The French government is considering a move to block Chinese car makers from benefiting from tax subsidies it offers to French buyers of electric cars.
The European Commission has only just announced an investigation into whether Chinese car makers are effectively ‘dumping’ cheap cars, especially electric cars, onto the EU market in an effort to destabilise local manufacturers.
“Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies” said European Commission President Ursula von der Leyen as she launched the investigation.
The EU’s contention, as it stands, is that Chinese car makers are receiving unfair subsidies from the Chinese government.
Already, there have been rumblings in the European car industry on the subject.
Head of the vast Stellantis Group, which includes the likes of Peugeot, Citroën, Opel, Jeep, and Fiat, Carlos Tavares has previously said that extra import duties should be placed on Chinese cars being sold in Europe, on the basis that European brands have to pay a tariff of between 15 and 25 per cent to enter the Chinese market. It’s worth pointing out that Tavare’s cross-town arch-rival at Renault Group, Luca De Meo, has said that any such tariff-based messing about is pointless and that all should be allowed to compete.
The French government, however, is not waiting around for Tavares, De Meo, or the EU. The Elysee Palace is reportedly weighing up changes to the current €5,000-€7,000 subsidy given to buyers of new electric cars, and Reuters is reporting that the French government is looking specifically at ways to ensure that the subsidy — which costs the French exchequer €1 billion per year — is not paid out to subvent the cost of buying a Chinese, rather than a European, car.
Apparently, the rules on the subsidy will be revamped by early December, and will follow a course of looking at the energy input used to create the car in the first place.
In theory, that should give European car factories a leg-up, given that many of them are already running — or so it is claimed — on renewable solar and wind power, whereas China is still very coal-dependent. It looks as if the new French rules will also consider the amount of energy needed to transport each car from its original factory to the market where it is sold, potentially putting Chinese car makers under further pressure.
World trade rules
The French government is already proclaiming that such a rule change would not breach World Trade Organisation regulations, as it’s being made under environmental and public health laws, and would not actually represent a tariff. The EU Commission will doubtless be taking note.
There are a number of issues in all of this, not least that even if you take away the incentive payment, many Chinese models would still undercut their European opposition.
For example, in the Irish market, if you took away — under the same criteria — the €3,500 SEAI grant from the popular MG 4 electric hatchback (which is entirely a Chinese-made car, in spite of its classic British badge) then the price of the basic model would rise from a basic €30,995 to €34,495. By comparison, the most affordable equivalent Renault Megane E-Tech electric hatch would remain more expensive, at €38,995.
Chinese production
Then there is the issue that many European car makers are already thoroughly in bed with their Chinese opposite numbers. BMW has just launched the latest generation of the Mini hatchback in electric form, which will go on sale with a choice of 300km or 400km ranged-models, both of which will be built in China in a factory established as part of a joint venture with Great Wall Motors, and will use a chassis, battery, and electric motors co-developed with Great Wall. It will be at least another year before the new electric Mini will be built in Europe, at the Mini factory in Oxford, alongside its combustion-engined brothers.
Equally, both Volkswagen and Audi have recently announced tie-ups with SAIC (owners of MG) and XPeng to use their platforms and batteries for future electric models, in an effort to chop development times and bring new electric products to market that much more quickly. The move could also affect Tesla, which imports many Model 3 and Model Y cars to Europe from its factory in Shanghai.
While the EU probe, and the French tinkering with subsidy regulations, will doubtless awaken ire in Beijing, it may also trigger a little schadenfreude (or the Mandarin equivalent, of course). While China has invested countless billions in building up its car industry, and gearing it towards electric cars, and while the US government has pumped $369 billion into low-carbon industry, such as wind turbines and battery production, the EU earlier this year committed a mere €10 billion to such investment. With so little apparent interest at EU level to committing funding for major industries, such as the car industry, to turn to green tech can it be any surprise that we’re being out-paced by foreign rivals?
Certainly, environmental think-tank Transport & Environment (T&E) thinks that the EU has effectively shot itself in the foot. Xavier Sol, sustainable finance director at T&E, said: “Washington and Beijing will be laughing at the EU’s weak proposal. There is a big mismatch between the strategic objectives of the EU’s green industrial policy and the cash that has been put on the table.
"Wealthy countries like Germany and France have to stop dragging their feet on fresh funds. In the long-term we will need a Europe-wide approach if the continent is to compete with the US and China in the global clean-tech arms race.”
The Commission’s, and Ms von der Leyen’s, investigation may well be more of a sticking plaster to try and cover up the EU’s shortcomings when it comes to actually investing in Europe’s electric car conversion.
William Todts, executive director of T&E, goes further, saying: “Our goal should be to have intense but fair competition, prevent monopolies and retain Europe’s industrial base in the 21st century. If that is also what EU lawmakers want, they should act much more decisively. As it stands, Europe may well be on course to become a dumping ground for subsidised Sino-US EVs and batteries.”
