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In the past month, the Ministry of Foreign Affairs and the Ministry of Commerce have repeatedly spoken out about the EU's anti-subsidy investigation into Chinese electric vehicles.

"The anti-subsidy investigation launched by the European Commission this time is different from previous ones. It was not applied for by companies or trade unions, but initiated by the European Commission itself. This is very rare in terms of procedure and has certain political considerations." Tu Xinquan, dean of the China WTO Research Institute of the University of International Business and Economics, said in an exclusive interview with Beike Finance that the purpose of this move by the European Commission is to give its own automotive industry more time and space for transformation.

Tu Xinquan, Dean of the China WTO Research Institute of the University of International Business and Economics. Photo provided by the interviewee

Talk about investigation

EU uses trade restrictions to give the auto industry more time to transform

Shell Finance:Why did the European Commission impose temporary anti-subsidy duties on Chinese electric vehicles?

Tu Xinquan:I think one of the important reasons is that my country's new energy vehicles are highly competitive. With the support of intelligent, electrified and networked technologies, Chinese cars are like a "new species", which makes the EU feel threatened. Therefore, they hope to stop the rapid growth of Chinese cars through trade restrictions.

China's new energy vehicle industry is developing faster and has achieved more outstanding results. The penetration rate of new energy vehicles in my country continues to rise, and in 2023, the penetration rate of new energy vehicles in my country has exceeded 30%. In terms of product technology, China's new energy vehicles are already in a leading position. After sufficient verification in China, car companies choose to go overseas to more countries.

As a developed economy, the EU is not only the initiator of the green development concept, but also a very important market for electric vehicles. European users are generally more receptive to electric vehicles, so Chinese automakers have gradually launched new energy vehicle export plans to Europe. This is a very natural process, but the relative competitiveness of Chinese automakers has caused EU local automakers to be at a disadvantage in the competition of new energy and intelligence.

From a time perspective, my country's new energy vehicle companies have only been in Europe for two or three years, and their size is not large, but their momentum is strong. In order to protect its own industry and companies and to stop the rapid growth of Chinese automobiles, the European Commission has adopted restrictive measures. However, it should be made clear that there are many unreasonable aspects in the European Commission's measures.

Countries generally hold a positive attitude towards new energy vehicles. Replacing fuel vehicles with new energy vehicles can reduce global carbon emissions. European and American countries have been vigorously promoting the development of new energy vehicles based on environmental protection goals. Therefore, I believe that the general trend of the global automotive industry's electrification and green transformation will not change.

Shell Finance:What are the international competitive advantages of China’s new energy vehicles?

Tu Xinquan:From the perspective of the industrial chain, including battery research and development and production, electric vehicle production design, and charging infrastructure, Europe's automotive industry still has many shortcomings compared to China's automotive industry.

my country's new energy vehicles are excellent in the application of intelligence, automation and electrification, and can be said to have created a "new species."

In the emerging market of new energy vehicles, Chinese automakers have shown great vitality, but the transformation of traditional European automakers has been very slow.

Therefore, I believe that the European Commission's move is a trade restriction measure aimed at giving its own automotive industry more time and space for transformation.

Talk about coping

The competent authorities have intervened in the preliminary ruling stage

Shell Finance:What are the unreasonable aspects of the European Commission’s investigation?

Tu Xinquan:The anti-subsidy investigation launched by the European Commission this time is different from previous ones. It was not initiated by companies or trade unions, but by the European Commission itself. This is very rare in terms of procedure and also seems to be overstepping one's authority. In a sense, the European Commission's actions have certain political considerations.

The structure of anti-subsidy investigation is divided into two stages. The first stage is the preliminary investigation stage. After this stage, the preliminary ruling results that everyone sees now are produced. The preliminary investigation process is relatively simple and can be understood as "proving oneself". The European Commission will collect evidence through the Internet, literature or domestic market research and draw a preliminary conclusion.

In addition, the European Commission will also conduct investigations on companies, such as by making phone calls or sending questionnaires. If Chinese companies do not provide relevant data, the European Commission may determine that the company does have problems.

