Chinese electric vehicles are in the sights of Brussels, which has just imposed precautionary surcharges to slow their surge and protect European manufacturers.
Here are the reasons that pushed the EU to act and Beijing’s possible response.
A boom driven by subsidies
Between 2014 and the end of 2022, the Chinese government says it has spent more than 200 billion yuan (25.5 billion euros) on subsidies and tax deductions linked to the purchase of an electric vehicle.
Enough to boost Chinese manufacturers against their American competitors, who have benefited less from aid.
They also benefited from rising domestic demand: 69% of electric vehicles sold worldwide in December were in China, according to research firm Rystad Energy.
Exports have also surged. According to the American think tank The Atlantic Council, global sales of Chinese electric vehicles will climb by 70% in 2023, to 31.6 billion euros.
And nearly 40% of these exports went to the European Union, which became the leading buyer of these Chinese vehicles.
BYD, number one in the sector
The undisputed leader in China is BYD. In 2023, it posted record profits and announced its intention to enter the top five automotive groups in Europe.
In March, it became the first to pass the symbolic threshold of seven million vehicles produced (hybrid and electric combined) since entering this market.
According to state media, the other Chinese manufacturers that export the most electric vehicles to Europe are SAIC, MG Motor and Polestar — owned by Volvo and its Chinese parent company Geely.
Concerns and dissension in the EU
Rising exports have allowed Chinese brands to gain market share in the EU, going from less than 2% of electric cars sold at the end of 2021 to almost 8% by the end of 2023, according to specialist institute Jato.
More generally, electric vehicles from Chinese factories, all brands combined, represented almost 22% of the European market last year, compared to 3% three years previously, according to the Association of Automobile Manufacturers (ACEA).
European imports of Chinese electric vehicles jumped from 57,000 in 2020 to 437,000 in 2023, according to the US-based Peterson Institute for International Economics.
Brussels is concerned about this, denouncing an “unfair subsidy policy” which, according to it, represents “a threat” to European manufacturers.
After nearly nine months of investigation, the EU will impose surcharges of 17.4% on Chinese manufacturer BYD, 19.9% on Geely and 37.6% on SAIC from Friday. The other manufacturers will be subject to an additional average duty of 21% if they cooperated with the investigation or 37.6% if they did not.
Brussels now has four months to adopt them definitively, leaving open a window of dialogue with Beijing.
The measures are not unanimous in the EU: Germany, whose manufacturers Audi, BMW, Mercedes and Volkswagen achieve almost 40% of their global sales in China, has warned of the risk of a “trade war”.
If confirmed, the surcharges will be definitively adopted unless a qualified majority of Member States objects.
Possible Chinese replicas
China announced in mid-June that it “reserved the right” to file a complaint with the World Trade Organization (WTO), promising to “take all necessary measures to resolutely defend the rights and interests of Chinese companies.”
However, it did not immediately reveal any countermeasures.
Beijing announced in January an investigation targeting all wine spirits imported from the European Union, including cognac. Wine, dairy products, pork and high-powered cars are also in the crosshairs, according to Chinese state media.
“We reiterate our deepest concern,” Florent Morillon, president of the National Interprofessional Cognac Bureau, warned in mid-June.
The Chinese “will launch retaliation, that’s for sure,” Tu Le, founder of the specialist firm Sino Auto Insights, told AFP, citing “luxury products and French and Italian wines” as possible targets.
“On the other hand, with China’s economy still not doing well, the answer could be much ado about nothing.”
Impact on sales
Sales of Chinese vehicles will inevitably suffer.
According to an estimate released on Thursday by the German Kiel Institute, the surcharges could reduce imports of electric vehicles from China into the EU by 42%, but without any significant impact on prices, which could even rise slightly in the long term.
“In the short term, there will be a drop” in exports, Gregor Sebastian, an analyst at Rhodium, added in mid-June.
“As 40% of Chinese EV exports went to the EU in 2023-2024, this will be a challenge [pour les constructeurs en Chine] to redeploy these exports,” he wrote.