For many Chinese brands, this day has been anticipated. On September 13, the European Commission’s official website disclosed that European Commission President von der Leyen stated in the European Parliament’s fourth “State of the Union Address” that the European Commission would launch aCountervailing investigation into electric vehicles imported from China.
Immediately afterwards, on September 14, the spokesperson of the Ministry of Commerce said in response to a reporter's question regarding the EU leaders' announcement that they would launch a countervailing investigation into China's electric vehicles,China expresses high concern and strong dissatisfaction with this.China believes that the investigative measures proposed by the EU are actually to protect its own industry in the name of "fair competition". It is a naked protectionist act that will seriously disrupt and distort the global automotive industry chain and supply chain, including the EU, and will have a negative impact on China-EU economic and trade relations.
According to Bloomberg, Von der Leyen said in her speech, "The global electric vehicle market is flooded with affordable Chinese cars. Their prices are low because they receive huge state subsidies, which is distorting our market." Von der Leyen also emphasized, "We must keep a clear head about the risks we face."
Von der Leyen’s words may be a bit alarmist.
First of all, electric vehicles sold by Chinese brands to the European market are not cheap., a BYD Han EV, is priced equivalent to a BMW X5 in Europe, and is priced higher than the Model 3 of the same level.
So are electric cars sold from China to Europe cheap?
No.
Secondly, although China’s electric vehicles have the largest sales volume in the world, they have just started in the global market., in terms of scale, it is mainly supported by the Chinese market, the world's largest new energy vehicle market.
In other countries around the world, the proportion of Chinese electric vehicles is not high, and in countries and regions with large new energy vehicle markets like the United States and Europe, Chinese brands also have barriers to entry. Li Bin, the founder of NIO, once said that Tesla CEO Elon Musk received courtesy when he visited China. Why do Chinese companies encounter obstacles in selling high-tech cars to American consumers?
It is very difficult for Chinese brands to truly enter the global market. "The global electric vehicle market is flooded with affordable Chinese cars" is not an objective statement based on facts.
At the same time, do Chinese electric vehicles really enjoy huge subsidies as the EU claims?
In fact, Pinjia has also discussed this issue before. The simplest way is to compare the prices of Model Y produced in Germany, Model Y imported from China to Germany and the domestic Model Y without subsidies, and you will find thatThe fundamental reason for the low price of electric vehicles in China is that due to the advantages of the domestic supply chain and battery cost capabilities, the cost of vehicle manufacturing has a greater advantage than the local production and manufacturing costs in Europe.
The intensified competition in China's new energy market this year has also led to the price of Chinese electric vehicles entering a new stage of "the same price for petrol and electricity". The Volkswagen ID.3 entry-level models produced in China and Europe use different battery standards. Even though the Chinese version has higher energy density and longer battery life, the Chinese ID.3 is still cheaper.
This also just confirms the strong cost control capabilities of Chinese manufacturing.
However, since the EU has spoken out, it is probably not empty talk.
First, what is a countervailing investigation? What impact does it have?
Zhong Lun Law Firm analyzed in an article published in August 2023 that in terms of countervailing investigations, the EU has always identified Chinese state-owned enterprises, including state-owned commercial banks, as "Public Bodies". Therefore, during the EU countervailing investigation, not only the government subsidies, tax exemptions, etc. directly received by the enterprise will be regarded as subsidies, but also the raw material supply, energy and power supply, low-interest loans, etc. obtained by the enterprise from state-owned companies may be regarded as subsidies and included in the calculation. Raw materials and energy are the main cost items for manufacturing companies, so the EU's identification of "public institutions" may significantly increase the amount of so-called subsidies, which in turn will lead to higher countervailing tax rates.
Some industry insiders believe that following the anti-subsidy investigation, the EU may also launch an anti-dumping investigation into Chinese electric vehicles.
As early as June this year, there was news that France was pushing the EU to launch a "double-reverse" (anti-dumping and countervailing) investigation into Chinese-made electric vehicles.
Because the French government believes that Chinese electric vehicles are destroying its local automobile industry.
On the one hand, the French government believes that Chinese electric vehicles have taken away most of the government subsidies. Data released by it shows that about 40% of France’s electric vehicle purchase subsidies in the first quarter of 2023 will go to products from Chinese companies. At the same time, French President Macron also announced in May this year that the new energy subsidy policy will be reformed.
Previously, France’s subsidy conditions for electric vehicles were: Electric vehicles produced by any country and any manufacturer can receive a 5,000-euro subsidy from Paris, provided that the vehicle price does not exceed 47,000 euros.
The new bill will be adjusted so that the payment of subsidies will be directly linked to the carbon dioxide emissions during the production of electric vehicles, but details have not been released yet.
On the other hand, judging from the performance of the French electric vehicle market, the best-selling Chinese electric vehicle in France is currently the MG4. The price before subsidies is about 36,000 euros, and its share of the French electric vehicle market is less than 5%.
But in terms of price, this model is still very competitive compared to Model 3.
This is also the reason why China and Europe have different perceptions of the price of electric vehicles in China:In China, an imported model is usually more expensive than a locally produced model, while in Europe, the price of imported Chinese electric vehicles is equivalent to, or even cheaper than, locally produced electric vehicles. Therefore, the EU may use this to conduct a double-reverse investigation into electric vehicles produced in China.
Second, Chinese electric vehicles account for less than 12% of sales in Europe. Is this a danger signal for Europe?
