Connect with us

Europe

EU probe into Chinese EVs: ‘The whole supply chain is subsidized’

Published

on

In Brussels, Belgium, EU officials announced new taxes on Chinese electric vehicles (EVs) and shared the findings of an ongoing investigation into “state subsidies”.

Dozens of EU officials spent 250 working days in China, visiting more than 100 companies and gathering thousands of pages of evidence.

“The whole supply chain is subsidised,” a senior official at the meeting was quoted as saying by the SCMP, reporting on the findings of the investigation, which many predict could spark a trade war.

The official pointed out that this meant that the Chinese government was subsidising all players, and that this chain extended from the refining of lithium used in batteries, to the production of cells and batteries, to the production of BEVs [battery electric vehicles], and even the transport of BEVs to EU markets.

Automotive manufacturer pledges to ship hybrid cars to Europe

According to the SCMP reporter, “Chinese business representatives were shocked by the presentation. After a quick check of the figures, an executive from an electric car company promised to start shipping hybrid cars to Europe instead, as they would not be subject to such high taxes.

“The EU has ignored facts and WTO rules, disregarded China’s repeated strong opposition and acted unilaterally, disregarding the objections and warnings of many EU member governments and industries,” China’s Ministry of Commerce said in a statement minutes after receiving the notification.

Separate tariffs for three Chinese companies

Following the announcement in September by Ursula von der Leyen, President of the European Commission, that an investigation into Chinese electric cars would be launched, work began immediately and the sample size was reduced from 21 Chinese groups exporting electric vehicles to Europe to three.

These were BYD, soon to become the world’s biggest seller of electric vehicles; Geely, which spent the 2000s acquiring major European brands such as Volvo; and SAIC Motor, owner of the iconic MG and Volkswagen’s joint venture partner.

The final tax on most Chinese electric vehicle exports to Europe will be a weighted average calculated on the basis of the subsidies on the books of these three companies. This is likely to mean an additional tax of around 21 per cent on average.

When experts realised that the giant SAIC was on the list, they predicted that the countervailing duties could far exceed the EU’s average rate of 19 per cent.

Details of the EU investigation: Thousands of questionnaires sent out

As part of the investigation, the companies were sent questionnaires of more than 60 pages and 18,000 words each. They asked for access to financial information and forensic-level details of the assistance each received from the Chinese state.

According to the SCMP, the document said: “It is in your own interest to answer as accurately and completely as possible and to provide supporting documentation. You may supplement your answer with additional data”, but in reality it was a veiled threat to “comply or you will be excluded from the European market”.

According to Rhodium Group research, only SAIC chose not to comply and on Wednesday found itself facing the highest import tax on all EU electric vehicle shipments and the third highest tax ever imposed by the EU.

This tax is on top of the existing 10 per cent rate, meaning the cars will cost almost 50 per cent more.

Other companies, including BYD and Geely, will be taxed at a lower rate than standard EU models, with a weighted average of 21 per cent.

BYD could benefit from new taxes

“SAIC is very dependent on the European market and has no plans to localise production yet, so it will be very affected,” said Ilaria Mazzocco, an expert on China’s electric vehicle trade at the Centre for Strategic and International Studies.

BYD, on the other hand, appears to be in a good position with an EU factory, low tariffs and a geographically diversified market.

The EU also sent a series of questionnaires to the Chinese government, asking it to forward them to selected lithium suppliers and local banks. Beijing refused.

“The Chinese government has been very active in seeking justification for various steps. There has been a lot of interaction, but less positive activity on their side in terms of providing us with the information we requested,” the senior EU official said.

Instead, according to the EU, Beijing has tried to obstruct the investigation with a series of threats that have multiplied as the Brussels probe has drawn to a close.

EU not afraid of WTO

Brussels is confident it has a “watertight” justification for the tariffs and is not worried about a WTO challenge that would point to the fact that some Chinese companies pay lower taxes than their European competitors.

Judging by the EU’s findings, the inspectors found subsidies everywhere they looked. Lithium processors and battery makers are told by the state to sell to electric vehicle companies at below-market prices, while car companies are exempt from battery excise taxes.

The companies issue green bonds, which state financial institutions are required to buy, and are given preferential land, income tax breaks and cheap refinancing options mandated by the People’s Bank of China.

