Global markets are now flooded with cheaper Chinese EVs and their price is kept artificially low by huge state subsidies, European Commission President Ursula von der Leyen said.

(Image credit: CnEVPost)

The European Union has announced an investigation into electric vehicles (EVs) from China to assess whether punitive tariffs are needed, as more Chinese car companies begin to target international markets, especially Europe.

The EV sector is a crucial industry for a clean economy and has huge potential for Europe, but the global market is now flooded with cheaper Chinese EVs, European Commission President Ursula von der Leyen said in her annual address to the bloc's parliament.

Chinese EV prices are kept artificially low by huge state subsidies, which are distorting the EU market, she said.

"And as we do not accept this from the inside, we do not accept this from the outside. So I can announce today that the Commission is launching an anti-subsidy investigation into electric vehicles coming from China," she said.

"Europe is open for competition. Not for a race to the bottom. We must defend ourselves against unfair practices," she added.

At the same time, she emphasized that it is vital to keep open lines of communication and dialogue with China, as there are still topics on which cooperation is possible and necessary.

"De-risk, not decouple – this will be my approach with the Chinese leadership at the EU-China Summit later this year," she said.

China has subsidized local consumer purchases of EVs for the past several years to support the industry's growth. The subsidy expired at the end of last year and was not renewed. The policy previously applied to all car companies that manufacture in China, including Tesla and Volkswagen.

The country also offers purchase tax incentives for local consumers to buy EVs, which was due to expire at the end of 2023 but has been extended until 2027, with the incentives to be reduced in steps.

Similar to the car purchase subsidy, the purchase tax breaks apply to local and foreign carmakers.

Despite Von der Leyen's claims that the global market is now flooded with cheaper Chinese EVs, the reality is that local EV makers' vehicles sell for far more in overseas markets than they do in China.

BYD's Seal battery electric vehicle (BEV), for example, is currently available in five versions in China, with starting prices ranging from RMB 189,800 ($26,050) to RMB 279,800.

BYD officially launched the Seal in Europe on September 4, with two versions starting at 44,900 euros ($48,190) and 50,990 euros, nearly double the model's price in China.

BYD announced its entry into the European passenger car market on September 28, 2022, when it unveiled the European pre-sale prices for the Atto 3, Han, and Tang, all of which were nearly twice the price in China.

In addition to BYD, Nio (NYSE: NIO) and Xpeng (NYSE: XPEV) have also entered the European market, and Zeekr shipped its first vehicles for European consumers late last month.

($1 = 0.9317 euros, $1 = RMB 7.2854)

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