The European Commission opened an inquiry on Wednesday, September 13, into subsidies offered to electric vehicle (EV) manufacturers in China. The European Commission is the executive arm of the European Union.
The investigation was confirmed by the commission's president, Ursula von der Leyen, at her annual State of the Union speech in Strasbourg, France, before the European Parliament. She stressed, "Europe is open to competition but not for a race to the bottom."
Tech Industry Between Europe and China
The surprising statement is another hiccup in the relations between the EU and China. The news comes after the United States and Europe decided in late May to lessen their reliance on Beijing rather than sever all ties.
During European morning trading, CNBC reported that auto stocks were flat, wiping off gains of nearly 1% on a day when other industries were down.
"We have to be clear-eyed about the risks we face," von der Leyen told the lawmakers who attended the event, as reported by CNBC. "Take the electric vehicle sector, it is a crucial industry for the clean economy with a huge potential in Europe, but global markets are now flooded with cheaper Chinese electric cars and their prices are kept artificially low by huge state subsidies."
She went on to say that this was distorting the market. She added that as they would not tolerate such practice from inside the market, they would not even tolerate it from outside.
Within 13 months of its launch, the commission requires anti-subsidy investigations to issue any necessary actions. It states that, if required, final measures must be applied within four months after temporary measures have been in place for at least nine months.
Von der Leyen made a comparison between the effect on Europe's solar business and what may happen to the region's automobile industry, both of which have experienced tough competition from Chinese enterprises.
While EU representative von der Leyen acknowledged the need to counteract Beijing's unfair trade policies, she also emphasized the need to maintain open channels of communication. "De-risk, not decouple. This will be my approach at the EU-China summit later this year," she said.
Emerging Chinese Competitors
As the automotive industry progresses toward electrification, Europe's largest vehicle makers have expressed concern about the competitive threat presented by emerging Chinese competitors.
Volkswagen CEO Oliver Blume was among the auto industry leaders who recognized China as a threat at the IAA Mobility conference, a motor show in Germany, this year. He said that the business has formed a new China strategy to prioritize the development of technology to meet the needs of the Chinese market.
