Brussels launches fightback against cheap Chinese electric cars flooding Europe

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Ursula von der Leyen, president of the European Commission

Ursula von der Leyen, president of the European Commission, highlighted the threat Chinese auto subsidies pose to EU manufacturing – Stefan Wermuth/Bloomberg

Brussels has launched a probe into Chinese state subsidies for electric vehicle makers, as it vowed to protect Europe’s car industry from a “race to the bottom”.

European Commission chief Ursula von der Leyen warned that subsidies for Chinese car makers risked undermining competition in the bloc and posed a threat to the continent’s manufacturing sector.

Ms von der Leyen, who is the president of the European Union’s executive arm, said during a speech at the bloc’s parliament in Strasbourg: “Global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies.”

The investigation is the first step towards possible higher import duties on Chinese-made vehicles. Cars imported from China currently face a tariff of 10pc when coming into the EU.

The bloc already imposes tough tariffs on a range of Chinese imports to prevent “dumping” of cheap goods, ranging from steel to optical fibre cable.

The focus on electric vehicles comes as Chinese manufacturers ramp up exports in response to flagging demand at home as the economy slows. Exports have jumped 68pc so far this year, according to the China Association of Automobile Manufacturers.

European manufacturers have complained that they cannot compete with these cheap imports, arguing that prices are being kept artificially low by weaker safety standards, cheap but polluting power sources and state subsidies.

Ms von der Leyen said: “Europe is open for competition but not for a race to the bottom.”

“This is distorting our market and as we do not accept this distortion from inside our market, we do not accept this from the outside.”

The Chinese government has helped elevate its electric vehicle market to the world’s biggest by funnelling billions of dollars into subsidies. Its electric vehicle makers receive state aid directly, while the government also offers incentives to buyers.

France has pushed the EU chief to launch the probe amid concerns that Europe would fall behind in the transition to electric vehicles if it doesn’t take a firmer stance against China’s protectionism.

The European Commission’s internal market chief, Frenchman Thierry Breton, last week warned that Europe was increasingly “being relegated to net imports of electric vehicles or solar panels”.

Paris has already announced subsidies for new electric cars tied to manufacturers’ carbon emissions, a policy that has disadvantaged Chinese producers that tend to be more reliant on coal-generated electricity.

The tougher stance on electric car subsidies comes against a backdrop of mounting tensions between Beijing and the West.

Ms von der Leyen said it remained “vital” for Europe to maintain “communication and dialogue” with the world’s second largest economy.

“De-risk, not decouple. This will be my approach at the EU-China summit later this year.”

The EU plans to ban combustion engine cars from 2035 under its Green Deal initiative to cut emissions.

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