Europe’s EV Troubles Run Deeper Than China
China is speeding ahead in the electric-vehicle race. Europe’s antisubsidy investigation into Chinese EV makers reflects this new reality, but tariffs alone aren’t enough to keep Europe’s automakers in the fast lane. The European Union has launched a probe into whether state subsidies have given Chinese EV makers an unfair leg up as they accelerate into European markets.
That shouldn’t be surprising given the importance of the auto industry to Europe—and how rapidly Chinese rivals have emerged as global leaders over the past couple of years. It also fits with the broad trend of rising protectionism globally, particularly for high-tech sectors such as EVs and batteries. Imports from China account for around 15% of battery EVs sales in Europe, according to Bernstein.
But not all of those come from Chinese automakers: Tesla, shipping from its Shanghai factory, made up 30% of those Chinese exports, says the brokerage firm. Even European carmakers such as BMW and Mercedes have been selling their made-in-China EVs to their home continent. Subsidies have indeed played a big part in the rise of China’s EV industry.
China has grown to become the world’s largest EV market after years of providing financial support and favorable policies for carmakers and battery manufacturers. But some of that largess is now draining away. For example, the government used to pay generous subsidies for EV buyers, but that program expired this year.
EV buyers still enjoy tax breaks, however. And like many other industries in China, local governments still subsidize manufacturers. For example, Chinese EV champion BYD booked around 14.7 billion yuan of government grants, equivalent to $2 billion, in 2022.
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