According to Reuters, EU officials recently stated that Chinese electric cars have put pressure on European automakers to produce low-cost electric cars. EU officials believe that the price of Chinese electric cars in the European market is about 20% cheaper than local models. This has also enabled Chinese electric cars to account for 8% of the European market. The EU officials claim that this figure will likely increase to 15% by 2025 if nothing is done.
For this reason, the European Commission has launched a probe into whether to impose punitive tariffs on Chinese electric car imports to protect European Union automakers. The probe has been launched due to concerns that Chinese electric cars are putting pressure on European automakers. The EU believes that some of the Chinese brands benefit from subsidies given by the Chinese government.
The EU’s Probe
The European Union is launching a probe into subsidies that China provides to electric car makers. This probe is aimed at warding off a flood of cheap imports and protecting European automakers. The EU is also probing whether to impose punitive tariffs on Chinese electric car imports. The probe is expected to take up to 15 months.
The European Commission President, von der Leyen said
“Europe is open to competition, but it does not engage in a race to the bottom.” … “Take the electric vehicle industry, for example. This is a sector that is vital to the clean economy and has huge potential in Europe, but the global market is now flooded with cheaper Chinese electric vehicles, whose prices are artificially artificially driven by huge state subsidies. Depressed,” … “This distorts our markets and just as we don’t accept distortions from within the markets, we don’t accept distortions from outside.”
The Impact on European Automakers
European automakers have realized that they have a fight on their hands to produce lower-cost electric cars and erase China’s lead in developing electric cars. The EU’s probe into Chinese electric cars is welcomed by German Economy Minister Robert Habeck, who said the probe is about unfair competition, not keeping efficient cheap electric cars out of Europe. However, the probe has also been criticized for provoking a trade war with China over electric cars.
Volkswagen is considering layoffs at its all-electric vehicle plant in eastern Germany, the German news agency DPA reported on Wednesday. This shows the severe issues that European brands are facing due to the influx of cheap Chinese cars to the region.
Gizchina News of the week
European Commission President, von der Leyen announced at the annual EU State of the Union address in Strasbourg, the European Parliament, on Wednesday that the European Commission had launched a plan to probe electric car brands that get aid from the Chinese government. She stated that the probe will check the subsidies received. It will also check if the EU needs to impose tariffs to protect itself from Chinese electric car brands. Specifically, those that get subsidies from the Chinese government.
Von der Leyen said that the EU must clearly look at the risks it faces. “Take the electric vehicle industry, for example. This is a sector that is vital to the clean economy and has huge potential in Europe. But the global market is now flooded with cheaper Chinese electric vehicles. Their prices are artificially artificially driven by huge state subsidies.”
Subsidy is helping Chinese electric car brands
Thanks to its 10-year subsidy policy, China has now become the largest electric vehicle market in history. It also has a complete global electric vehicle supply chain. For example, some time ago, German users found that the price of Volkswagen’s compact pure electric sedan ID.3 in China was much lower than the price in their hometown in Germany. This discovery did not go down well with the users of this car in Germany. Why will an electric car from Germany be cheaper in China than it is in Germany? This is the question that many users were asking.
In response to this matter, a Volkswagen spokeswoman explained in an interview with foreign media Autobild that the price difference is caused by a variety of factors. The factors given are listed below
- The Chinese market has production cost advantages and low energy costs.
- Almost all suppliers of this model are from China. This means shorter transportation routes and lower production costs which make the selling price even lower.
- The “price war” between Tesla, BYD and other manufacturers is intensifying. Volkswagen is naturally not far behind.
Final Words
The EU’s probe into Chinese electric cars is aimed at protecting European automakers from unfair competition. The probe could lead to punitive tariffs on Chinese electric car imports, which could make Chinese electric cars more expensive and give European automakers a competitive advantage. However, it could also lead to a trade war with China, which could hurt European automakers that export cars to China. The impact of the investigation on European automakers remains to be seen. However, it is clear that Chinese electric cars are putting pressure on European automakers to lower their prices and develop more affordable electric cars.
Chinese electric cars are cheaper than European electric cars. No doubt, this puts pressure on European automakers to lower their prices. If the EU imposes punitive tariffs on Chinese electric car imports, it could make Chinese electric cars more expensive. This will also give the European automakers a competitive advantage. However, the EU will not want to start a trade war with China. This, will thread carefully as it takes its decisions.
