The European Union is set to launch an anti-subsidy investigation into Chinese electric vehicles (EVs), according to European Commission president Ursula von der Leyen. She stated that the global market has been flooded with cheaper Chinese electric cars due to substantial state subsidies, distorting European markets. This move has raised concerns among European carmakers who often find themselves undercut by competitors benefiting from significant state subsidies.
A Growing Issue
Chinese EVs have been gaining traction in international markets, posing challenges for European manufacturers. China’s vehicle exports have been on the rise, surpassing South Korea in 2021, Germany in 2022, and are on track to overtake Japan this year. This trend, coupled with Chinese manufacturers making a significant impact at international auto expos, has raised eyebrows across the European automotive sector.
Chinese Success in Europe
Chinese automakers have rapidly dominated various aspects of the global EV supply chain, which is crucial for affordable EVs. Within just over a decade, China has secured a substantial share of Europe’s EV market. According to Adamas Intelligence, in the first half of 2023, 19% of the energy capacity (measured in gigawatt hours) delivered to EV buyers in Europe came from Chinese-made EVs and battery packs.
Challenges for European Car Buyers
The potential EU investigation could lead to higher prices and reduced variety for European car buyers. Chinese EVs, often equipped with advanced features not found in their Western counterparts, have gained popularity for their affordability and impressive range. For example, the BYD Song Plus DM-i plug-in hybrid, with a range of 1,000 km (including 150 km in electric mode), is available in China for just $27,000. Such offerings could present significant competition to European EVs.
While the EU may be concerned about predatory practices and significant subsidies from Beijing, critics argue that measures like the Inflation Reduction Act (IRA) in the US and the European Green Deal (EGD) may have come too late to counteract China’s growing influence in the EV market. Chinese-made EVs have already transported 30,000 tonnes of battery metals to Europe in 2023, reflecting the country’s dominance in the EV supply chain.
Battery Metal Impact
China’s exports of battery metals to Europe have surged, with lithium carbonate equivalent increasing by 67% year-on-year. Similarly, graphite exports have risen by 68%, and nickel imports have grown by 46%. Although cobalt use remains modest in Chinese EVs, it has seen a 62% increase in imports. China’s preference for cheaper lithium iron phosphate (LFP) batteries, which account for 50% of the Chinese market, indicates a different chemistry of choice than Western EVs.
What Lies Ahead
The EU’s move to investigate Chinese EV subsidies could potentially disrupt China’s exports of overcapacity in its domestic EV industry. This change in the supply chain could affect battery metal prices, as China’s dominant position allows it to influence these markets. European miners hope this investigation could lead to higher premiums for their products when delivered to Western markets with stricter environmental and social regulations. Von der Leyen’s mention of artificially low prices suggests that a shift in the industry may be on the horizon.