In the long run, it may get to a degree the place BYD will be capable to promote its automobiles profitably in Europe whereas nonetheless retaining the value decrease than the price of manufacturing for European auto firms, says John Lee, a Berlin-based researcher and director of the consultancy East West Futures. And that will spell doom for them, he provides: “Should you can’t promote at a worth [that’s] aggressive together with your rivals with out really dropping cash on manufacturing, then that’s a loss of life spiral.”

The risk from Chinese language rivals feels so pressing that observers say this could possibly be a life-or-death second for well-known European manufacturers like Volkswagen, the world’s largest automaker.

“[The fall of Volkswagen] is an excessive situation, however it’s not implausible, after which you may have the cascading results,” says Lee. “The auto sector in Europe is kind of transnational. Components are made in Jap and Central Europe, with Germany as a hub. Which means there’s a possible move of results to Poland, to Hungary, and different locations that make parts.”

Allegations of unfair competitors

Thus far, the one official particulars recognized in regards to the investigation are what von der Leyen mentioned in her speech: “International markets are actually flooded with cheaper Chinese language electrical automobiles. And their worth is stored artificially low by large state subsidies.”

The burden will probably be on China to show that the value of Chinese language EVs shouldn’t be backed. That will probably be a tough carry, because it’s well-known that continued state help has been an enormous issue within the success of China’s EV business. 

Whereas essentially the most express Chinese language authorities subsidy—a one-time buy credit score for customers—resulted in 2022, there are numerous different implicit subsidies nonetheless in place within the nation, says Mazzocco. Examples embrace below-market credit score, below-market fairness, negotiated charges on land leases, and advert hoc tax cuts given by native governments. 

“A yr in the past, we tried to quantify [EV] industrial coverage spending in a number of nations, and we discovered that below-market credit score was essentially the most vital instrument utilized in China, and it was huge relative to each different nation,” she says. “So I believe in the event that they wish to discover subsidies, they’ll discover subsidies.”

If the investigation does discover that Chinese language firms certainly have an unfair benefit, European officers may institute the next import obligation on Chinese language EVs. A full investigation might final a few yr, says Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis, an funding administration agency, who has suggested the European Fee previously.