Foreign brands including Tesla to face scrutiny as part of EU probe into China car subsidies

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Tesla and European carmakers that export from China to the EU are set to come under scrutiny as the bloc probes whether the country’s electric vehicles industry is receiving unfair subsidies, said Brussels’ most senior trade official.

EU executive vice-president Valdis Dombrovskis on Tuesday said there was “sufficient prima facie evidence” to justify the probe into imports from China of battery-powered vehicles, which Brussels fears could overwhelm the bloc’s car industry.

“Strictly speaking, it’s not limited only to Chinese brand electrical vehicles, it can be also other producers’ vehicles if they are receiving production-side subsidies,” said Dombrovskis in an interview, responding to a question on whether Tesla or Geely, the owner of Sweden’s Volvo, might fall under the probe.

He spoke with the Financial Times at the conclusion of a five-day trip to Beijing, during which he said he was constantly pressed by his Chinese counterparts about the probe.

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

The EU was “open to competition” in the EV sector, but “competition needs to be fair”, said Dombrovskis, adding that other large economies had already introduced tariffs on battery EVs from China.

“The EU is now probably the largest market which is open for Chinese producers,” he said.

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

Both sides said they made some progress on Dombrovskis’s visit, announcing a “mechanism” on Monday evening to discuss export controls — mirroring a similar effort between Beijing and Washington — as well as an agreement from China to buy more EU agricultural goods.

China also pledged to prioritise resolving problems such as a backlog in approving licences for European infant formula makers and barriers to imports of luxury goods.

But Beijing also made clear its displeasure with the anti-subsidy probe. Dombrovskis said his Chinese counterparts raised the matter in every meeting.

Tesla already exports electric cars to Europe from its Shanghai gigafactory, although those numbers may fall following the opening of a facility in Berlin last year, said analysts. About one-fifth of all EVs sold in Europe are manufactured in China.

In the first half of this year, Chinese-made vehicles accounted for 11.2 per cent of EVs sold in Germany, according to a brief by the Center for Strategic and International Studies this month.

About 91 per cent of those cars were from Chinese-owned European brands such as Britain’s MG, owned by China’s SAIC, or Volvo’s Polestar, or from joint ventures between European and Chinese companies such as Dacia Spring, Smart or BMW iX3, said CSIS.

Dombrovskis also emphasised that new Chinese data laws were a “systemic problem” for foreign businesses operating in the country. European companies have complained that the laws, which require groups to store data locally, are vague and cumbersome to observe.

“If companies . . . need to have the licensing for data transfers of important data but nobody has defined what is important, it’s difficult,” he said. “Providing more clarity would already be a good starting point.”