“This means that the Chinese government provides subsidies to all operators,” he continued. “From the refining of lithium used in batteries, to the production of cells and batteries, to the production of BEVs (battery electric vehicles) and even the transportation of BEVs to EU markets.”
Representatives of Chinese companies were shocked. After a quick crunch of the numbers, an official at a concerned electric vehicle company promised to start shipping hybrid cars to Europe because they would not be subject to such high customs duties.
“The EU ignored facts and WTO rules, ignored China’s repeated strong opposition, ignored calls and dissuasive measures from many EU member governments and industries, and acted unilaterally ” fumed a statement from the Chinese Ministry of Commerce, published minutes after the agreement. a notification had been received.
From day one, the EV inquiry – as it is now known across Europe, where it has dominated the debate on China – has been mired in controversy.
“Global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low thanks to huge public subsidies. This distorts our market,” European Commission President Ursula von der Leyen said during her annual State of the Union address last September.
His announcement took many of his officials by surprise. It was also news to the Chinese government, whose diplomats were immediately unhappy that they had not been consulted before the public announcement, as is common in such relations.
The work began immediately: out of 21 Chinese groups exporting electric vehicles to Europe, they reduced the size of the sample to be studied to three.
The eventual duty applied to most Chinese EV exports to Europe would be a weighted average calculated based on the subsidies found on the books of these three companies. When experts noted the presence of giant SAIC on the list, they predicted that countervailing duties could far exceed the bloc’s average rate of 19 percent.
Questionnaires were sent to companies, each lasting around sixty pages and more than 18,000 words. They demanded access to financial information and forensic details on documents each had received from the Chinese state.
“It is in your interest to respond as precisely and completely as possible and to attach supporting documents. You can supplement your answer with additional data,” reads dry legalese that translates to a veiled warning that would come true: comply, or you will be excluded from the European market.
6:59 p.m.
Why the EU and US are worried about China’s overcapacity
Why the EU and US are worried about China’s overcapacity
The others – including BYD and Geely – have played along and will therefore be taxed at a lower rate than standard EU-owned models, which will face a weighted average of 21 percent.
“SAIC is very dependent on the European market and has no plans to localize its production yet, so it is going to be very affected by this,” said Ilaria Mazzocco, an expert on the Chinese electric vehicle trade at the Center for Strategic Studies and international.
“BYD appears to be in a great position with a European factory, low tariffs and a geographically diverse market.”
The Chinese government also received a series of questionnaires, which it refused to forward on behalf of the EU to certain lithium suppliers and local banks.
“The Chinese government has been very active, seeking to justify its various measures,” said the senior European official. “There was a lot of interaction, but less positive activity on their part when they were supposed to provide us with the requested information.”
04:47
Could a shift to the far right within the European Parliament change its relations with China?
Could a shift to the far right within the European Parliament change its relations with China?
Instead, Beijing attempted to derail the investigation with a series of threats that increased as Brussels’ probe neared its conclusion.
In January, it launched an anti-dumping proceeding on EU brandy shipments, widely seen as a reward for France, which was – along with Spain – one of the strongest supporters of action against the vehicles electrical. France shipped $1.8 billion worth of cognac to China last year, according to customs records.
Over the past month, state media have threatened tariffs on European pork as well as the auto, aviation and dairy sectors.
“China will closely monitor the EU’s further progress and resolutely take all necessary measures to firmly defend the legitimate rights and interests of Chinese enterprises,” the Ministry of Commerce statement said.
Brussels is convinced it has a strong case for tariffs and would welcome a challenge at the WTO, where it would highlight the fact that some Chinese companies will pay lower tariffs than their European rivals.
Their investigators discovered subsidies everywhere they looked. The state required lithium processors and battery makers to sell to electric vehicle companies at below-market prices, they said, while automakers were exempt from taxes on battery consumption.
Companies issued green bonds that state financial institutions were ordered to buy and were granted concessional land, tax breaks and cheap refinancing options mandated by the People’s Bank of China, the central bank.
The EU believes its businesses have suffered. Between January 2020 and September 2023, Chinese companies increased their market share in the EU from 4 percent to 25 percent, while the share of their local competitors fell from 69 percent to almost 60 percent, officials said.
Chinese subsidies “endanger” Europe’s green transition, they added, by removing the price at which European companies could sell electric vehicles, meaning in some cases they suffered losses on each vehicle sold.
For environmentalists, who have little regard for German automakers who are slow to wean themselves off combustion engines, this will sound like sour grapes.
“We don’t want tariffs that wouldn’t help us achieve our decarbonization targets,” Malta’s energy minister, Miriam Dalli, told the Post last month. “Having more expensive products will not help us achieve our ambitious goals. »
But in Brussels, pushing through the investigation was seen as a test of its credibility, with officials saying they needed to show China that they not only bark but also bite.
The three Chinese automakers now have four days to report any flaws in the calculations, after which member states have until July 15 to voice their own concerns.
The saga pitted the capitals against each other, with Paris encouraging von der Leyen, even as Berlin worked behind the scenes to kill her. During the meetings, a senior official said, the Germans even used the term “so-called overcapacity,” a sign of their alignment with Beijing.
The five-year rights are due to be set in early November, with some speculating the next four months will be a mix of retaliatory measures and frantic diplomacy.
“Every effort must now be made to limit the negative effects on international supply chains and European companies as much as possible,” said Wolfgang Niedermark, board member of the Federation of German Industries.
“European companies have no interest in a trade conflict with China escalating. »