EU launches probe into low-priced Chinese electric cars

SAIC-owned MG was the 11th largest brand for UK car sales during August

Imports from Chinese car makers to western Europe doubled to more than 200,000 in 2022

The European Union is investigating whether low-priced Chinese electric vehicles are distorting the car market amid growing import numbers, with their government-subsidised prices threatening the livelihood of European car makers.

The investigation was announced in a speech on Wednesday by European Commission president Ursula von der Leyen. 

The increased focus on Europe as a market for China’s big car makers posed a problem for the region’s nascent electric car industry, von der Leyen said. “Their price is kept artificially low by huge state subsidies. This is distorting our market,” she added.

Imports from Chinese car makers into western Europe doubled to more than 200,000 in 2022 compared with the year before for a market share of 2%, according to figures from analyst company Schmidt Automotive. In the first seven months of this year, Chinese makers have increased their share to 2.8%.

Within just electric vehicles, that share rises to 8.2% across western Europe, Schmidt’s figures show

The biggest player in terms of numbers is SAIC, whose MG brand was the 11th largest in the UK through August this year, according to figures from UK lobby group the SMMT. MG’s success means the UK has the second highest penetration of Chinese car makers in any European country after Sweden at 5%, according to Schmidt’s figures.

News of the investigation was greeted warmly by European automotive lobby group ACEA. “Von der Leyen’s announcement is a positive signal that the European Commission is recognising the increasingly asymmetric situation our industry is faced with,” Sigrid de Vries, ACEA director general, said in a statement emailed to Autocar.

The news will also be welcomed by Stellantis, whose CEO, Carlos Tavares, has been outspoken about what he sees as an “invasion” of cheaper cars subject to lower tariffs into the region compared with those faced by European car exports into China. Chinese cars are taxed at 10% coming into Europe, compared with 25% going the other way.

“The European market is wide open to the Chinese and we do not know if their strategy is to grab market share at a loss and increase their price later,” Tavares said at the Paris motor show last year.

So far, only MG has shown aggressive pricing tactics, with the MG 4 – the UK’s second best-selling electric vehicle this year after the Tesla Model Y – undercutting European competitors in the compact hatchback segment by thousands of pounds. The MG 4 starts at £26,995 for a model with a 51kWh battery, compared with an entry price of £37,115 for the Volkswagen ID 3 with a 58kWh battery pack. MG has stressed it is not selling the cars at a loss.

Other electric models, for example from BYD, are closer to pricing from established car makers.

Those European car makers still doing business in China are expected to push back on penalising Chinese car sales in Europe too heavily, fearing a backlash. Many are also taking advantage of cheaper build costs there to export back to Europe.

The list of cars from global auto makers built in China being sold or due to be sold in Europe is growing and includes the BMW iX3, Dacia Spring, Citroën C5X, Tesla Model Y (right-hand-drive models), Honda e:Ny1, Honda CR-V, Honda ZR-V, Cupra Tavascan, Mini Cooper EV, Mini Aceman and DS 9. 

Chinese manufacturers are supported at home by purchase subsidies for electric cars, as well as taking advantage of a cost-efficient supply chain within the local battery industry, which has also received help from a state-directed industrial strategy.

As a result, electric cars are cheaper to build in China. Banking firm UBS oversaw a teardown of the new BYD Seal electric saloon and concluded there was a $10,000 (£8000) direct cost gap between a China-made electric car with high vertical integration and local sourcing and an EV made by a legacy manufacturer. Chinese car makers can also take advantage of the country’s dominance in cheaper lithium-iron-phosphate batteries (LFP).

With the UK now outside the European Union, the UK is free to pursue its own strategy when it comes to Chinese car makers. Autocar has approached the Department for Business and Trade for comment on whether it would conduct its own investigation into pricing.

However, on Monday, business and trade secretary Kemi Badenoch said the government wants a pragmatic relationship with China that recognises the country’s strength in battery-electric vehicles.

“At the moment, China is leading on this technology so we wouldn’t be able to get where we want to get to on net zero by banning Chinese products,” she said at a ceremony held at the Mini Oxford plant to announce government funding to build EVs there. “It does present an economic challenge but we are working on that.”

Mini will next year start importing electric Coopers from China until 2026, when it will localise production in Oxford using a platform developed with China’s Great Wall and likely using Chinese batteries.