EU's Anti-Subsidy Measures Target Chinese Electric Vehicles

The European Commission (“Commission”) has recently adopted measures to address the influx of Chinese electric vehicles into the European market. On 4 July 2024 the Commission published a regulation which imposes provisional countervailing duties ranging from 19.7% to 38.6% on battery electric vehicles (“BEVs”) originating from China. This measure is in response to alleged concerns that subsidised cars from China might be sold in the EU at unfairly low prices.

Background and Findings of the Investigation

The Commission initiated the investigation in October last year in response to alleged rapid market penetration of low-priced and subsidised BEVs. According to the Commission, this influx could pose a threat to the Union BEV industry by depressing prices or preventing price increases. Given the high costs of technological development, research and development financing required in the BEV sector, this could ultimately result in material injury in its view. The Commission justified its decision to initiate the investigation ex officio by referring to specific circumstances. The Commission's investigation revealed, at this provisional stage, that in its view Chinese BEVs were being significantly subsidised. This practice, also known as countervailing, involves providing a financial contribution to a specific recipient, for them to benefit from more favourable terms than those available on the market.

Anti-subsidy as well as anti-dumping procedures are trade defence mechanisms used by countries to protect their domestic industries from foreign companies selling products at unfairly low prices. The process begins with a complaint from an industry or an association representing it, alleging that dumping or countervailing is occurring and causing injury. The Commission is also entitled to open an investigation ex officio, meaning without an external complaint. The Commission directorate general for Trade, receives the complaint, initiates it, and then conducts a thorough investigation to determine whether the dumping (and/or subsidy) exists and the extent of the injury. If the investigation confirms these (and some other) elements, provisional measures may be imposed while the investigation continues. Once the investigation is complete, approximately more than a year after its initiation, definitive duties can be imposed. These definitive measures are valid for five years from imposition (and can be prolonged).

Future Outlook in the EV Market

The imposition of these duties marks a step in the EU's efforts and political commitment to maintain fair competition and protect its strategic industries from unfair trade practices. While these measures might stabilise the European automotive industry in the short term, they also prompt further discussions on the need for a more strategic approach to trade, competition and industrial policy within the EU, including the concept of strategic autonomy. There is currently a debate in Brussels in the trade and antitrust community about whether there is a need for a more streamlined and coherent integrated EU trade, antitrust and industrial policy. This debate will continue, particularly in the recently renewed European Parliament following the recent European elections. 

If you need more information or further guidance in this area, please contact Hein Hobbelen and Aurélie de Amorin from our integrated Trade, Competition and Public Affairs team in Brussels.

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