Beijing’s response was immediate. The day after European Commission President Ursula von der Leyen announced an investigation into Chinese public subsidies for electric vehicles, “wattures,” China rebelled.
“This is a blatant protectionist act that will seriously disrupt and distort the automotive industry and supply chain globally, including in the European Union. (EU), and that will have a negative impact on economic and trade relations between China and the EU”declared the Chinese Ministry of Commerce on September 14.
The investigation announced by Brussels responds to the extraordinary rise of China in the automobile industry. A few figures are enough to demonstrate it. In 2021, the country imported twice as many vehicles as it exported, in value. In the first half of 2023, the Chinese industry surpassed Japan and ranked first in the world, exporting vehicles worth 35 billion dollars (32.76 billion euros), compared to imports worth 21 billion dollars. Regarding subsidies for electric cars, the company AlixPartners estimates them at $57 billion in the form of tax reductions or aid in the purchase of vehicles.
Local champions
Using alternately carrot and stick, China has, since 2009, promoted investment in the sector. At a time when technology is not ready to conquer the general public, local authorities have been motivated equip their taxi and bus fleets with electric vehicles, thanks to central government subsidies of up to 60,000 yuan (7,700 euros) per car and 100,000 yuan per bus. BYD, now the Chinese number one in the sector, will be the big winner of this strategy.
Subsequently, China will support the battery sector by requiring manufacturers in 2015 to equip themselves with Chinese batteries to benefit from purchasing aid. Enough to promote local champions, such as BYD and especially CATL, which dethroned the Korean Panasonic in 2020 to become world number one in the sector. To encourage people to choose an electric car instead of a thermal vehicle, some cities have implemented another incentive system.
In 2016, Shanghai offered a privilege to electric vehicles by implementing green license plates, which escape the current auction system for thermal license plates. The following year, other metropolises followed this example. “According to our research in cities that have taken these measures, sales of electric vehicles have increased three to five times compared to the rest of China”says Stephen Dyer, automotive specialist and director of the consultancy AlixPartners.
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