STRASBOURG — Against fears that low-cost China-made electric vehicles (EVs) may cause huge losses for European automakers, the European Union (EU) will open an anti-subsidy investigation.

The inquiry was announced by the European Commission (EC) President Ursula von der Leyen at the annual State of the Union address at the European Parliament.

In her remarks, von der Leyen said that the EV sector is a crucial industry for the clean economy with a huge potential for Europe, but the global markets are flooded by low-cost Chinese electric cars, their prices kept artificially low by vast state subsidies.

“We have to be clear-eyed about the risks we face”, said von der Leyen, stating that the surge of cheap Chinese EVs “is distorting our market.” Von der Leyen added that Europe cannot accept this from the inside or the outside, announcing the anti-subsidy inquiry into EVs made in China.

“Europe is open to competition but not to a race to the bottom. We must defend ourselves against unfair practices”, von der Leyen said.

Von der Leyen reinforced her statements with the example of the solar industry, which China’s unfair trade practices have negatively impacted. Many startups were forced to pull out of the industry, while others filed for bankruptcy and talents left Europe in search of fortune abroad, she said.

Von der Leyen also stressed the importance of the economic corridor project, agreed upon during the recent G20 summit in New Delhi, that aims to connect India and Europe through the Arabian Gulf.

The EU Commission president said, "the European Union is working with new and old partners in strengthening its communication, and I was in New Delhi last week to sign the most ambitious project of our generation, which is the economic corridor connecting India, the Middle East and Europe".

Von der Leyen noted that this corridor would be the most direct and fastest railway line between India, the Middle East and Europe so far.

Meanwhile, the announcement of the anti-subsidy inquiry reflected the accumulating fears of the European auto industry and made France especially happy, which has been pushing for the investigation.

The increasing dominance of Chinese EVs in the European market has often been voiced. Research in the past showed that a Chinese EV is around €10,000 cheaper than a European EV, thanks to the subsidies the Chinese government provides for local EV makers.

According to the EC, necessary measures must be put in place within 13 months of initiating an anti-subsidy inquiry. Provisional measures must become active no later than nine months, followed by four months to set certain measures after legally warranted.

“Europe is open to competition but not to a race to the bottom. We must defend ourselves against unfair practices.”

“Competition is only true as long as it is fair. Too often, our companies are excluded from foreign markets or are victims of predatory practices. They are often undercut by competitors benefiting from huge state subsidies,” von der Leyen told MEPs.

Economy, competitiveness and industrial policy featured prominently in the speech. Financial and military support for Ukraine, sanctions against Russia, climate action, digital regulation and migration reform were also addressed, together with a reflection on enlargement and the bloc’s ability to welcome new member states.

Von der Leyen called for trade deals with Australia, Mexico and Mercosur to be closed by the end of the year as part of its so-called ‘de-risking strategy’, and announced she will task Mario Draghi with preparing a report on the future of European competitiveness. She also stressed the need to deliver on the EU Green Deal while protecting farmers, families and industry.

Right after the speech, Manfred Weber, president of the European People’s Party (EPP) said: “We want a European Green Deal, not a Chinese one. We don’t want to see Chinese electric vehicles benefiting from our ambitious climate approach”. — Agencies