However, in this investigation, the European Commission's questionnaires and phone calls seem to have involved some companies' core business secrets and technical secrets, which is very unusual. Anti-subsidy investigations generally only consider price issues, which may involve subsidies, taxes, land rents and even water and electricity charges. Whether it is necessary to involve core technical secrets still needs to be considered.

We noticed that the European Commission asked Chinese companies more detailed questions this time than in the past, so it is very difficult for companies to be fully prepared in a short period of time. Whether to provide their own technical secrets will also make Chinese companies hesitate.

Overall, we believe that the preliminary conclusions currently made by the European Commission are incomplete and unconvincing.

Shell Finance:What signal are the repeated statements from the competent authorities sending?

Tu Xinquan:According to convention, when Chinese companies encounter anti-subsidy investigations, relevant departments including the Ministry of Commerce's Trade Relief Bureau will contact the relevant parties to communicate information.

But normally, the Chinese government will not intervene in the preliminary ruling stage, and consultations with relevant parties are only held in the final stage.

This time the situation is more special, probably because the automobile industry is relatively large, covers a wide range of areas, and has a greater political impact. In the preliminary stage, the Chinese government has formally intervened and provided stronger support, and the level of consultation is higher than in the past.

In terms of specific negotiation methods, both sides will first talk about facts and reason. From a macro perspective, we can talk about the cooperation between the Chinese and European automobile industries, and from a micro perspective, we can talk about what problems there are in the European Commission's investigation process, such as the problems mentioned earlier, such as the short process, insufficient time, and overly demanding requirements. These can all be the content of the negotiation. The purpose is to find a win-win point through communication and negotiation, terminate the other party's anti-subsidy investigation or reduce the tax rate, narrow the scope, etc.

Talking about going overseas

Win-win cooperation among industries can reduce the possibility of conflict

Shell Finance:The European Commission is expected to make a final ruling in early November. How will Chinese automakers respond before the final ruling is announced?

Tu Xinquan:At present, the investigation process has not yet ended, and Chinese companies must actively respond to the investigation.

The European Commission is following a legal process, and our companies can respond accordingly during the process. First, companies can hire lawyers and accountants to provide more detailed evidence to the European Commission, including raising objections to some unreasonable points made by the other party. Because the European Commission will hold hearings and conduct on-site investigations, I think Chinese companies should continue to do a good job and make adequate preparations in terms of procedures.

In addition, although I just said that the European Commission’s actions were politically motivated, achieving a win-win situation through cooperation between industries is also a very important way.

Some European companies have felt the competitive pressure from Chinese automakers, and both sides can try to seek ways to reduce these companies' concerns through cooperation, such as mutual investment, technology sharing, and access to sales networks, so as to expand common interests and reduce the possibility of conflict.

Shell Finance:What is your prediction for the future development of this case?

Tu Xinquan:I am only expressing my own guess that there is hope that the countervailing duties will be cancelled in the end. Many parties including our competent departments, associations and enterprises have made a lot of efforts to seek trade fairness and hope that the countervailing duties can be cancelled in the end.

Furthermore, another solution to countervailing duties is "price commitment", which means that Chinese export companies set a standard for their export prices and raise their export prices. This will weaken their competitiveness and sales may be affected, but they will not have to pay taxes and their profits will be higher. This is also a solution.

Shell Finance:Faced with changes in the overseas environment, how can Chinese car companies better "go global"?

Tu Xinquan:Judging from the current anti-subsidy tax rate, Chinese companies are still affected. After all, costs will increase and prices will also increase, but in the long run, there will be no chance at all. Tariffs are not a complete prohibition, and Chinese car companies can still enter the European market, but prices and scale may be adjusted.

I think that on the one hand, Chinese automakers should continue to explore the European market and try to reduce the impact of additional tariffs on them by adjusting their pricing strategies and through investment cooperation between Chinese and European companies. Companies can also consider entering Europe through technology licensing, parts exports, and factory investment.

On the other hand, new energy vehicles have a relatively mature market in Europe, but there are still many emerging markets for Chinese companies to explore. Some Chinese automakers have already started their overseas expansion strategies in Southeast Asia and Latin America.

Beijing News Shell Financial Reporter Bai Haotian

Edited by Zhang Bing, Proofread by Wu Xingfa