How does it affect geometry?, EU launches a countervailing investigation into Chinese electric vehicles

The rumor that the European Union will launch a "double anti" investigation into electric vehicles imported from China has taken a new move.

On September 13, local time, when the European Parliament issued its annual Union State of the Union address, von der Leyen, the President of the European Commission, announced that the European Commission was launching a countervailing investigation on electric vehicles from China.

Von der Leyen said that the global market is now full of cheap Chinese electric vehicles. Their prices have been artificially lowered due to huge subsidies from the state, which is distorting our market.

Although measures related to the anti subsidy investigation have not been further implemented, the European Union China Chamber of Commerce, the Chinese Ministry of Foreign Affairs, and the Chinese Ministry of Commerce have all made clear statements. On September 14th, a spokesperson for the Chinese Ministry of Commerce responded that China expressed "high concern" and "strong dissatisfaction" regarding this, and pointed out that the EU's move is a blatant protectionist act that will seriously disrupt and distort the global automotive industry and supply chain, including the EU, and will have a negative impact on China Europe economic and trade relations.

"This is an anti-monopoly phenomenon that will inevitably occur after China's new energy vehicle industry becomes strong." Cui Dongshu, Secretary General of the National Passenger Car Market Information Joint Conference, pointed out in an interview with China News that the EU should objectively view the development of China's electric vehicle industry, rather than arbitrarily using unilateral economic and trade tools to prevent or increase the development and operating costs of Chinese electric vehicle products in Europe. At the same time, China should also respond to investigations with reason, evidence, and restraint, striving for the best results.

The Munich Auto Show became an important factor

The EU's investigation into China's electric vehicles has long been suspected, directly related to the latter's surge in exports.

In the past two years, China's new energy vehicles have accelerated their overseas expansion, disrupting the original international automotive landscape. Taking the data released by the General Administration of Customs since the beginning of this year as an example, it shows that in the first quarter of this year, China surpassed Japan to become the world's largest automobile exporter, with an export volume of 1.07 million vehicles, a year-on-year increase of 58.1%. Among them, the export of new energy vehicles reached 248000 units, a year-on-year increase of 1.1 times.

From the perspective of exporting countries, Europe has become the main destination for Chinese electric vehicles. According to data previously released by the China Association of Automobile Manufacturers, the proportion of China's automobile exports to Europe to China's total vehicle exports in the first half of this year has increased from 5.7% in 2018 to 39.1%. This number exceeds the Asian and North American markets.

In Europe, as the birthplace of automobiles, the market expansion of Chinese car companies has clearly caused the former's anxiety. According to the Securities Times, during the G20 Summit held in New Delhi in September this year, von der Leyen also expressed his concern about the rise of Chinese electric vehicles in the EU.

In fact, as early as two years ago, there were reports that the European Union would launch a "double anti" investigation into Chinese electric vehicles in response to their rapid growth in the European market. In June this year, France also plans to push for the EU to launch a "double anti" investigation against Chinese electric vehicle companies.

In the interview, Cui Dongshu believed that although the "double anti" investigation has been circulating for a long time, this year's Munich International Auto Show may be an important influencing factor in launching its investigation.

The full name of the Munich Auto Show is IAA MOBILITY 2023- Germany International Auto and Smart Mobility Expo, which is held every two years and is known as the "wind vane" of the automotive industry in the industry. At this year's Munich International Auto Show, the impressive performance of Chinese electric vehicle companies attracted international attention.

According to incomplete statistical data, nearly 50 Chinese companies participated in this year's Auto Show, accounting for about 7.4% of the total participating companies. Chinese car companies and passenger car brands also accounted for one-third of the passenger car brands at this year's Munich Auto Show. According to public reports, the booths of Chinese brands such as BYD and Xiaopeng Motors were crowded during media days.

At the opening ceremony of the auto show, German Chancellor Scholz also made it clear that electric vehicles from China will provide innovative driving forces for German car companies. He said that fair competition can stimulate industries and innovation. Senior executives from established German car companies have also stated that "China is ahead of our generation in the field of electric vehicles" and "Europe must strive to catch up and cooperate with them in various aspects such as manufacturing costs and ecosystems.".

