Foreign brands including Tesla are facing scrutiny as part of an EU investigation into car subsidies in China

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Tesla Inc and European carmakers that export from China to the European Union are set to come under scrutiny as the bloc investigates whether the country’s electric car industry is receiving unfair subsidies, Brussels’ top trade official said.

EU Executive Vice President Valdis Dombrovskis said on Tuesday there was “sufficient prima facie evidence” to justify an investigation into imports of battery-powered cars from China, which Brussels fears could overwhelm the bloc’s car industry.

“Strictly speaking, it is not limited to Chinese brand electric vehicles only, but could also include vehicles of other producers if they receive subsidies from the production side,” Dombrovskis said in an interview in response to a question about whether Tesla or Geely is the owner. . Swedish company Volvo may fall under investigation.

He spoke with the Financial Times at the end of a five-day trip to Beijing, during which he said he was under constant pressure from his Chinese counterparts regarding the investigation.

For Beijing, the EU’s announcement this month of an anti-subsidy investigation days before Dombrovskis’ visit opened a new front in recent tensions between the two trading superpowers.

The EU is “open to competition” in the electric vehicle sector, but “competition must be fair,” Dombrovskis said, adding that other large economies have already imposed tariffs on battery electric vehicles from China.

“The EU is now potentially the largest open market for Chinese producers,” he added.

During the visit, Dombrovskis pursued an ambitious agenda to try to persuade Beijing to dismantle what European companies say are hundreds of trade barriers that contributed to a record trade deficit last year of nearly $400 billion.

The two sides said they made some progress on Dombrovskis’ visit, and on Monday evening announced a “mechanism” to discuss export controls – mirroring a similar effort between Beijing and Washington – as well as an agreement for China to buy more agricultural goods from the European Union.

China also pledged to prioritize resolving problems such as delays in approving licenses for European infant formula makers and barriers to imports of luxury goods.

But Beijing has also made clear its displeasure with the anti-subsidy investigation. Dombrovskis said his counterparts raised the issue at every meeting.

Chinese Minister of Commerce Wang Wentao told Dombrovskis that the rapid development of China’s electric vehicle sector was the result of R&D innovation, free competition and a “complete industry system.”

“Wang Wentao expressed his deep concern and deep dissatisfaction that the European Union will launch an anti-subsidy investigation into Chinese electric cars,” the Ministry of Commerce said, accusing Brussels of “protectionism” that would affect environmental cooperation and the stability of global car supplies. chains.

Analysts said Tesla is already exporting electric cars to Europe from its massive factory in Shanghai, although those numbers may decline after the opening of a facility in Berlin last year. About a fifth of electric cars sold in Europe are manufactured in China.

In the first half of this year, Chinese-made cars accounted for 11.2 percent of electric cars sold in Germany, according to a brief released by the Center for Strategic and International Studies this month.

CSIS said that about 91 percent of those cars were from Chinese-owned European brands such as British MG, owned by the Chinese company SAIC, or Volvo’s Polestar, or from joint projects between European and Chinese companies such as Dacia Spring, Smart, or BMW iX3. .

Dombrovskis also stressed that China’s new data laws were a “systemic problem” for foreign companies operating in the country. European companies have complained that laws requiring groups to store data locally are vague and cumbersome to comply with.

“If companies… ‘We need a license to transfer important data, but no one has defined what is important, then it is difficult,’” he said. “Providing more clarity would be a really good starting point.”