China’s ministry of commerce has expressed its strong dissatisfaction with the European Union’s (EU) announcement last month it planned to launch an investigation into government subsidies for electric vehicles (EVs) entering its markets.

EU president Ursula von der Leyen in a state of the union address at the European Parliament in Strasbourg last month announced an investigation would be launched into state subsidies provided to Chinese EV manufacturers, fearing EU based vehicle manufacturers would be undermined by the artificially low prices of Chinese EVs.

During her speech she said: “The electric vehicle sector is a crucial industry for the clean economy with a huge potential in Europe but global markets are now flooded with cheaper Chinese electric cars and their prices are kept artificially low by huge state subsidies.”

The subsidy investigation was formally launched this week.

The probe is seen in China “an act of trade protectionism” which could disrupt the global automotive industry and related supply chains and greatly damage China/EU economic and trade relations.

European vehicle manufacturers and suppliers, particularly German companies, have invested heavily in China over the last two decades and are increasingly using their operations in the country as an export base including shipments to the EU.

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By GlobalData

China, which has stepped up its vehicle exports over the last year, said the move by the EU lacks sufficient evidence and is inconsistent with relevant World Trade Organisation (WTO) rules. The ministry claimed on its website the EU had asked China to negotiate at very short notice but had failed to provide “effective materials” for negotiations. It claims the probe has “severely damaged the interests of China”.

The Chinese government said it is once again urging the EU to prudently maintain stability of global industrial and supply chains and the China/EU comprehensive strategic partnership, including the use of trade remedy measures. It said it encourages deepening cooperation in the new energy vehicle (NEV) industry to create a “fair, non-discriminatory and predictable” market environment for the common development of the China/EU EV industry.

The ministry said it will pay close attention to the EU’s follow up investigation procedures and will firmly safeguard the legitimate rights and interests of Chinese companies.