Regarding the anti subsidy investigation launched this time, Cui Dongshu frankly stated that the inevitable accompanying phenomenon of China's strong new energy vehicles is that only when they become strong can some people pay attention and some feel uncomfortable.

How does it affect geometry?

Prior to the anti subsidy investigation on China's new energy vehicles, the European Union had already conducted anti subsidy investigations on China's copperplate paper in 2010 and the photovoltaic industry in 2013.

In a public article released by Zhonglun Law Firm, it was pointed out that the "double anti-dumping" investigation is a shortened form of anti-dumping and countervailing investigations, collectively referred to as "two anti-dumping and one safeguard" with safeguard measures investigation. It belongs to the trade remedy investigation under the WTO framework, and its legal basis comes from the WTO Agreement on the Implementation of Article 6 of the General Agreement on Tariffs and Trade in 1994 and the Agreement on Subsidies and Countervailing Measures.

Among them, anti-dumping investigations are aimed at whether the export price of enterprise products is lower than their normal value, causing damage to similar industries in the importing country; The anti subsidy investigation is aimed at whether enterprises have been subsidized, which in turn infringes on the interests of similar industries in the importing country.

According to Bloomberg citing the European Commission, the anti subsidy investigation must be implemented within 13 months of its initiation. Temporary measures must be implemented no later than 9 months, and if allowed by law, final measures will be implemented within the following 4 months.

This means that after the launch of this anti-dumping investigation, Chinese car companies need to complete various export arrangements, business adjustments, supply chain optimization and other work within 13 months, so as to be less affected by anti-dumping taxation.

But many industry experts believe that there is no need to overestimate the impact of this event both domestically and internationally. "The impact is limited." Cui Dongshu admitted to China Daily reporters that the development momentum of new energy vehicles in China is rapid, and the market size is constantly increasing. These trade protectionism will inevitably encounter. Overall, this anti subsidy investigation will not have a significant impact on China's exports of new energy vehicles. On the contrary, once the sanctions are implemented, the European automotive consumer market will also be damaged.

The initial stage of "going abroad" still faces multiple challenges

Under the dual incentives of policies and markets, Chinese new energy vehicle companies have become a new trend to go global. For car companies, overseas markets have also become a new growth point that can be laid out.

On September 11th, the China Association of Automobile Manufacturers released data stating that the export volume of automobiles in the first eight months of this year reached 2.941 million units, a year-on-year increase of 61.9%. It is expected to soon exceed last year's total of 3.11 million vehicles. Among them, the export volume of new energy vehicles in the first 8 months reached 727000 units, becoming a huge increase in automobile exports.

However, it is worth noting that behind the high-speed growth of data, some practical problems that exist in the process of China's new energy vehicles going global are still difficult to ignore.

Transportation, integration with local markets, and so on are all exam questions on the way for Chinese new energy vehicle companies to go global. Jiang Han, a senior researcher at Pangu Think Tank, admitted to China Reporter that the internationalization of China's automotive industry is still in its early stages, and further observation and judgment are needed for its future development. "At present, the development momentum is very good, and the overall development advantages are relatively obvious," he said.

Cui Dongshu also believes that based on the current layout of China's new energy vehicles in overseas markets, there is still a gap between the goal of "establishing a foothold" and the effective development of localized production. He added that the establishment of pre-sales and after-sales systems is a key link to be established and improved in the localization production process.

Currently, China's new energy vehicle exports are mainly focused on whole vehicle exports, and the increasing transportation costs, geopolitical conflicts, and tariffs in different regions are all variable factors in China's automobile exports. Previously, there was a view that exporting complete vehicles was just the first step in car exports, and investing and building factories overseas was the future.

In Cui Dongshu's view, the competitive point for China's new energy vehicles to go global in the future will definitely be cost-effectiveness, improving product performance through technological innovation, and thus enhancing recognition overseas.

"Cost performance is not about low prices, but a better quality to price ratio." Jiang Han told reporters that China's competitive advantage in the new energy vehicle market is definitely not just about price advantage. Currently, driven by technological innovation, China's new energy vehicles have entered a new stage of quality to price ratio, and the overall development advantage is significant. "In the long run, the main pressure faced by China's electric vehicle exports still lies in market acceptance and brand influence," he added.

Author: Qiu Hui, journalist of China Report