Chinese companies’ market share in the EU rises to 25 per cent

The EU believes its own companies are suffering as a result. Between January 2020 and September 2023, Chinese companies increased their market share in the EU from 4 per cent to 25 per cent, while the share of their local competitors fell from 69 per cent to almost 60 per cent, officials said.

The inspectors added that Chinese subsidies are “jeopardising” Europe’s green transition by depressing the price at which European companies can sell electric vehicles, meaning that in some cases they are making a loss on every vehicle sold.

BYD’s growth plans unaffected

Chinese electric vehicle maker BYD, led by billionaire Wang Chuanfu, can withstand the EU’s additional tariffs on electric vehicles from China and take market share from harder-hit rivals, analysts say, according to Forbes.

Shares in the Chinese carmaker jumped 8.8 per cent in Hong Kong and up to 6 per cent in Shenzhen on Thursday as the tax hike was significantly lower than the 30 per cent previously expected.

The EU said BYD would have to pay an additional 17.4 per cent tax on top of the current 10 per cent from next month.

Kenny Ng, a Hong Kong-based securities strategist at Everbright Securities International, said: “The market believes that the impact on BYD will not be as severe as previously feared. Compared with other Chinese automakers, BYD may have an advantage in the region at the moment,” said Kenny Ng, a Hong Kong-based securities strategist at Everbright Securities International.

SAIC calls for ‘decision review’

Ng says BYD could take market share from SAIC as tariff hikes could reduce the appeal of the MG brand in Europe.

Thanks to its competitive pricing, MG counts Western Europe as its biggest market, where it was the fifth-largest EV brand by deliveries last year, according to market research firm Canalys.

The MG4, for example, has a starting price of 28,990 euros, compared with around 33,000 euros for its main rival, Volkswagen’s ID.3.

In a public statement, SAIC called on the EU to reconsider its decision, which it said would have a major negative impact on economic cooperation between China and the region.

Strong reaction from German car industry

On the other hand, the new tariffs imposed by Brussels have led to a split between Germany on the one hand and France on the other.

Berlin worked behind the scenes to stop the tariff increases, while Paris backed Leyen. One senior official said the Germans even used the term “so-called overcapacity” in the meetings as a sign of how much they were aligned with Beijing.

Wolfgang Niedermark, a board member of the Federation of German Industries, said: “The focus now should be on minimising the negative impact on international supply chains and European companies. European companies have no interest in an escalation of the trade conflict with China,” Niedermark said.

The VDA, which represents carmakers such as Volkswagen, BMW and Daimler, strongly criticised the decision, with president Hildegard Müller warning that it was “another step away from global cooperation”.

European carmakers producing electric vehicles in China will also be affected. The largest group is Dacia and BMW, which will face an import duty of 21%.

This is even higher than Chinese carmaker BYD, which will see a lower tariff of 17.4% for participating in the Commission’s investigation and providing evidence that it benefits from less state support.

ACEA, the European Automobile Manufacturers Association, whose members have more diverse interests, said it had merely “noted” the decision.

German government pushes for negotiations

“The European Commission’s punitive tariffs are hitting German companies and their best products,” said German Transport Minister Volker Wissing (FDP) in X.

“Vehicles must become cheaper, not through trade wars and market fragmentation, but through more competition, open markets and significantly better business conditions in the EU,” Wissing wrote.

Similar comments were made by Economy Minister Robert Habeck (Greens), who told German media that “tariffs are always a political measure of last resort and often the worst option”.

“It is very important that talks take place now,” Habeck said, calling for negotiations between the EU and China.

German firms fear retaliation

German companies are also concerned about possible Chinese retaliation, with Volker Treier of the German Chambers of Industry and Commerce (DIHK) warning that “the tariffs announced by the Commission on Chinese e-cars will not be without consequences for the export-oriented German economy”.

Fears were fuelled by the response of the Chinese Ministry of Commerce, which said it was ready to “take all necessary measures” to protect the interests of its manufacturers.

“It is also up to China to come to Europe with constructive proposals to prevent an escalation of trade conflicts and to stop anti-competitive behaviour consistently and quickly,” said VDA’s Müller, calling on the EU and China to resolve the issue through negotiations.

