European Union launches investigation into Chinese EV subsidies
The EU has initiated a probe into unfair Chinese subsidies of a Hungarian EV manufacturing plant.
Brussels has authorized a probe into the subsidies received by Hungary's BYD electric vehicle manufacturing plant. The move aims to investigate whether Hungary is receiving unfair government aid.
It comes against the backdrop of deepening economic ties between Budapest and Beijing. The European Commission is currently in the preliminary stages of its probe, aiming to investigate whether BYD is benefiting from unfair state help. Analysts expect that the move will result in tensions increasing with both Beijing and Hungarian Prime Minister Viktor Orban.
The probe could result in penalties against the BYD plant and potentially Hungary itself if the company refuses to cooperate. Under the European Commission’s rules, the company could be forced to reduce capacity, repay subsidies, or sell its assets.
Chinese investment has been a significant part of Hungary’s attempts at growing its economy. Under the leadership of Orban, Hungary has received more than a quarter of all Chinese investments in Europe. The BYD manufacturing plant in Szeged, Hungary, is expected to receive four billion Euros, creating 10,000 jobs.
The EU argues that the plant is of minimal economic value to the EU as a whole because the factory was built using Chinese labor and non-EU parts.
It’s yet another twist as the European market struggles to keep up with Chinese advancements in the EV sector, with much of the world’s market for EVs already cornered by China. Although the EU claims that it welcomes Chinese investment, it claims that it must be done with respect to achieving a level playing field.
The EU introduced the Foreign Subsidies Regulation in 2023, and it has been used several times against Chinese companies across the trade bloc. It authorizes the European Commission to impose penalties if companies receive direct or indirect investment from non-EU governments.
It’s not the first time that the Tesla rival has been targeted by trade investigations, with a previous investigation resulting in an additional 17% in tariffs placed on all BYD imports. Whether this could derail BYD’s ambitious plans to expand in Europe and other global markets remains to be seen, with the Chinese government and BYD both refusing to comment.
