The European Union (EU) has initiated an anti-subsidy investigation into Chinese electric vehicles (EVs), including exports from Tesla Inc. TSLA, causing a slight dip in Tesla’s share value.
What happened: Insiders revealed that the EU’s probe, first reported by Bloomberg, aims to determine the extent of subsidies provided by China to Tesla and other domestic manufacturers such as BYD Co. Ltd. BYDDF , SAIC Motor Corp., and Nio Inc. NIO. The objective is to implement countermeasures, if necessary, to ensure a level playing field for the EU’s industry.
Announced by European Commission President Ursula von der Leyen on Sept. 13, the investigation could reshape the dynamics within the world’s second-largest EV market. Tesla’s Shanghai factory, which began exporting Model 3 sedans late in 2020, has become the company’s main vehicle export hub.
Around 93,700 vehicles, which accounts for 47% of Tesla’s deliveries, in Western Europe as of July 2021 were manufactured in China. No comments have been provided by Tesla, BYD and SAIC regarding this situation, according to Bloomberg.
The investigation launched by the European Union will focus on the support that China provides to its manufacturers. This includes loans from state-owned banks funding from state investment funds as the allocation of land and electricity resources.
The significant increase in vehicle (EV) sales within the European market has raised concerns within Europe’s automotive sector. In 2023 Chinese EVs captured a market share of 5.6% compared to a mere 1.1% in 2020. This industry is crucial for employment directly and indirectly supporting 14 million jobs.
European companies are anxious about consequences from Beijing which could involve restricted access to China’s market or reduced exports of vital raw materials necessary for European manufacturers. To proactively address any impacts resulting from the investigation Valdis Dombrovskis—a vice president, at the European Commission—recently visited China, Bloomberg reports.
Why it matters: The outcome of the EU’s investigation could impact Tesla’s operations and sales in Europe significantly. Given that almost half of Tesla’s total deliveries in Western Europe are made-in-China vehicles, any countermeasures from the EU could dent the automaker’s market presence in the region. The investigation may also escalate trade tensions between the EU and China, potentially affecting other sectors and businesses.
Read Next: US-Sanctioned Chinese Tech Giant Aims To Make EV ‘Superior To Tesla Model S’
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