Employees assemble new energy vehicles at the smart factory of electric vehicle company Leapmotor on April 8, 2024 in Jinhua, Zhejiang Province, China.
Vcg China Visual Group | Getty Images
BEIJING – A European investigation into China’s electric cars is so selective that the results are unreliable, a Chinese official said in an exclusive interview with CNBC on Monday.
The European Commission last week announced plans to impose tariffs on Chinese electric vehicles imported from July 4. The provisional decision follows a months-long investigation into the role of government subsidies in China’s EVs.
China’s electric car industry has stalled after more than ten years of development. Domestic, it is not only Tesla under pressure but pushed traditional automakers and startups were into fierce competition through car technology features and price. The pace of growth at home is also encouraging Chinese electric car companies to improve their sales strategies for Southeast Asia, the Middle East and Europe.
The Chinese side has publicly criticized the EU’s move and rejected relevant accusations – including from the US – of industrial overcapacity that puts manufacturers in other countries at risk of dying and killing workers.
The EU’s anti-subsidy investigation is only looking at Chinese companies, rather than businesses with the largest export volumes, said Jin Ruiting, director of the Macroeconomic Research Academy, a research institute directly under the National Development and Reform Commission. He did not specify the exporter.
The selection of the sample was “very selective,” Jin said in Mandarin, translated by CNBC. They claim it violates World Trade Organization rules.
The WTO declined to comment.
“In accordance with the applicable rules, the final selection of the sample is based on the largest representative volume of production, sales or exports to the Union that can reasonably be investigated in the time available,” Olof Gill, spokesman for the European Commission for trade and agriculture, said in a statement to CNBC .
Gill said the largest export volume was not the only criterion and the Commission also looked at the volume of domestic production and sales. “The Commission considers that the sample was selected in accordance with WTO rules and relevant EU legislation in this regard,” he said.
Major German automakers, which derive significant sales from China and have local partnerships, have been quick to voice their opposition to the EU’s planned tariffs.
Volkswagen Group said in a statement that rejects the “countervailing duties” and “the timing of the EU Commission’s decision is detrimental to the very current demand for BEV vehicles in Germany and Europe.”
“Volkswagen Group confidently accepts a lot of international competition, including from China, and sees this as an opportunity. It also benefits our customers,” the German automaker said.
Volkswagen delivered 3.2 million passenger cars in China last year, more than 3.1 million deliveries to Western Europe, including the UK. The BMW Group also delivered more cars in China last year than in continental Europe.
“The risk of protectionism starts a spiral: Tariffs lead to new tariffs, to isolation rather than cooperation,” said Oliver Zipse, CEO of the BMW Group, in a statement. “From the BMW Group’s point of view, protectionist measures, such as the introduction of import duties, do not contribute to successfully competing in the international market.”
EU probe included Tesla, which opened a factory in Shanghai in 2019 and exports some Chinese-made cars to other markets. The commission said that carmaker Elon Musk may receive individual tariffs.
Need an industrial complaint?
Jin NDRC added that the EU’s anti-subsidy investigation appears not to be based on industry or business complaints.
“There is a problem with the selection of the (EU) sample, and I think there is a big problem with the conclusion,” he said in Mandarin, translated by CNBC. “So I think the investigation process is not transparent, and the results are not reliable.”
The EU’s Gill said the bloc’s regulations allow the Commission to launch investigations without having to receive industry complaints.
The commission said last week its investigation concluded that Chinese-made battery electric cars benefit from “unfair subsidies, which pose a threat of economic injury to EU BEV manufacturers.”
“As a result, the Commission has reached out to the Chinese authorities to discuss these findings and explore possible ways to resolve the issues identified in a WTO-compatible manner,” the EU statement said.
Planned tariffs range from 17.4% for BYD cars to 38.1% for state-owned electric vehicles. SAIC.
Rhodium Group analysts said in an April report that duties would need to reach 40% to 50%, if not higher for BYD, to “make the European market unattractive for Chinese EV exporters.”
The Biden administration announced in May that it would raise tariffs on Chinese electric car imports from 25% to 100%. Senior administration officials cited “rapid exports” and “excess capacity” as reasons for the new duties.
EV vs ICE car
Jin claimed that while the capacity utilization for traditional fuel-powered vehicle companies in China is 70% to 80%, BYD and some new energy vehicle companies are 100% or higher.
He also pointed to a report from the International Energy Agency predicting high demand for electric cars that the world will achieve net zero emissions in the coming decades – a demand Jin says Chinese carmakers are just getting started on.
The IEA says that to achieve net-zero emissions by 2050, it expects electric car sales to account for around 65% of global car sales by 2030. That would require an average growth of 23% in sales per year to date. The agency said that sales of electric cars will increase by almost 35% in 2023 from the previous year.
Jin claims that oversupply is the reason why global trade exists, and that while China produces so many electric cars, other countries dominate in exports of liquefied natural gas, agricultural products and high-end semiconductors.
Overall, Jin emphasized the need for global cooperation rather than de-risking, despite what he called short-term gains for some politicians.
Beijing has repeatedly called on the Biden administration to lift restrictions on U.S. sales of advanced semiconductors to China.
– CNBC’s Rebecca Picciotto contributed to this report.