Müller said they needed China to solve global problems, including climate change, and argued that a trade war would jeopardise this transformation.

Objections from the Czech Republic and Malta

Like the German manufacturers, the Czech Association of the Automotive Industry has announced that it believes such measures could have a negative impact.

“On the contrary, it was the removal of trade barriers that led to an increase in international trade and prosperity in recent years, especially in the automotive sector, which relies on strong exports,” said Zdeněk Petzl, the association’s executive director.

Petzl warned that China could aggravate already tense trade relations by retaliating against Europe and the US, stressing that European car companies import more than 90 per cent of key materials for electric vehicles and batteries from China.

“The introduction of new tariff measures will certainly be felt by Chinese manufacturers and may slow their growth, but we do not expect it to affect China’s subsidy policy,” Petzl said, advocating a systemic approach to strengthen European industry, increase competitiveness and open new markets.

Malta’s energy minister, Miriam Dalli, told The Post last month: “We don’t want tariffs that don’t help us achieve our decarbonisation goals. Having more expensive products will not help us achieve our ambitious targets,” she told The Post last month.

Related Topics:
Continue Reading

Europe

German carmakers face historical crisis as Chinese competition and market contraction erode profits

Published

3 hours ago

on

03/08/2026

By

The German automotive industry is enduring a severe period of distress, driven by intensifying competition from Chinese vehicle manufacturers and an increasingly overheated domestic market in China.

For decades, China served as the primary engine that propelled German carmakers into global titans, yielding robust sales and billions in profits. Today, that historic reliance has transformed into their heaviest liability.

According to an analysis published by Politico, domestic Chinese manufacturers—having spent decades observing, learning, and investing—are now producing better-equipped electric vehicles at prices lower than those offered by Volkswagen, BMW, and Mercedes-Benz.

At the same time, China’s automotive market—the largest in the world—has become severely overheated and contracted by a fifth this year. The sharp downturn has forced both domestic and foreign automakers into a ruthless battle for survival.

The tangible impact of this pressure became clear this month as German carmakers reported their half-year financial results, disclosing billions of dollars in losses alongside announcements of widespread layoffs and plant closures across Europe.

“The environment has never been as challenging as the one we face today,” Oliver Blume, Chief Executive Officer of the Volkswagen Group, told investors. “Looking ahead, the risks before us are steadily mounting.”

The structural distress within the auto sector delivers another blow to Germany’s already struggling economy. It also presents a escalating political predicament for Chancellor Friedrich Merz’s fragile coalition ahead of critical state elections this autumn.

Dismantled dreams in the automotive sector

Since the 1980s, China had functioned as the primary engine of high profit margins for German automakers.

To gain access to a vast and rapidly expanding consumer market, carmakers were required by Beijing to establish joint ventures with local partners.

For decades, that arrangement proved highly lucrative, delivering massive returns to shareholders.

However, in the post-pandemic era, Chinese companies rapidly outpaced their German rivals in electric vehicle technology, which gained swift adoption across China.

While German brands long enjoyed high prestige among Chinese consumers, buyers have swiftly shifted toward domestic manufacturers offering superior technology at lower price points.

“They are suffering massive losses in China and may no longer be able to recover there,” said Pedro Pacheco, an automotive analyst at the consulting firm Gartner.

Chronic problems spread beyond China into Germany

The fallout is increasingly being felt inside manufacturing plants within Germany itself, rather than remaining confined to China.

BMW announced this week that it will eliminate 8,000 jobs across Germany by the end of 2027, with severance payments set to begin in October.

Mercedes-Benz is asking its workforce to extend weekly working hours from 35 to 40 hours for the same pay.

Meanwhile, industry flagship Volkswagen is locked in negotiations with labor unions over plans to lay off 100,000 workers and shut down domestic factories.

This severe downturn is providing political momentum to the Alternative for Germany (AfD) party, which is gaining traction in national polls.

The party is leveraging the auto sector’s decline and job losses to launch sharp attacks on the government.

“Even major industrial pillars like Volkswagen, Porsche, or Infineon are recording historic drops in profits and planning hundreds of thousands of layoffs in the coming years,” AfD co-leader Alice Weidel said this week. “This demonstrates how far the deindustrialization of our business hub has truly advanced.”

