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Politics
Hyperdrive
TESLA’S CHINA EXPORTS IN CROSSHAIRS OF EU ANTI-SUBSIDY PROBE
* Carmaker ships more EVs to Europe from China than any other
* Investigation may lead to levies aimed at offsetting subsidies
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By Alberto Nardelli and Craig Trudell
September 25, 2023 at 11:52 PM HST
Updated on
September 26, 2023 at 12:04 AM HST
Listen
4:56
One automaker is looming larger than any other in the investigation of electric
vehicles flowing into the European Union from China: Tesla Inc.
During the evidence-gathering that precipitated this month’s surprise
announcement of an EU anti-subsidy probe into Chinese EVs, the US carmaker was
among the companies found to have likely benefited, according to people familiar
with the matter.
Tesla shares fell 1.6% in premarket trading at 5:58 a.m. in New York.
The aim of the investigation will be to determine whether, and the degree to
which, China has subsidized Tesla and domestic manufacturers including BYD Co.,
SAIC Motor Corp. and Nio Inc., and to take any necessary countervailing measures
to level the playing field for the EU’s industry, said the people, who asked not
to be identified discussing private deliberations.
BloombergHyperdriveMercedes S-Class, Porsche Stand to Lose Most in China EV
RowUK and EU to Discuss Post-Brexit EV Tariffs Ahead of DeadlineHyundai, Kia to
Cut EV Prices in South Korea as Demand SlowsLG Electronics Chief Says EV Shift
Will Help Spur New Growth
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The probe that European Commission President Ursula von der Leyen made public on
Sept. 13 has the potential to reshape the competitive dynamics within the
world’s second-largest EV market, after China. Both sides have ample reason to
proceed carefully: While the EU risks exposing its manufacturers to potential
retaliation, the bloc is the most attractive export destination for Chinese
companies rife with excess production capacity.
Tesla started exporting Model 3 sedans built at its Shanghai factory in late
2020, less than a year after starting production at its first overseas car
plant. By July 2021, the company referred to the facility as its primary vehicle
export hub.
Through the first seven months of this year, Tesla sold an estimated 93,700
made-in-China vehicles across Western Europe, accounting for roughly 47% of its
total deliveries, according to Schmidt Automotive Research. The next biggest
exporter of EVs from China to Europe was SAIC’s MG, with roughly 57,500
registrations.
Tesla, BYD and SAIC declined to comment. Last week, Nio’s co-founder and
president Qin Lihong said they “have no intention to go against any market
regulation in terms of subsidies.” The European Commission didn’t immediately
reply to a request for comment.
Read More: Musk Loves China, and China Loves Him Back — for Now
Tesla has enjoyed perks in China that other international companies struggled to
obtain, with the most notable being the state’s blessing to wholly own its
domestic operations, rather than have to share custody with a local joint
venture partner. Tax breaks, cheap loans and other forms of assistance helped
turn China into Tesla’s most important market outside the US.
These and other forms of support that China provides domestic manufacturers,
including credits from state-owned banks, capital provisions from state
investment funds, and provisions of land and electricity, are now coming under
EU scrutiny. Chinese carmakers also benefit from subsidies in related sectors
across the value chain, including batteries and software.
Some European companies, such as BMW AG and Renault SA, that operate joint
ventures with Chinese manufacturers will also be included in the probe along
with all carmakers that produce in China and export to the EU, the people said.
A spokesperson at BMW didn’t immediately respond to requests for comment and a
representitive from Renault had no immediate comment.
After having collected initial evidence that formed the basis for launching the
investigation, the EU is now looking to consult with relevant authorities —
including in China — and companies to determine the extent to which subsidies
may be undercutting EU producers, if at all.
In recent probes of other sectors such as e-bikes and fiber-optic cables, the EU
discovered subsidy margins ranging from 4% to 17%, people familiar with the
findings said.
Any amount of edge is critical in the low-margin auto industry, which Europe is
increasingly pressuring to electrify as part of its broader Green Deal
initiatives. The EU adopted standards earlier this year requiring manufacturers
to slash 55% of CO2 emissions from new passenger cars by 2030, and to zero out
emissions five years later.
Read More on EU-China Trade:
Macron Is Pushing Europe Into $900 Billion Fight With China
EU Trade Chief to Tell China That Retaliation Is a Bad Idea
EU Warns China It Will Be ‘More Assertive’ on Fair Trade
There’s concern within Europe that its companies have fallen behind Tesla and
Chinese companies with respect to EV and battery technology, threatening the
viability of the EU’s car industry that provides almost 14 million direct and
indirect jobs.
European businesses have raised concerns about potential retaliation and
tit-for-tat disputes emerging from the EV probe. The fear is that Beijing could
hit back in broad ways, such as by curtailing access to its massive market,
including in unrelated sectors, or limiting exports of critical raw materials
that European manufacturers depend on.
Read More: Germany Frets VW Is Heading Down a Road to Nowhere
The EV dispute was high on the agenda of the EU trade chief’s recent trip to
China. Valdis Dombrovskis, an executive vice president at the European
Commission, sought to stabilize the relationship and limit fallout from the
investigation, which Beijing has called “a naked act of protectionism.”
— With assistance by Jorge Valero, Danny Lee, Chunying Zhang, Linda Lew, and
Albertina Torsoli
(Updates with share move in the third paragraph.)
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