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China attacks EU’s ‘naked protectionist act’ on electric cars

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Beijing has attacked the EU’s anti-subsidies investigation into China’s electric car industry as a “naked protectionist act” and warned that it will have a negative impact on relations in its first official comments on the probe.

China’s commerce ministry vowed to protect the “legitimate rights” of its companies and reminded the EU of the strong presence and long history of European producers in the world’s second-largest economy.

“It is a naked protectionist act that will seriously disrupt and distort the global automotive industry supply chain, including in the EU, and it will have a negative impact on China-EU economic and trade relations,” the ministry said in a statement.

European Commission president Ursula von der Leyen announced the investigation on Wednesday, kicking off what might be one of the most serious battles with Beijing in the bloc’s efforts to “de-risk” from China.

Chinese electric vehicles still represent only a small share of the bloc’s market, but they are rising fast and could hit 15 per cent within two years. Their ascent has worried the EU, which had its solar panel market dominated by Chinese producers more than a decade ago.

For China, the EV industry is a bright spot in an economy that is struggling to emerge from the pandemic. Beijing is looking to advanced technology industries and the green transition to help China’s economy reduce its dependence on the property sector.

German carmakers in particular have enjoyed a strong position in China’s car market but have recently come under pressure from an explosion in electric-vehicle sales from domestic producers.

China’s EV makers themselves are suffering from oversupply problems. Exports to the EU were one of the great hopes for the industry after the US limited access by levying heavy tariffs on Chinese car imports while offering subsidies for domestically produced electric vehicles.

“EU automobile companies have invested and operated in China for many years, and the Chinese market has become the largest overseas market for many EU automobile companies,” China’s commerce ministry said.

“China has always upheld an open and co-operative attitude and welcomes EU automobile companies to further expand investment in China, including investment in electric vehicles.”

It added that China’s EV industry had achieved its competitiveness “through hard work”, was favoured by consumers including in the EU and had made important contributions to tackling climate change and the “green transformation including the European Union”.

“China will pay close attention to the EU’s protectionist tendencies and follow-up actions, and firmly safeguard the legitimate rights and interests of Chinese enterprises,” the ministry said.

Shares in Chinese carmakers fell on Thursday, with Warren Buffett-backed BYD, the world’s biggest seller of battery electric cars and hybrid plug-ins, down 1.4 per cent in Hong Kong.

Hangzhou-based Geely, which owns Volvo and Lotus, slid 0.3 per cent. EV start-up Nio declined 0.8 per cent, while Xpeng rose 0.5 per cent.

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