BEIJING – Europe has launched an investigation into Chinese subsidies for electric vehicles, but no assumptions should be made about the outcome of the investigation, the trade chief of the European bloc’s executive branch said on Tuesday.
About two weeks ago, the European Commission announced an investigation into government subsidies for EV manufacturers in China.
The investigation focuses on subsidies for electric vehicle production and will be “fact-based,” Valdis Dombrovskis, executive vice president and trade commissioner of the European Commission, told reporters on Tuesday. He spoke in Beijing after a four-day trip through China.
The investigation will comply with EU and World Trade Organization rules and will include engagement with Chinese authorities and companies, he added.
“The outcome of the investigation will be determined by those… [I] cannot anticipate the outcome of the investigation,” Dombrovskis said.
Chinese exports of electric cars have soared in recent months. Looking at exports of all types of cars, China’s has already surpassed Germany and is on track to surpass Japan as the world’s largest car exporter this year, according to Moody’s.
Homegrown Chinese electric car companies Nio, Xpeng And BYD are among those that have begun to expand into Europe, but so far in relatively small numbers. More than two-thirds of Chinese exports of electric cars to Europe came from here Tesla and other international brands that produce in China, HSBC said.
However, the future consequences for business are significant.
Dombrovskis noted the EU’s plans to phase out sales of cars with combustion engines by 2035. He also said that the share of Chinese EV brands in the EU market has increased from less than 1% to 8% in the past two or three years.
The other element of the EU subsidy investigation is the “risk of injury” to the European car industry, he told reporters.
European car giants such as Volkswagen generate significant sales from China, but are struggling to penetrate the highly competitive electric car market there. Earlier this year, VW and EV startup Xpeng announced a strategic partnership that would see them jointly develop cars for the Chinese market.
China’s Ministry of Commerce quickly criticized the EU investigation, calling it a “blatantly protectionist act” that would disrupt the global auto industry.
Cui Dongshu, head of the China Passenger Car Association, also said in an online post that China’s new energy vehicle exports are growing due to a highly competitive domestic supply chain and market environment.
On Tuesday, Dombrovskis told reporters that the EU investigation into EV subsidies came up in virtually every meeting with his Chinese counterparts.
China’s ambitions in electric vehicles started more than a decade ago. Former Audi engineer Wan Gang became China’s Minister of Science and Technology in 2007 and convinced the central government to roll out a national strategy for developing new energy vehicles and battery technology.
According to the Ministry of Finance, the central government spent at least 33.4 billion yuan ($4.57 billion) in subsidies on electric vehicle development between 2009 and 2015. Beijing tends to lump electric vehicles into the broader category of new energy vehicles.
The government-led action was not without waste. In 2016, the Ministry of Finance said it had determined that at least five companies had defrauded the system of more than 1 billion yuan.
The country’s more recent EV-related subsidies have focused on tax breaks for consumers. Electric cars are seen as one of the bright spots in China’s slowing economy, driving advanced manufacturing, retail sales and exports.
— CNBC’s Clement Tan contributed to this report.