The European Commission’s announcement to launch a countervailing investigation into electric vehicles from China has attracted significant attention from both China and Europe. However, many experts believe that this move may not effectively address the challenges currently facing the European Commission.
Typically, countervailing investigations are initiated upon receiving a complaint. However, in this case, the European Commission took the unusual step of proactively launching an investigation during the original trial phase. Analysts suggest that European Commission President Ursula von der Leyen aims to use this investigation to establish the EU as a “geopolitical” organization, a goal she has been actively pursuing since taking office.
There are both political and economic reasons behind the decision to investigate Chinese electric vehicles. The European car industry is one of the EU’s core industries, and a decline in this sector would be detrimental to the EU’s economy. Currently, Chinese electric vehicles hold an 8% market share in the EU, which is expected to double to 15% by 2025. Concerns arise that if the price advantage of Chinese electric vehicles persists, it will impact the development of the European car industry.
Reactions within the EU have been mixed, with Germany and France, the two largest automobile countries in Europe, taking differing stances. The French government and the car industry support the investigation, while the German car industry opposes it. Germany’s strong opposition may be due to its significant exports and investments in China’s lucrative market. For instance, China is the largest market for German automaker Volkswagen, accounting for 10% of their market share, while Germany exports approximately $120 billion worth of goods to China annually.
While the European Commission justifies its countervailing investigation based on the belief that “large government subsidies make Chinese electric vehicles highly competitive,” some European experts refute this claim. They argue that Chinese electric vehicles’ competitiveness lies in their high quality and low price, which is a result of China’s diligent work and foresight in the electric vehicle sector.
If a trade war were to break out between China and the EU, it would be detrimental to both sides. The EU’s affordability is lower than that of China, making the potential impact on the EU’s main industries significant. The EU automotive industry, which accounts for 6.1% of the EU workforce, relies heavily on exports, with China being the third-largest foreign market for European goods.
It is hoped that a trade war can be avoided, as it would lead to disastrous consequences for both Europe and China. However, it is acknowledged that Europe may bear a heavier burden due to its current economic circumstances.
Recently, the President of the European Commission, Ursula von der Leyen, announced in her annual State of the Union address that the European Commission would launch a countervailing investigation into electric vehicles from China. As soon as this statement came out, it attracted great attention from all walks of life in China and Europe. Insightful people in Europe believe that the European Commission’s move may not be able to solve the dilemma it is facing.
△ European Commission President von der Leyen delivered the 2023 State of the Union address at the European Parliament (Image source: EU External Action Service)
Multiple reasons behind the EU launching an anti-subsidy investigation
A reporter from the main station learned from the EU-China Chamber of Commerce that there is something unusual about the EU anti-subsidy investigation against Chinese electric vehicles, that is, the investigation was initiated by the European Commission. In general, countervailing investigations are “no complaint, no prosecution”, which means that if the EU member states or the industry do not file a complaint, the investigation will not be initiated. This time, it’ n unusual for the European Commission to proactively initiate an investigation during the original trial phase.
Philipp Lausberg, a policy analyst at the Center for European Policy, believes that this investigation has a deep political background, and that von der Leyen intends to use this investigation to further build the EU into a “geopolitical” organization It is also a goal core that von der Leyen has been pursuing since taking office and a “political achievement” that she has worked hard to achieve.
Philippe Losberg, policy analyst at the Center for European Policy: When von der Leyen became president of the European Commission, he announced that it would be a geopolitical commission, and he wanted to enable the EU to become an independent geopolitical participant in the world, which becoming increasingly important in an increasingly confrontational geo-economic environment. They want to become more independent and achieve independence and strategic autonomy.
According to multiple reports in the local media in Europe, the investigation comes at a time when the current European Commission is facing change. Von der Leyen can use this as a bargaining chip to gain access to France and the United States when trying to get his re-election or another post as Secretary General of NATO. According to Politico Europe (politico.eu), France is the main driver of the EU anti-subsidy investigation. Thierry Breton, the French EU Commissioner for the Internal Market, has been promoting the anti-subsidy investigation within the European Commission over the last few months.
