Risk tougher duties

Chinese EV makers risk tougher duties over failure to cooperate with EU probe

European Commission warns BYD, SAIC and Geely that their lack of cooperation frees its hands to impose higher penalties, letters seen by POLITICO show.

BY KOEN VERHELST

The European Commission has told the three Chinese electric car makers it’s investigating over state subsidies that they haven’t provided enough information, according to letters seen by POLITICO, a warning that could pave the way for tougher European Union fines.

The letters, addressed to EV makers BYD, SAIC and Geely and all dated April 23, reach the same conclusion: that the trio did not provide enough information on subsidies, operations and supply chains.

Working without these inputs, the Commission says, means it will need to revert to the concept of “facts available.” This usually means, in practice, that it has a free hand to slap higher duties on the imported products.

The correspondence indicates that the trade investigation, launched by European Commission President Ursula von der Leyen last year, could be heading toward a harsh outcome as Brussels steps up action to keep increasingly dominant Chinese makers of green tech — from EVs to solar panels, to wind turbines — at bay.

Trade Commissioner Valdis Dombrovskis told POLITICO’s Brussels Playbook on Thursday that the EV probe was “advancing,” and he expected it to wrap up “before the summer break.”

Those comments come days before Chinese President Xi Jinping is due to visit France on the first stop of a European tour. Beijing has launched its own anti-dumping investigation into imports of European brandy — signaling its displeasure toward Paris, which lobbied behind the scenes for the EV probe.

Speculation on the outcome of the investigation is already intensifying, with analysts at Rhodium Group concluding in a report this week that the Chinese EV makers were so competitive that they would still turn a profit even if the EU imposes import tariffs of 15-30 percent. Duties as high as 50 percent would be needed to inflict serious pain, the report states.

Distortive subsidies

The three companies are under investigation for allegedly receiving distorting subsidies to produce electric vehicles, potentially creating an unfair advantage on the EU market compared to European car makers.

Such an anti-subsidy case normally results in a duty levied on EU imports. Announced formally in October, the EU should — at the latest — announce its decision on provisional duties by early July. Duties would apply to all imports of EVs from China, though the EU can decide to tweak percentages per producer.

The three letters outline how the Commission requested information on the company’s operations, sales projections and their supplies. One recurring complaint is that the three companies kept claiming supplying companies didn’t need to fill out a subsidy questionnaire.

In the case of SAIC, Brussels already sent a letter in December complaining about the lack of cooperation. “Nevertheless, your client maintained its approach and continued to refuse access to some key information,” the letter seen by POLITICO reminds the lawyers for SAIC.

The letter to SAIC is particularly testy: “Your client almost systematically presented requests for deadline extensions although it did not use this additional time to provide the necessary information requested by the Commission.”

Working together with Volkswagen since 1984, state-owned SAIC is intimately connected to Europe. Among the nine plants the joint venture operates is a controversial one in Xinjiang, where the Chinese government is believed to have interned over 1 million Uyghurs.

SAIC, according to the Commission, claimed that it could not control its suppliers — whose names are redacted in the letter — and therefore could not compel them to submit questionnaires on their “provision of capital, loans, guarantees, or any other types of financing.” The EU’s trade department also rejected the argument that such a survey would violate SAIC’s fundamental rights.

The Chinese company saw the consequences looming, and — the Commission alleges — argued that it had told Brussels enough.

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“The amount of information and data submitted thus far should be sufficient for the calculation of subsidy amount. It is therefore groundless and unnecessary for the Commission to apply Article 28 in determination of subsidy,” SAIC replied at some point during the investigation, referring to the article that allows for the “facts available” approach.

When it comes to Geely — which owns Volvo in Europe — the Commission laments that “none of the financing companies of Geely group provided a reply to Commission’s questionnaire.”

The Commission declined to comment. A lawyer for Geely confirmed the existence of the letter but declined further comment. The law firm representing SAIC did not respond to a request for comment, while a request sent directly to BYD also went unanswered.