According to data from the market research agency EU-EVS, in August, Chinese brands accounted for 11.3% of the European electric vehicle market sales, which is equivalent to the sales of Volkswagen brands in Europe. Compared with Tesla’s 15.3% market share in Europe, there is still a certain gap..Moreover, there are more than 10 Chinese brands involved here.
Among the electric vehicle sales in 14 European countries in August this year, MG had the highest sales volume, ranking tenth. In August, it sold more than 6,000 vehicles and accounted for nearly 4% of the market, surpassing French brands such as Renault and Peugeot.
From the perspective of model sales, Chinese electric vehicles with European background brands perform better in Europe. BYD, which is a hot seller in China, sold just over 7,000 units in 14 European countries in the first eight months of this year, and the market is still climbing. Sales of new power brands such as Xpeng and NIO in the European market are still very low. This also confirms to a certain extent,For brands that have become popular in the Chinese market, it is still a long journey to enter Europe.
From the perspective of Chinese brands going overseas, Chinese brands face long-term market challenges and brand building in Europe. Therefore, except for SAIC MG, BYD, and Great Wall, which have announced that they will build factories in Europe, Chinese brands entering Europe generally have no plans to build factories. On the premise of a weak market foundation, factory construction still needs to be treated with caution.
But for Europe, on the one hand, the advantage of their local automobile industry in the Chinese market is disappearing. On the other hand, as the scale of China's electric vehicle exports to the world increases, China's automobile export volume has also surpassed Germany's. This also means that in the global market, Chinese brands are surpassing European automobile brands, which are mainly German.
Compared with the current sales of Chinese electric vehicles in Europe, European countries that rely heavily on the automobile industry are actually more afraid that the explosion of Chinese automobile brands in the global market will weaken the competitiveness of European automobiles in the global market.
Third, can EU member states and European car brands influence the investigation process?
Initially, when France pushed for the EU to launch a "double-reverse" investigation into Chinese electric vehicles, Germany objected. However, just after the European Commission confirmed the launch of a countervailing investigation against electric vehicles imported from China, foreign media reported the latest report that Robert Habeck, German Deputy Prime Minister and Minister of Economics and Climate Protection, expressed his welcome.
Previously, we believed that the reason for the German government’s opposition was actually to protect the development of its local brands in the Chinese market. If a trade war is triggered by mutual investigations, both China and Germany will suffer losses.
At this year's IAA, Volkswagen openly talked about its emphasis on the Chinese market in Munich, which is also the reality that the German automobile industry must rely on the Chinese market at this stage.
However, Germany's attitude cannot change the EU's decision. Judging from the existing double-reverse cases, the impact of EU member states on the final investigation results is actually very small.
In fact, France and Germany are the two important automobile industry countries in Europe.In addition to being tied to economic development, the European automobile industry is also closely related to the carbon emission system implemented by the European Union.The "2035 carbon emission ban" previously issued by the European Union also means that the history of European fuel vehicles may end in 2035. Although many European car brands are strongly resisting, they have to realize the urgency of transformation.
This is an embarrassing reality that established European car companies have to face: they rely on profits from fuel vehicles, but they also have to go all-electric in order to achieve zero carbon.
Recently on overseas social media, when Volkswagen’s technical director Grünitz complained that Volkswagen could not make money on pure electric vehicles and currently still needs the internal combustion engine business to maintain profits and would slow down the launch of new pure electric models, Musk immediately commented,Traditional automakers, including Volkswagen, must quickly switch to self-driving electric vehicles or be obsolete.
It is necessary to both support GDP and meet carbon emission targets, which also means that for the European automobile industry, the reasons for transformation or not are very complicated.However, the entry of Chinese brands has made them passive. This may also be the reason why countries such as Germany, which are highly dependent on the Chinese automobile market, have wavered in their attitudes.
Fourth, how will the anti-subsidy investigation affect Chinese brands going overseas? How will Chinese car brands respond?
A few years ago, the EU launched an anti-dumping and anti-dumping investigation on Chinese brand electric bicycles exported to Europe. It took more than a year from the initiation of the investigation to the final ruling. The final ruling was to increase the anti-dumping tax rate to 9.9% and the countervailing tax rate to 3.9%.
According to the above cases, some industry insiders pointed out thatThe EU launched a "double-reverse" investigation and estimated that "potential risks" may turn into "actual impacts" within 12-14 months, and may ultimately result in additional punitive tax rates.
Increased tax rates are the result,The bigger impact is, will the globalization strategy just launched by Chinese brands be hindered by this?
The reality must be cruel. In fact, it can be seen from the fact that during the Munich Auto Show, Wan Gang, chairman of the China Association for Science and Technology, led a team to issue a signal to seek "deepening global cooperation", the Chinese automobile industry has foreseen the difficulty of entering Europe and hopes to find a more balanced way to achieve international cooperation.
For Chinese brands, will accelerating the construction of factories in Europe change the existing trade investigation issues?
In fact, many Chinese brands have been asked by brands in the past two years whether they have plans to build factories in Europe, and most Chinese brands have expressed a cautious attitude.
Because no matter from the existing market size, as well as a series of environmental protection, policy and other challenges that may be faced when building a factory in Europe, Chinese brands need to make multiple trade-offs.
But judging from the current situation, perhaps the process of building factories in Europe will be accelerated. In addition, Chinese brands must also place their hope in exchanges and cooperation between governments, because it is also imperative for Chinese cars to go global.