来源：张中祥

Viewing China’s clean tech manufacturing subsidies as the primary driver of its dominance in the EV market, the EU has imposed tariffs on all Chinese EV imports. But subsidies tell only part of the story, and it is unlikely that these measures will effectively dent China’s expansion into the European EV market. Moving forward, the EU and China must reach a compromise and consider implementing a minimum price strategy at least for major EV manufacturers from China.

本文是基于张中祥教授在2024年11月25-26日在堪培拉澳大利亚国立大学举行的中国经济前沿论坛上的主旨报告，主旨报告由墨尔本大学杰出教授、澳大利亚原驻中国大使Ross Garnaut博士主持。

Over the past decade Chinese electric vehicles (EVs) have developed remarkably. In 2022, the sales volume of EVs in China reached 25.6 per cent of the total sales of new cars, three years ahead of schedule, to meet the 25 per cent target set in China’s New Energy Vehicle Industry Development Plan (2021­-2035).

This raised questions of why Chinese-made EVs have come to dominate the market, why the European Union has taken measures to restrict imports of Chinese-made EVs, and how to resolve this conflict with Europe over Chinese EV dominance.

In 2024, China sold 12.87 million EVs, accounting for 40.9 per cent of the total new car sales. EVs accounted for 21.8 per cent of China’s vehicle exports in 2024, with 1.28 million EVs shipped out of 5.86 million vehicles.

The United States and the European Union have responded with trade restrictions and accused China of using distortionary subsidies to push expansion of its EV sector.

In October 2023, the European Union initiated an investigation into subsidies in the Chinese EV industry and EU imports from China. One year later, the European Commission concluded its investigation, imposing countervailing duties on EV imports from China for five years. Valdis Dombrovskis, then European commissioner for trade, announced that the tariffs would average 20.8 per cent, on top of an existing 10 per cent, claiming they would not close the market to Chinese imports but level the playing field.

The European Commission’s Draghi report, that was commissioned in parallel with its investigation of Chinese subsidies, estimated that Chinese subsidies for clean-tech manufacturing, as a share of GDP, were twice as high as those in the European Union. According to the International Energy Agency, these policies have left the European Union with a significant cost disadvantage — the cost of manufacturing battery cells in China, for example, is 20–35 per cent lower than in Europe.

China has countered that US and EU firms also benefit from subsidies to support production but that Chinese firms have become more competitive.

Neither side tells the full story.

Subsidies have indeed played a crucial role in the early phase of China’s EV development and have been widely used to support brands that would likely be phased out if not for their role protecting the economy and jobs.

Estimates by the US Center for Strategic and International Studies suggest that cumulative government support to the EV sector in China totalled 393 billion RMB (US$58 billion) between 2009 and 2017 and that this support jumped to 560 billion RMB (US$78 billion) from 2018 to 2021.

The OECD estimates that Chinese industrial firms received government support equivalent to 4.5 per cent of their revenue. The support is largely in the form of below market rate lending. With additional tax concessions and government grants, Chinese firms may receive up to nine times more government support — relative to sales — than comparable OECD firms.

But the market advantage of Chinese EVs is not solely due to subsidies. Early industrial layout, long-term industrial policy guidance and long-term support that promoted largescale domestic demand, more than producer subsidies, were key factors. Continuous increases in research and development investment (upgrading batteries and intelligent technology), industrial production chain advantages and a rich pool of engineers and skilled workers also contributed to Chinese EV market dominance. An especially large domestic market, strengthened by internal competition, provides huge pressure to lower production costs and prices.

The European Commission cannot afford to take a laissez-faire approach to Chinese EV imports. Simulations by the European Central Bank suggest that if subsidies to the Chinese EV industry follow a similar trajectory to the solar PV industry, EU domestic production of EVs would decline by 70 per cent and EU producers’ global market share would fall by 30 per cent.

Chinese car companies and the Chinese government are both taking action to alleviate this problem in European markets.

EU tariffs are imposed only on EVs imported from China. In response, Chinese brands are moving to expand their manufacturing presence in Europe to circumvent these measures.

But there are several issues to consider when Chinese automakers go global.

Chinese companies have to recognise that, when building factories overseas, it will be difficult to replicate the advantageous cycle operating in China. It is also expected that the European Union will tighten local content requirements to a minimum value that must be added in EU countries. Chinese EV and battery manufacturers should also be prepared to make technology transfers in return for market access if they invest in the European Union.

To safeguard its interests, the Chinese government has filed an application under the Multi-Party Interim Appeal Arbitration Arrangement against these measures within the WTO. China has also requested WTO consultation over Canadian, EU and Turkish tariffs on EVs. China has additionally pushed for a minimum import price that would avert the need for extra tariffs.

While minimum pricing has been used for homogenous commodities, EVs are highly sophisticated products — with multiple models and configurations sold at substantially different prices. The large number of product types carries a high risk of cross-compensation and is likely to render minimum pricing unenforceable and impractical.

The European Union has instituted a ban on the sale of internal combustion engines from 2035, so increased development of EVs within Europe is inevitable. Chinese EVs enjoy full industrial production chain and cost advantages and EU tariffs are unlikely to dent the expansion of Chinese EVs into European markets. One estimate suggests that duties would have to be as high as 40–50 per cent to make the Chinese EV unattractive in the European market and even higher to lock out integrated markets like BYD.

Depending on the speed of development and the competitiveness of EVs made in the European Union, it may have to compromise and accept China’s price commitments in the early stages of tariff enforcement.

China, on the other hand, might have to consider whether some of its EV manufacturers should be allowed to negotiate separately with the European Union on price commitments. The alternative is to let all manufacturers suffer from the same high European tariffs.

The European Union and China are both adversely affected by the Trump 2.0’s trade policy. Both need to weigh the potential impact of Trump’s presidency and adjust their expectations accordingly.

If China and the European Union cannot reach a compromise on a minimum price applicable to all Chinese EV exports, a hybrid approach applying minimum prices for major EV manufacturers and imposing countervailing duties on others provide a possible solution.

ZhongXiang Zhang (张中祥) is Founding Dean and Distinguished University Professor at the Ma Yinchu School of Economics and Director of the China Academy of Energy, Environmental and Industrial Economics, Tianjin University.

This article appears in the most recent edition of East Asia Forum Quarterly, ‘Managing industrial subsidies’, Vol 17, No 4, 2025. 

原文链接：

https://eastasiaforum.org/2025/12/04/chinas-ev-dominance-sparks-eu-retaliation/

https://doi.org/10.59425/eabc.1764842400

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