The European Union will begin an investigation into Chinese subsidies of electric vehicles, the bloc’s top official announced Wednesday, in a move that highlights Europe’s growing industrial and geopolitical competition with China.
The inquiry could lead to trade restrictions, such as import tariffs on Chinese vehicles.
Chinese automakers have gained a dominant position in the global electric vehicle industry and see Europe as a key potential market. Automakers in Europe, who are racing to expand their battery-powered lineups, have expressed concern that they face unfair competition against models from China that can be sold at a lower price, thanks to subsidies from the government in Beijing.
“Europe is open for competition, not for a race to the bottom,” said Ursula von der Leyen, the president of the European Commission, speaking in Strasbourg, France. “We must defend ourselves against unfair practices.”
She announced the initiative during her annual state of the European Union address, which sets the tone for the year ahead.
The European Union sees the electric vehicle sector as “a crucial industry for the clean economy, with huge potential for Europe,”Ms. von der Leyen said. “But global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies.”
Despite longstanding and deep economic ties between Europe and China, political and diplomatic relations between the two sides have deteriorated since Russia invaded Ukraine in February 2022, because of Beijing’s support of Moscow.
A flurry of diplomatic visits this year has underscored that European Union members don’t have a clear united policy on China. Ms. von der Leyen has been pushing for the concept of “de-risking” the Europe-China relationship by becoming less economically dependent on Beijing, rather than severing ties.
But the association representing German automakers urged caution in response to the inquiry. The industry is heavily invested in the Chinese auto market, the world’s largest, and a trade war with China over electric vehicles could cost them more than they stand to gain.
Earlier this year, Volkswagen announced that it was investing 1 billion euros ($1.1 billion) to build a new innovation center for electric cars in Hefei, China. It also bought a $700 million stake in XPeng, a Chinese start-up that makes electric vehicles.
“Possible counter reactions from China must be taken into account,” warned the German Association of the Automotive Industry.
The inquiry would be part of a European Union push against what it calls anti-competitive behavior by China that throttles European businesses, costing Europe jobs and revenue.
“We have not forgotten how China’s unfair trade practices affected our solar industry,” Ms. von der Leyen said. “Many young businesses were pushed out by heavily subsidized Chinese competitors.”
In the late 2000s, Beijing pumped vast amounts of money into solar energy technology, enabling domestic manufacturers to make multibillion-dollar investments in new factories and gain market share globally. China’s boom in production caused the price of panels to plummet, forcing dozens of companies in Europe and the United States out of business.
China has taken a similar approach to the development and commercialization of electric cars. Government programs promoting production in China picked up speed after Wen Jiabao became the country’s premier in 2003. Mr. Wen set ambitious targets for the sale of electric cars and required cities to make sure that those targets were met.
By 2009, China had set a clear goal of becoming a global leader in electric cars, and was offering government subsidies of $8,800 per car for taxi fleets and local government agencies in 13 Chinese cities to buy all-electric or hybrid gasoline-electric cars.
Chinese makers of electric cars have been stepping up efforts to expand in Europe and elsewhere. China’s auto exports surged 31 percent in August, after a 63 percent jump in July, according to the China Passenger Car Association. New models from China dominated the international auto show held in Munich last week.
Keith Bradsher contributed reporting.