Merz and his governing coalition will get an initial indication of how these cutbacks resonate with voters during state elections this autumn in Saxony-Anhalt and Mecklenburg-Western Pomerania, both of which are strongholds for the AfD in eastern Germany.

Chinese vehicles begin to dominate European market

While automakers continue to perform well in North America and Europe, the collapse of sales in China is eroding overall profits.

Facing fierce domestic competition and systemic overcapacity at home, Chinese carmakers are exporting vehicles in record volumes.

Europe has emerged as their primary target market: China now sells more vehicles in Europe than Germany sells in China.

European consumers are enthusiastically embracing these imports. According to the latest data from the automotive industry association ACEA, sales of Chinese-made cars in the European Union surged by 63% in the first half of this year, rising from 338,000 units in 2025 to roughly 549,000 units in 2026.

That figure now represents nearly 10% of total European automobile sales.

Although German car companies carry an unparalleled exposure to China, even manufacturers with no operational footprint there, such as Renault, are feeling the severe impact of rising Chinese vehicle sales in Europe.

Automotive analyst Matthias Schmidt noted that the influx of inexpensive Chinese vehicles featuring advanced technology has put pressure on Renault and its budget brand, Dacia.

Renault disclosed on Thursday that sales of its Dacia brand fell by 8% year-on-year in the first half of 2026.

European firms forced into cooperation with Chinese rivals

The European Commission attempted to intervene by imposing tariffs on Chinese-made electric vehicles following an anti-subsidy investigation, but the added costs have done little to stem the inflow.

The tariffs do not apply to plug-in hybrid vehicles, leaving a lucrative loop-hole for Chinese manufacturers to exploit.

These shifting dynamics are driving several European automakers to forge direct partnerships with Chinese competitors.

Stellantis, the Franco-Italian-American conglomerate, established a joint venture with Chinese manufacturer Leapmotor. According to ACEA data, Leapmotor’s European sales surged from just 7,701 units in the first half of 2025 to 48,261 units during the same period this year.

Volkswagen CEO Blume hinted that his company could pursue a similar path, telling investors the carmaker might begin manufacturing certain models in Europe that were originally developed in China for European consumers.

Olaf Lies, Minister-President of Lower Saxony—a major shareholder in Volkswagen—said earlier this summer that it would be a strategic error for the automaker to isolate itself from China’s technological advancements.

“Our objective should not be to isolate technological developments from one another,” Lies stated.

However, Schmidt warned that such a strategy carries significant risks for the German brand’s equity.

He noted that these vehicles would effectively remain Chinese-engineered cars bearing a VW badge, a dynamic that could prompt consumers to buy the cheaper Chinese-branded versions directly.

Accelerating the search for new markets

European automakers are also attempting to offset losses by pursuing growth in emerging markets.

“North America, India, and the Global South represent our growth engines for tomorrow,” Blume told investors during a briefing.

Yet Chinese manufacturers have already established a commanding presence in those regions, dominating electric vehicle sales across Southeast Asia and Latin America.

Under heavy pressure, European automakers are also attempting to monetize their mass-production expertise by capturing a share of rising global defense spending.

Blume told investors that Volkswagen is engaged in “very advanced discussions” with a defense contractor, adding that he expects “a decision to be made within this year.”

However, portions of the workforce, particularly in Germany, remain hesitant about associating the company with the arms industry.

Furthermore, the move carries a serious risk of retaliation from Beijing. Earlier this month, China imposed export restrictions on 14 defense and technology firms, including German defense giant Rheinmetall.

While those measures were presented as retaliation against export curbs targeting Chinese entities, automotive companies entering the defense sector could find themselves exposed to similar actions.

“European carmakers must act very, very carefully because this is not just a quick gain,” Pacheco warned. “It may look like one, but once you step onto that chessboard, you need to know how to play chess.”

Continue Reading

Europe

Morawiecki launches Rozwój Plus movement following high-profile split from Poland’s PiS

Published

3 days ago

on

31/07/2026

By

The first major event organized by the political circle of Mateusz Morawiecki, following his split from Law and Justice (PiS), is set to take place in Warsaw’s Praga district.

The gathering comes just days after the former prime minister and dozens of his allies severed ties with the national-conservative PiS.

