Chinese subsidies Archives

Last month, the EU launched an investigation into the privileged position of electric cars made in China due to subsidies. This does not only apply to Chinese manufacturers, but to all electric cars produced in China that are exported to the European market. Following this case, the New York Times revealed that China subsidizes the Nio with 32,000 euros per car.

In 2020, Nio was facing bankruptcy. The Chinese government gave about one billion euros to save the company, but it was not just financial support, because with that money the government bought a 24 percent stake in the company. After that, there was another financial injection from an unnamed state banking house in the amount of 1.5 billion euros.

In addition to government support, Chinese car manufacturers have another big advantage in terms of low prices compared to manufacturers from Europe and the US, and that is the lower cost of labor. A manufacturing worker there earns about a third of what an American or European auto worker earns annually. Also, Reuters recently wrote about an unnamed employee of the Changan Automobile Factory in Che-fei, who experienced a reduction in income and left his job in July, because his salary in May and June was only four thousand yuan a month (about 512 euros), instead of 900 euros as he expected.

When it comes to other electric car manufacturers, BYD is the largest Chinese electric car manufacturer, and in the first six months of this year, it made a profit of 1.35 billion euros. Some data show that the BYD Seal could be produced 35% cheaper than the Volkswagen ID.3, which, thanks to the technology, is another advantage of the Chinese manufacturer.

Source: New York Times

As European Commission President Ursula von der Leyen announced a few days ago, the EU launched an investigation into the privileged position of electric vehicles produced in China due to subsidies. “These can also be vehicles from other manufacturers if they have used subsidies in China,” said Executive Vice President of the European Commission for an Economy Valdis Dombrovskis.

Many electric car manufacturers have plants in China, such as Tesla, Renault, VW, etc. All of them export their cars to the European market, and during the collection of evidence, Tesla was among the companies that were found to have had additional benefits. The goal of the investigation is to determine whether and in what way China subsidized car manufacturers in order to take all necessary countermeasures and equalize the market position for everyone.

Tesla enjoyed a special position in China that other companies did not have. Thanks to the Chinese government, the American company has fully utilized its domestic operations, instead of sharing them with a local joint venture partner as is the case with VW and Audi in China. Tax breaks, loans and other forms of aid have helped make China Tesla’s second most important business market outside the US.

Many will think that China will make a countermeasure against European manufacturers. Well, the chances of that are slim. If we consider that the European electric car market is the second largest in the world, after China, it can be hardly expected that the Chinese government will play against itself.

Other car manufacturers, BMW and Renault, have no comment on the situation.

Source: Reuters

Cars and catalogues