BEIJING, October 6  (TMTPost)— The European Union (EU)’s probe into electric vehicle imported from China may have triggered a major battle that dampens automakers across the world, including those in the Europe.

Credit：Visual China

Tesla and European automobile manufacturers like BMW and Renault will be part of EU’s investigation, the Financial Times reported. The probe targets not limited to EVs from Chinese brands, the Executive Vice President of the European Commission Valdis Dombrovskis confirmed. "It can be also other producers’ vehicles if they are receiving production-side subsidies,” Dombrovskis told the Financial Times. During the evidence-gathering that precipitated the EU's announcement of its probe, Tesla was among the companies found to have likely benefited, people familiar with the matter told Bloomberg.

Tesla’s Gigafactory Shanghai exports the Model 3 to Europe, Renault exports the Dacia Spring EV to Europe from China, BMW exports its China-built iX3 EV to Europe and some Volvo models as well as Polestar models sold in Europe are built in China. A Bloomberg report noted that China is the biggest destination for Germany’s premium vehicles. The country made up more than a third of global sales of BMW’s 7-series and Mercedes’ S-Class last year, and more than one third of Volkswagen subsidiary Audi’s global sales are made in China. Bernstein analysts Daniel Roeska and Eunice Lee expected three German luxury-carmakers—Audi, Mercedes-Benz and BMW are at the greatest risks of suffering a big hit should the trade dispute escalate.

Earlier this week, EU officially launched an anti-subsidy investigation into EVs from China, about three weeks after European Commission President Ursula von der Leyen announced EU’s executive body is going to take the action. Global markets “are now flooded with cheaper Chinese electric cars”, and their price is “kept artificially low by huge state subsidies”, which is distorting European market, von der Leyen said in her state of the union stress to the European parliament on September 13. Head of the executive arm said Europe is open for competition, not for a race to the bottom. While stressing EU would defend itself against unfair practices, she cautioned “it is vital to keep open lines of communication and dialogue with China”. The official reiterated de-risking, instead of decoupling, from China.

The European Commission will decide whether to impose tariffs more than the current 10% standard rate for cars in the coming 13 months. The possible tariff will affect not just Chinese automakers but also foreign brands that produce vehicles there such as Tesla, Renault and BMW. The move may result in tariffs close to the 27.5% level already imposed by the U.S. on Chinese EVs, Bloomberg cited people familiar with the matter following von der Leyen’s announcement.

“The EU has no intention to decouple from China,” Dombrovskis said ahead of the 10th China-EU High-Level Economic and Trade Dialogue held last week. EU has a very imbalanced trade relationship with China and needs to protect itself in situations when its openness is abused, the EU’s chief trade negotiator said. During his visit in China for the dialogue, Dombrovskis revealed the probe will be fact-based and in line with EU and World Trade Organization rules, and added he cannot prejudge the outcome. He noted shares of Chinese EV brands in EU market have risen from less than 1% to 8% in the past two or three years.

China felt very dissatisfied with EU’s investigation as it is based on subjective assumption, lacks adequate evidence, and doesn’t adhere to World Trade Organization rules, a spokesperson of the Ministry of Commerce commented on Wednesday right after EU’s opening investigation. In the high-level dialogue with EU representatives in late September, China has called the subsidy probe “naked protectionist behavior” under the cover of “fair trade”, and cautioned such attempt will severely disrupt and distort the global automotive industrial and supply chain, of which EU has a part, and impose negative impact on China and EU’s economic and trade relationship, the spokesperson said. The person said Beijing will keep a close eye on EU’s following investigative procedures and firmly protect rights and interests of Chinese firms.