△ Breton EU Internal Market Commissioner and European Commission President von der Leyen
In addition to political reasons, Philip Losberg also said that there are also economic reasons for launching a countervailing investigation into China’s electric vehicles at this time. The car industry is one of the EU’s core industries, and the weakening or collapse of this industry will be an “economic disaster” for the EU. The current market share of Chinese electric vehicles in the EU is 8% and is expected to almost double to 15% by 2025. If the price advantage of Chinese electric vehicles still exists, its share in the European market is sure to increase. Overview some Europeans, this will affect the development of the European car industry.
Reactions are mixed within the EU, with German industry making its opposition clear
According to European media reports, since von der Leyen announced the launch of a countervailing investigation into Chinese electric vehicles, there have been mixed reactions within the EU, especially Germany and France, the two largest automobile countries in Europe, with completely different attitudes. The French government and the car industry support the investigation, while the German car industry clearly opposes it. The German Association of the Automotive Industry said the EU must consider a possible strong response from China and work to create favorable conditions for European carmakers – from lowering electricity prices to reducing bureaucratic obstacles. An important factor why Germany and France, the two major EU countries, have different reactions to this is that the German car industry’s exports and investments in China and its interests in the Chinese market are far greater than France’s.
Philippe Losberg, policy analyst at the Center for European Policy: Most of the German car industry is very cautious and they are worried about such investigations and possible tariffs against China because they are really worried about the consequences of the an investigation. Taking Volkswagen as an example, China is their biggest market, and they account for 10% of the Chinese car market. At the same time, China is Germany’s fourth largest exporter. Germany’s annual exports to China reach 100 billion, nearly US$120 billion. Many people are concerned that this will be compromised.
The European Commission launched a countervailing investigation into Chinese electric vehicles based on the so-called ruling that “large government subsidies make Chinese electric vehicles highly competitive.” But some knowledgeable people in Europe have seen that this is not true.
Philippe Losberg said in an interview that high quality and low price are the reasons why China’s electric vehicles are extremely competitive, and behind this is hard work and foresight.
Philippe Losberg, policy analyst at the European Policy Centre: Chinese cars, especially electric cars, are indeed of good quality. In the past, people always thought that the quality of Chinese cars was not good, but now they are really better quality and cheaper, which is strong competitiveness. China has accumulated a wealth of expertise in the field of electric vehicles over the last 10-15 years, which certainly deserves respect, while some European automakers are resting on their laurels. Of course, they are now paying the price.
“If a trade war breaks out, the EU’s ability to withstand it is not as good as China’s”
According to relevant regulations, countervailing investigations usually take 9 to 13 months. The 27 EU member states will decide whether the results of the investigation will lead to the imposition of punitive tariffs on Chinese electric vehicles through a voting process. Relevant proposals will only be passed if they are supported by 55% of EU member states or member states representing 65% of the total EU population. In the opinion of some knowledgeable people in Europe, if a trade war breaks out between China and the EU, it will be a lose-lose situation for both sides. Under the current circumstances, the affordability of the EU is lower than that of China.
△ If a trade war breaks out between China and Europe, the potential impact on the EU’s main industries (Image source: Bloomberg)
According to Bloomberg, after the European Union announced a new anti-subsidy investigation into Chinese electric vehicles, European companies began to settle their economic accounts. Data shows that the EU automotive industry has created almost 14 million jobs directly or indirectly, accounting for 6.1% of the EU workforce. The potential impact on exporters is huge. Last year, the EU exported goods worth US$240 billion to China, making China the third largest foreign market in Europe.
Philippe Losberg, policy analyst at the European Policy Centre: I hope that a trade war does not break out between Europe and China, because both sides will lose and a trade war will be disastrous. I think that’s true for both, but maybe it could be worse for Europeans. Perhaps, under the current circumstances, Europe’s affordability is not as good as China’s affordability.
Reporter | Zhu Xili
Original title: European Headlines丨The EU will launch a countervailing investigation into Chinese electric vehicles, which may struggle to resolve its own difficulties
Editor in charge: Guo Weiwei
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