The move also led to Morawiecki’s resignation from the presidency of the European Conservatives and Reformists (ECR) group in the European Parliament.

Organized by his Rozwój Plus (Development Plus) movement, the conference—dubbed “Morawiecki’s barbecue” due to the prominent inclusion of charcoal-grilled kiełbasa sausages—will mark a significant moment in Polish conservative politics.

The event will bring together key figures from the emerging movement alongside featured guests, including former world chess champion Garry Kasparov and General Rajmund Andrzejczak, the former chief of the General Staff of the Polish Armed Forces.

The gathering will offer Morawiecki’s camp an opportunity to present a political vision distinct from that of the current PiS leadership.

“Poles care about the fight for a strong Poland, their wallets, their jobs, housing, development, identity, culture, the Christian faith, and the defense of the cross hanging in the Sejm,” Morawiecki said this week. “These are our principles; this is our faith.”

Discussions will focus on demographics, security, and the politics of memory—topics that have grown increasingly sensitive amid recent tensions in Polish-Ukrainian relations.

While Morawiecki describes Rozwój Plus as an “expert group and think tank,” its political ambitions are becoming increasingly clear.

A new parliamentary group established on Wednesday brings together 40 deputies and one senator, providing his allies with an official platform in parliament and a base from which to challenge PiS.

“This is a threat to us,” Mateusz Kurzejewski, a PiS politician and spokesperson for Przemysław Czarnek’s prime ministerial campaign, told Euractiv. “After all, this is an initiative that reduces our chances of victory, though it does not eliminate them entirely. Therefore, we will continue to work hard.”

However, whether Morawiecki can successfully reshape the Polish right remains uncertain.

An SW Research poll commissioned by Onet revealed that 32.9% of respondents would consider voting for a party led by the former prime minister.

The strongest potential support comes from voters who already align with the right. Among respondents currently close to PiS, 14% said they would consider supporting Morawiecki, while 7.1% of those aligned with the further-right Confederation held the same view.

The initiative could also draw limited support from the ruling camp. Approximately 7.4% of voters currently supporting Prime Minister Donald Tusk’s pro-EU Civic Coalition, The Left, Poland 2050, or the Polish People’s Party indicated they would not rule out voting for a party led by Morawiecki.

Sources within Tusk’s government believe the split in PiS could benefit the ruling coalition in the short term.

“Particularly because this situation helps soften the impact of the hospital scandal,” one source told Euractiv. “Today, no one is talking about it anymore, and fortunately, no new statements have been made.”

The controversy revolves around allegations that a Warsaw hospital operated a preferential admission system for politicians belonging to the governing Civic Coalition, allowing them to enter a VIP lounge and receive medical treatment ahead of other patients.

Questions have also been raised regarding the salary of the doctor heading the hospital’s emergency department, who is reportedly linked to Tusk’s party.

Yet the same source warned that Morawiecki’s departure may have little long-term impact on the Civic Coalition.

They argued that PiS possesses a fiercely loyal electorate, whereas enthusiasm for Rozwój Plus could prove temporary.

“Look at the IBRiS poll for Rzeczpospolita,” another source said. “70% of PiS voters say they are voting for their ideal party. This core electorate accounts for about 70% of PiS’s current voters.”

A similar perspective prevails within PiS, where politicians contend that Morawiecki is chasing a voter base that may be too small to sustain a new party.

Speaking to Euractiv, Kurzejewski said:

“People do not want to vote for politicians who have been excluded from PiS. As for Law and Justice voters, they do not want to vote for those who betrayed them. That is why this project means Rozwój Plus will fail to clear the electoral threshold.”

Today’s event will therefore serve as an early test of whether Morawiecki can translate curiosity and institutional support into lasting political clout—or whether his departure will become merely another short-lived fracture on Poland’s crowded right wing.

Continue Reading

Europe

Ceuta migration crisis sparks diplomatic row as Italy demands Spain’s suspension from Schengen

Published

3 days ago

on

31/07/2026

By

An influx of thousands of migrants entering Spain from neighboring Morocco has plunged the autonomous enclave of Ceuta into chaos since Wednesday, prompting fresh backlash against Prime Minister Pedro Sánchez’s immigration policies.

