UK considers probe of Chinese EV subsidies

UK considers probe of Chinese EV subsidies

POLITICO — 2024-02-27

Automotive Industry

A British investigation would follow the launch of a similar probe by the EU last October.

Britain is considering whether to investigate Chinese state subsidies for electric vehicle (EV) makers, two people familiar with the nascent plans told POLITICO.

A UK investigation would follow the launch of a similar probe by the EU last October. That probe sparked fury from Beijing, while critics have warned that it could jack up the price of more climate-friendly vehicles during a climate emergency and cost of living crisis.

Now, British automakers are urging the UK government to speed up its own work amid concerns the UK will see a flood of Chinese-made EVs diverted into its market from the EU if the bloc slaps duties on imports when its probe wraps up later in 2024.

In the last few weeks “the wheels have started turning,” said a senior figure at a major British automaker familiar with plans at the UK Department for Business and Trade. There is “work behind the scenes to look at what those options might look like,” the person said. Like others, they were granted anonymity to discuss sensitive issues.

UK Trade Secretary Kemi Badenoch is preparing to instruct Britain’s trade watchdog, the Trade Remedies Authority (TRA), to open an investigation, said a consultant familiar with the plans, since British manufacturers “are worried about putting their heads above the parapet” by filing a complaint themselves.

If any manufacturers “break cover they face retaliation in China and it’s an important market for them,” the consultant said.

She’s got the power

Kemi Badenoch has the power “to request initiation” of an investigation, said Oliver Griffiths, chief executive of the TRA.

Our anticipation is we will look at an application,” Griffiths told POLITICO later in the interview. But the UK needs to “make sure that we’ve got proper data.”

No request for an investigation has been made to DBT, but car manufacturers should formally raise any concerns with the Trade Remedies Authority before one is considered,” said a spokesperson for the Department for Business and Trade.

If the EU finds a clear-cut case of unfair subsidies “it’s very difficult for the UK government to say ‘no, no, we don’t agree with this at all,’” explained Alex Boyd, a former trade and economic adviser to No. 10 and now director at the consultancy Strand Partners.

The European Commission’s probe is expected to conclude in the second half of 2024, following European Parliament elections in June.

The UK “will be looking very closely to see if there’s a similar unfair trading practice” if the EU probe results in protective tariffs on Chinese EVs, Mike Hawes, chief executive of the British automotive lobby the SMMT, told journalists at a briefing in January 2024.

As China’s economy falters “they need export growth,” Hawes said. “You could see an influx” of EVs into Britain as Chinese manufacturers focus on increasing their market share.

Meanwhile, Britain is seeking to support its own domestic EV industry. In 2023 the British government committed £2 bn to support investments in EV and battery production from the likes of Jaguar Land Rover, Nissan and BMW.

However, any trade dispute could expose British exporters to Beijing’s wrath, after it retaliated against Paris — a key backer of the EU probe — by launching an anti-dumping investigation into French brandy imports at the start of 2024.

The UK government was “almost kind of hoping that they wouldn’t have to make that decision,” the senior figure at a major automaker said. “They’re still exploring what they could potentially do,” the person added.

But they’ve probably only got the space of a couple of months to make that decision,” they said. The message from British automakers has been: “‘Just try to limit the amount of time that there is a disparity between those external tariffs.’ Because what you don’t want is trade diversion from the EU into the UK.

There’s a key political tension between how we green our economies with all these wonderful new technologies, but at the same time does that mean the decimation of your manufacturing base for lack of competitiveness?” Boyd said.

It’s great for the consumer if they get cheaper products,” he added, but it’s “subsidized by somebody else.”