SHANGHAI – As the Munich auto show opened last week, Chinese electric-vehicle makers, led by BYD, stole the limelight long reserved for Europe's vaunted brands.
The attention heaped on China's EVs seems to have triggered panic among policy makers in the European Union.
Ursula von der Leyen, president of the European Commission, the EU’s executive body, announced Wednesday an anti-subsidy investigation into China-made EVs.
The decision to launch the probe will likely create problems much more complex for major European EV brands than for their Chinese rivals.
To be sure, the probe, carrying the threat of punitive tariffs, will prompt Chinese EV makers to rethink global strategies.
But the issue will not bother them for long.
Nearly every Chinese EV maker plans to sell vehicles in Europe.
But the reality is many of them have not begun to execute such plans. And now threatened by the European Commission probe, they will simply abandon them.
Among Chinese-owned EV brands exporting vehicles to Europe, only two – MG and BYD – have achieved meaningful sales in the market.
The investigation will not become a major headache because both have started selecting sites in Europe to produce EVs. What they need to do now to avoid hefty tariffs is to accelerate local production plans.
Some EV startups such as Nio and Xpeng have entered the European market. The probe might force them to stop expanding local distribution networks or wind up local operations altogether.
By contrast, the anti-subsidy investigation presents a greater risk of upending the global operations at Swedish automaker Volvo Car and three German auto giants – Mercedes-Benz, Volkswagen Group, and BMW.
They each have a brand that has either started producing or is about to build EVs in China for global markets, especially Europe.
Volvo is using China as a global production hub for the performance EV brand Polestar. It assembles the Polestar 2 electric sedan in China and will add production of the Polestar 3 and Polestar 4 SUVs in the country.
Mercedes established a joint venture with Zhejiang Geely Holding Group in 2020 to build EV models for Smart. The partnership now sells two Smart products, the #1 sedan and the #3 coupe-like crossover, in China and Western Europe.
Next year, VW Group will begin exports from its EV joint venture with Jianghuai Automobile Co. to Western Europe, where the vehicles will be marketed under Cupra, Seat's high-performance subbrand.
BMW is also on track to begin exporting Mini Cooper and Aceman EV models from a partnership with Great Wall Motor to Europe in 2024.
Trade restrictions are a double-edged weapon. The anti-subsidy investigation that the European Commission is expected to complete within 13 months is no exception.
While deterring low-cost China-made EVs from entering the European market, it might cause upheaval and a backlash for major European EV makers that produce in China and export to Europe.
