Last month the European Union (EU) launched an investigation into China-manufactured electric cars, claiming that these vehicles had received unfair state subsidies. Although the investigation primarily centered on Chinese EV manufacturers, EU Commissioner for Trade Valdis Dombrovskis stated that there was “sufficient prima facie evidence” to warrant the probe, and cautioned that it might extend beyond Chinese manufacturers.
This raised questions about the potential inclusion of Tesla, given that the company produces Model 3 and Model Y vehicles at Giga Shanghai, which it exports to certain EU markets.
Now it looks like Tesla will not be part of the investigation. According to the South China Morning Post, the EU is not focusing on Tesla but rather on three Chinese manufacturers: BYD, SAIC Motor, and Geely.
The scope of Tesla’s operations in China is substantial. Tesla’s Gigafactory in Shanghai exceeded the production output of its Fremont, California plant in 2021. In just a few years since it opened in late 2019, the Shanghai factory recently achieved the milestone of producing its 2 millionth EV. Many of those get exported to the EU, with Tesla accounting for 39% of all EV exports from China in the first half of 2023, as reported by the Center for Strategic and International Studies.
China’s domestic EV production has been given a significant boost by policies offering production subsidies, affordable land, loans, and grants. Estimates from consulting firm AlixPartners suggest that subsidies for electric and hybrid vehicles in China reached $57 billion between 2016 and 2022.