China might have problems with its economy, but as an exporter of affordable electric vehicles, it’s on a tear. Now, investigators from the European Commission will visit Chinese EV makers as part of a probe into whether they have an unfair advantage thanks to government subsidies.
In the coming weeks, the EU investigators will visit BYD, Geely, and SAIC, according to Reuters. Their visits will help determine whether the EU imposes higher tariffs to protect European carmakers.
BYD recently overtook Elon Musk’s Tesla as the global leader in sales of electric vehicles. Backed by Warren Buffett’s Berkshire Hathaway, the carmaker keeps its costs low partly by owning the entire supply chain of its EV batteries, significant since a battery accounts for roughly 40% of an electric vehicle’s price.
But as the existence of the EU’s anti-subsidy investigation suggests, many worry there’s more than supply-chain efficiencies behind the low prices of Chinese EVs. The visits promise to be central to the EU probe, announced in September and set to run for 13 months.
For the sake of argument, picture BYD getting much larger subsidies that allows it to sell EVs for half the price of anything European autos can sustainably produce. As a result Europeans overwhelmingly buy BYD over European EVs. Given that EVs are mandated to be the vast majority of cars sold in the near future, that’s Europeans buying very few European cars. Picture this persisting over long enough period to exhaust any savings European autos have. Such an event would result in a significant devaluation of European autos as well as outright bankruptcies. Followed by many thousands of Europeans losing well paying union jobs. Followed by BYD scooping up European autos brands and assets. If you see the downsides for Europe in this picture, perhaps you’d see why you or the EC might care differently about European autos subsidies versus Chinese ones. Perhaps this makes it make sense.
Tesla is not a european car maker.
Tesla is headquartered in an ally of the EU; BYD isn’t. Maybe Tesla’s subsidies are a problem to the EC - I don’t know. But you’re looking at it in a slightly simple way, as if it’s very important that this process needs to be fair.
It doesn’t need to be fair; it needs to be good for the EU. Is it good for the EU to impose tariffs on subsidised Chinese vehicles coming in (if indeed they are subsidised)? Quite possibly. (Quite possibly not: how important is it to have a big car manufacturing industry, versus your population having cheaper cars?) Whether it would also be good to impose tariffs on Tesla vehicles is also a valid question to ask, but those questions don’t have to have the same answer.
I am honestly not happy with american cars flooding our markets either, so I’d rather get rid of both :)