibitors at this Munich Auto Show come from China, including BYD, Xiaopeng Automobile, Zero Run Automobile, Avita Technology, etc. Some media commented on this,"If there is no Chinese car enterprises to join, Munich auto show I am afraid to 'rest vegetable'." European automakers have realized they are facing a battle to produce cheaper electric vehicles and weaken China's lead in making a large number of affordable and friendly electric vehicles. Industry sources said that Chinese car companies at this Munich auto show "anti-passenger" or make the EU determined to make a "countervailing investigation" measures.

The industry believes that the background for the EU to launch this investigation is also related to the rapid increase in the number of Chinese car exports. Now China has become the world's largest electric vehicle market, according to the China Automobile Association data show that in the first eight months of this year, the domestic automobile export volume was 2.941 million vehicles, an increase of 61.9% year-on-year, among which, new energy vehicles played a huge incremental role in automobile exports, the first eight months of new energy vehicle exports for 727,000 vehicles, an increase of 1.1 times year-on-year.

According to statistics, in the first half of the year, the proportion of China's automobile exports to Europe in China's total vehicle exports soared from 5.7% in 2018 to 39.1%, Europe is becoming an important destination for China's new energy vehicles to "go to sea", including BYD, Great Wall Motor, Geely Automobile, NIO, Xiaopeng, Zero Run and other automobile enterprises have plans to go to Europe. It should be noted that unlike other markets, most Chinese car companies do not have plans to build their own factories in the European market, mainly selling cars through import and export trade, and most brands have not yet established sales channels in Europe.

On September 14, Cui Dongshu, Secretary-General of the Association, said that he firmly opposed the EU's evaluation of China's new energy vehicle exports, not because of the huge state subsidies, but because of the strong competitiveness of China's industrial chain under full market competition. It said that China's new energy subsidies have been completely withdrawn by the end of 2022, and in order to compete fairly, the state requires local governments not to subsidize new energy vehicles from the end of 2018 to standardize market order. Subsequently, the state subsidies were withdrawn in an orderly manner to promote the strength of China's new energy vehicles.

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