China might have problems with its economy, but as an exporter of affordable electric vehicles, it’s on a tear. Now, investigators from the European Commission will visit Chinese EV makers as part of a probe into whether they have an unfair advantage thanks to government subsidies.
In the coming weeks, the EU investigators will visit BYD, Geely, and SAIC, according to Reuters. Their visits will help determine whether the EU imposes higher tariffs to protect European carmakers.
BYD recently overtook Elon Musk’s Tesla as the global leader in sales of electric vehicles. Backed by Warren Buffett’s Berkshire Hathaway, the carmaker keeps its costs low partly by owning the entire supply chain of its EV batteries, significant since a battery accounts for roughly 40% of an electric vehicle’s price.
But as the existence of the EU’s anti-subsidy investigation suggests, many worry there’s more than supply-chain efficiencies behind the low prices of Chinese EVs. The visits promise to be central to the EU probe, announced in September and set to run for 13 months.
Here’s a fun fact: 85% of China’s government spending is by local governments (provincial and below). China’s federal support for EVs has been mostly limited to reducing taxes and fees on EV manufacturing (most notably, removing the consumption tax that is charged on automobiles).
If removing tax barriers is a government subsidy, I guess the EU claim has some water. Otherwise, the EU will be stuck whack-a-moling particular provinces for their economic incentives (and, of course, ignoring the billions that Tesla has received).
