The European Union is considering using subsidies to support its electric vehicle (EV) industry. The move would aim to counter the influx of Chinese imports lowering the profit outlooks for domestic automakers.
Why is the EU considering EV subsidies to combat China?
Projections suggest that cheaper Chinese EVs could cost European automakers nearly $8 billion by 2030, according to an Allianz Trade study. In response, the EU increased tariffs on Chinese EV models in June 2024. They claim their prices were artificially low due to subsidies provided by Beijing and therefore undercutting the offerings of Europe’s own auto brands.
What has the EU been discussing in regards to EV subsidies?
The EU is now evaluating additional actions, including implementing their own subsidies.
The European Commission’s Executive Vice-President Teresa Ribera announced during the World Economic Forum in Davos, Switzerland, that a pan-European EV subsidy scheme is under discussion. Ribera emphasized the importance of a unified EU approach and cautioned against fragmented national programs.
Currently, EV incentives vary significantly across the EU, with some member states offering no purchase subsidies, according to the European Automobile Manufacturers’ Association.
What happens next?
However, this plan to aid European EV makers faces potential complications due to the World Trade Organization’s (WTO) rules, which the EU must follow. Because the WTO prohibits subsidies that unfairly favor domestic producers or hinder international competition, enacting a measure that Chinese automakers cannot also benefit from will be a challenge.