Local authorities warned on Wednesday that an increasing number of migrants were reaching Ceuta by sea.

Juan Jesús Vivas, the president of Ceuta, told reporters that the situation constituted “an absolute humanitarian and social emergency” and demanded that the central government take action.

The situation escalated further on Thursday as thousands of people entered Ceuta by land and sea, overwhelming reception centers.

Videos shared online showed individuals using wetsuits and life jackets to swim to shore.

In a statement posted Thursday on X, Sánchez announced that he was working with Moroccan authorities to restore order as quickly as possible and promised an immediate response.

The border chaos erupted just weeks after the Spanish Supreme Court issued a ruling preventing the direct deportation of migrants arriving by sea.

Sánchez’s political rivals laid the blame for the crisis directly on the prime minister. Santiago Abascal, leader of the right-wing Vox party, characterized the events as an “invasion,” while Alberto Núñez Feijóo, leader of the center-right People’s Party (PP), was also among those condemning the prime minister.

The developments drew additional criticism from anti-immigration figures across Europe, including Alice Weidel, co-leader of Alternative for Germany (AfD), and Manfred Weber, chairman of the European People’s Party (EPP), the largest group in the European Parliament.

“This proves one thing: the Migration Pact and return regulations must be put into force today, not tomorrow. Furthermore, Frontex must be strengthened,” Weber wrote.

Tensions have remained high in Spain since the Sánchez administration launched a program enabling undocumented migrants to apply for legal status and remain in the country. More than one million people have applied under the scheme.

This represents the most severe border crisis to hit Ceuta since 2021, when at least 8,000 people entered the territory from Morocco.

The autonomous Spanish cities of Ceuta and Melilla are the only EU territories sharing a land border with Africa.

Italian leaders demand Spain’s expulsion from Schengen

Meanwhile, the fiercest reaction to the migration crisis in Spain emerged from Italy. Top Italian politicians demanded that Spain be expelled from the Schengen Area as tensions continued to escalate.

Italian Prime Minister Giorgia Meloni said in a statement on X: “The images coming from Ceuta are shocking and demonstrate once again that uncontrolled illegal migration poses a real threat to the security of Europe’s borders.”

Meloni added that Italy was prepared to act, “including through extraordinary measures,” to protect its borders and guarantee the safety of its citizens.

Together with Deputy Prime Minister Matteo Salvini and Foreign Minister Antonio Tajani—the most senior ministers representing parties in the Italian right-wing coalition—Meloni demanded the suspension of the Schengen Agreement or the exclusion of Spain from the border-free zone.

Under the accord, individuals can travel freely between 29 signatory European countries.

However, several member states have reinstated checks at certain borders, as permitted under the agreement, citing migration risks.

Italy had previously temporarily reintroduced controls on its border with Slovenia to prevent smuggling and terrorism.

Tajani went beyond calling for Spain’s exclusion from Schengen, attributing responsibility for the events in Ceuta to the immigration policies of Spanish Prime Minister Pedro Sánchez, who had promised to legalize hundreds of thousands of undocumented migrants.

The minister characterized the policy as “profoundly wrong” and claimed it provided “an incentive for human trafficking.”

The remarks provoked a sharp reaction from Spanish Foreign Minister José Manuel Albares, who summoned the Italian ambassador to account for Tajani’s statements.

Replying to Tajani on X, the Spanish minister wrote: “This message is unbefitting the foreign minister of a partner and friendly country from whom we expect European solidarity, not partisan demagogy.”

Separately, European Commissioner for Migration Magnus Brunner, who is also an EPP member, stated that the European Commission supports Spain in protecting the integrity of its borders, including Ceuta, and is in contact with Spanish Interior Minister Fernando Grande-Marlaska regarding the matter.

A spokesperson stated that the Commission welcomed “the close cooperation established between Morocco and Spain to combat these migratory flows and to ensure the swift return of individuals who entered Ceuta illegally, in accordance with applicable rules.”

“When it comes to our cooperation with partner countries, Morocco is a key and reliable partner for the EU. In recent years, we have intensified our cooperation in the areas of migration and border management, as well as the fight against smuggling. We are currently working to turn our relations into a comprehensive and strategic partnership,” the spokesperson added.

Continue Reading

MOST READ

Turkey