BERLIN -- German Economy Minister Robert Habeck welcomed the European Union's anti-subsidy probe against Chinese-made electric cars.
The European Commission has launched an investigation into whether to impose punitive tariffs to protect EU producers against cheaper Chinese electric vehicle imports that it says are benefiting from state subsidies.
"This is about unfair competition, it's not about keeping efficient cheap cars out of the European market," Habeck said.
Habeck said that if the EU investigation proved that there are massive breaches of competition rules, "we must of course take action."
France also welcomed the investigation. The government's minister for Europe, Laurence Boone, said: "We won't let our market be flooded by over-subsidized EVs that threaten our companies just as it had happened with solar panels."
Announcing the investigation on Wednesday, European Commission President Ursula von der Leyen said: "Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies."
The Commission will have up to 13 months to assess whether to impose tariffs above the standard 10 percent EU rate for cars in its highest profile case against China since an EU probe into Chinese solar panels narrowly avoided a trade war a decade ago.
Erasing China's lead
European automakers have realized they have a fight on their hands to produce lower-cost electric vehicles and erase China's lead in developing cheaper models.
Chinese EV makers, from market-leader BYD to smaller rivals Xpeng and Nio are stepping up efforts to expand overseas as competition intensifies at home and domestic growth eases. China's auto exports surged 31 percent in August, China Passenger Car Association (CPCA) data showed.
The European Commission said China's share of EVs sold in Europe has risen to 8 percent and could reach 15 percent in 2025, noting prices are typically 20 percent below EU-made models. Popular Chinese models exported to Europe include SAIC's MG cars.
The influx of cheaper Chinese electric vehicles has already prompted some European automakers to take action. Renault announced in July that it aimed to slash production costs for its electric models by 40 percent.
Like other EV makers, it also faces increased pressure from U.S. rival Tesla, which has cut prices several times this year even as that has eaten into its margins.
VW, BMW, Renault could be hit
Germany's VDA auto association said the EU must take into account a possible backlash from China and focus on creating the conditions for European players to succeed -- from lowering electricity prices to reducing bureaucratic hurdles.
Germany's car industry including Volkswagen, BMW and Mercedes relies on China for a large proportion of its sales revenue and has long advocated keeping trade doors open.
The anti-subsidy investigation covers battery-powered cars from China, so also includes non-Chinese brands made there, such as Tesla's Model 3, Renault's Dacia Spring, BMW's iX3 and Volvo models.
The Chinese Chamber of Commerce to the EU said it was very concerned and opposed to the investigation's launch and that the sector's competitive advantage was not due to subsidies. It urged the EU to look at Chinese electric vehicles objectively.
Chinese automaker Aiways questioned the value of the EU investigation.
"We are curious about how possible reviews would affect non-Chinese manufacturers that produce vehicles for the global market within China," said Aiways head of overseas operations Alexander Klose.
"Additionally, we are surprised that affordable NEVs are constantly demanded to make the switch to electric mobility attractive and now suddenly there are complaints that vehicles are too cheap. We would also strongly welcome NEVs becoming cheaper overall so that Europe remains a strong manufacturer and the automotive industry does not go the way of the mobile phone industry."
Chinese state subsidies for electric and hybrid vehicles were $57 billion from 2016-2022, according to consulting firm AlixPartners, helping China become the world's biggest EV producer and to pass Japan as the largest auto exporter in the first quarter of this year.
China terminated a generous 11-year subsidy scheme for EV purchases in 2022 but some local authorities have continued to offer aid or tax rebates to attract investments, as well as subsidies for consumers.
The EU investigation is looking at a broad range of possible unfair subsidies, from prices for raw materials and batteries, to preferential lending or cheap provision of land.
The founder of Nio warned in April that Chinese EV makers should brace for the possibility that foreign governments would impose protectionist policies.
He estimated his company and Chinese peers had a cost advantage of as much as 20 percent over rivals such as Tesla thanks to China's grip over the supply chain and raw materials.
Kingsmill Bond, senior principal in the strategy team at the Rocky Mountain Institute, said Chinese producers in 2022 benefited from EV battery prices of $130 per kilowatt hour against a global price of $151.