© Reuters. FILE PHOTO: People stand next to BYD Company vehicles, at the 2023 IAA Mobility auto show, in Munich, Germany, September 10, 2023. REUTERS/Angelika Warmuth/File Photo
HONG KONG (Reuters) -The Hong Kong-listed shares of Chinese electric vehicle (EV) makers fell on Thursday after the European Commission launched an investigation into Chinese subsidies for EVs, escalating tensions between Beijing and the EU.
European Commission President Ursula von der Leyen announced the investigation in her annual address to lawmakers on Wednesday, saying: “Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies.”
Hong Kong shares of market leader BYD (SZ:) fell more than 3%. Smaller rival Xpeng (NYSE:) erased early losses and was flat in morning trade, while Nio (NYSE:) and Geely Auto slipped slightly. Shanghai-listed shares of state-owned car giant SAIC slid as much as 3.4%.
Nio and Geely declined to comment on the EU probe, while BYD, Xpeng and SAIC did not respond to requests for comment.
While Beijing has yet to respond to the investigation, the Chinese Chamber of Commerce to the EU hit back at the move, saying it was opposed to the probe and that the sector’s competitive advantage was not due to subsidies.
EU officials believe Chinese EVs are undercutting the prices of local models by about 20% in the European market, piling pressure on European automakers to produce lower-cost electric vehicles.
The European Commission said China’s share of EVs sold in Europe has risen to 8% and could reach 15% in 2025.
In 2022, 35% of all exported electric cars originated from China, 10 percentage points higher than the previous year, according to U.S. think-tank Center for Strategic and Internal Studies (CSIS).
Most of the vehicles, and the batteries they are powered with, were destined for Europe where 16% of batteries and vehicles sold were made in China in 2022, it said.
Popular Chinese models exported to Europe include SAIC’s MG and Geely’s Volvo (OTC:).
The single largest exporter from China is U.S. giant Tesla (NASDAQ:), CSIS data showed. It accounted for 40.25% of EV exports from China between January and April 2023, up from 36.5% in 2022.
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