The European Union (EU) is on the brink of a trade war with China over the issue of Electric Vehicles (EVS). China is the second-largest economy in the world, and the EU is the third largest. A trade war between them could be disastrous, particularly for the electric car industry. The flash point is the flooding of the European market with cheap electric vehicles from China, facilitated by state subsidies. This has led to European firms losing sales and market share to China.
Brussels is taking steps to correct this situation. The EU Chief announced an investigation into Chinese EVS. The investigation is not driven by the European industry but by Brussels, indicating that the decision to investigate China came from the EU's leaders, not from companies or the industry. The investigation could potentially escalate into a trade war if the findings are negative. If the findings are negative, Brussels could impose more taxes on Chinese EVS, leading to a tariff war between China and the EU.
China has criticized the anti-subsidy investigation, calling it protectionism. However, the EU argues that the investigation is to protect its own industry in the name of competition. The EU is not convinced that the difference in price between Chinese and European EVS is due to technology and skill, but rather to state subsidies like tax cuts, cheap land, or low raw material prices.
The investigation will take around 13 months. If China has manipulated the market, there will be tariffs. Currently, the EU imposes a 10% tax on Chinese electric vehicles, while the U.S imposes around 27%. The EU still has some room to maneuver. However, local authorities in China still offer subsidies to EV makers, which supports Europe's claim.
The EU's concern is not just financial but also political. China's support for Russia has ruffled a lot of feathers, and many European nations see Beijing as a threat. The EU's investigation is not a surprise but a natural course of action. The bigger worry is that larger economies are embracing protectionism, like the U.S, which passed the Inflation Reduction Act last year, calling for massive EV subsidies. The EU criticized this decision, calling it discriminatory. This indicates that EVs could become a political lightning rod in the future.
1. The European Union (EU) is on the brink of a trade war with China over the issue of electric vehicles (EVS).
2. China is the second largest economy in the world, and the EU is the third largest. A trade war between them could be disastrous.
3. The flash point of this potential conflict is electric cars or EVS.
4. Europe accuses China of flooding their market with cheap electric vehicles, which are subsidized, causing European firms to lose sales and market share.
5. The EU Chief announced an investigation into Chinese EVS.
6. Global markets are now flooded with cheaper Chinese electric cars, and their price is kept artificially low by huge state subsidies.
7. The EU does not accept this distortion in their market.
8. The EU is launching an anti-subsidy investigation into electric vehicles coming from China.
9. The decision to investigate China came from Brussels, not from companies or the industry.
10. If the findings of this investigation are negative, Brussels could impose more tax on Chinese EVS, leading to a potential tariff war between China and the EU.
11. China has criticized the anti-subsidy investigation, calling it protectionism.
12. The European Union plans to take this measure to protect its own industry in the name of competition.
13. China is the largest EV producer in the world, making up eight percent of all electric vehicles sold in Europe.
14. Europeans are buying from China because the EVS are cheaper, around 20 percent less expensive than EVS made in Europe.
15. The EU is investigating how this difference is possible, with China claiming it's due to technology and skill.
16. The EU believes the difference is due to state subsidies like tax cuts, cheap land, or low raw material prices.
17. The investigation will take around 13 months.
18. If China has manipulated the market, there will be tariffs. Currently, the EU imposes a 10% tax on Chinese electric vehicles, while the US imposes around 27%.
19. The EU's Auto industry employs 13 million people, which is seven percent of all European jobs in the Auto industry.
20. If European automakers cannot compete with China, they could end up shifting base to China. Brussels is trying to avoid this to ensure that the automakers and the jobs stay within Europe.
21. China's support for Russia has ruffled a lot of feathers, and most European nations see Beijing as a threat.
22. The EU criticized the US's decision to pass the inflation reduction Act, which calls for massive EV subsidies for certain electric vehicles made in North America.
23. The EU called this decision discriminatory, and believes EVs will be political lightning rods in the future.
24. Many believe that EVs are the future of the auto industry, and if that is the case, every country will try to capitalize on it. Countries like Japan and Germany have built their economies around fuel cars, and EVs could offer a similar opportunity.