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EV probes (Bloomberg)

2 October 2023

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Bloomberg title: EV Probes
By: Bloomberg News
Date: 29 September 2023

“One of the biggest targets of Europe’s big anti-subsidy probe into China’s electric car market may not be Chinese at all.

Tesla is among the companies found to have likely benefited from China’s subsidies for the EV market, according to people familiar with the matter. Elon Musk’s American carmaker started shipping Model 3 sedans built at its Shanghai factory in late 2020, and within a year began referring to that facility as its primary vehicle export hub.

It’s the latest twist in the surprising and bold investigation launched by the EU earlier this month.

Europe’s demand for Chinese EVs underscores the bloc’s reliance on Beijing. The two conduct some $900 billion in bilateral commerce, and lately it’s been pretty lopsided. The EU’s trade deficit with China for goods stood at more than $400 billion last year.

It also stands in contrast with the US, where tariffs levied during former President Donald Trump’s trade war have limited the ability for Chinese cars to enter the American market. Brussels has been far more welcoming, with Western Europe now the biggest market for EV exports from China.

The Tesla piece of the puzzle is an interesting snag, given the company’s American roots. But it still underscores how dominant China has become in the EV market.

Like Chinese carmakers BYD, Nio and XPeng, Tesla benefits from a slew of incentives Beijing has created to boost sales and help the industry, including tax breaks for drivers that make the cars more affordable and subsidies for each company based on how many EVs they make.

That’s all helped China become the biggest EV market on Earth, and why its biggest champions have made inroads not only domestically but also in places like Europe.

Source: Bloomberg newsletter

Now the EU — whose local carmakers were slow to the market — is pushing back against a flood of Chinese EVs that officials worry are threatening the viability of its own car industry.

The desire to derisk may also explain why Brussels has been hitting Beijing so hard as of late. During a trip to China this week, EU top trade negotiator Valdis Dombrovskis blasted Beijing’s failure to condemn Russia’s war in Ukraine and defended the EV probe.

“There’s no doubt the EU is being more assertive,” said André Sapir, senior fellow at Bruegel and former economic adviser to former EU President Romano Prodi, pointing to the announcement of the EV probe as a symbol of that. “It’s partly to send a message to the Chinese that we are toughening up.” “


Source:
Bloomberg newsletter on EV probes dated 29 September 2023

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