European Union Will Investigate Chinese Subsidies of Electric Cars

The European Union will begin an investigation into Chinese subsidies of electric vehicles, the bloc’s top official announced Wednesday, in a move that highlights Europe’s growing industrial and geopolitical competition with China.

Chinese automakers have gained a dominant position in the world’s electric vehicles industry and see Europe as a big potential market. Automakers in Europe, who are racing to expand their battery-powered lineups, have expressed concern that they face tough competition against low-priced models from China.

Ursula von der Leyen, the president of the European Commission, announced the initiative during her annual state of the European Union address, which sets the tone for the year ahead. The inquiry could lead to trade restrictions such as tariffs on Chinese vehicles.

“Europe is open for competition, not for a race to the bottom,” Ms. von der Leyen said, speaking in Strasbourg, France.

Ms. von der Leyen said that the electric vehicles sector “is a crucial industry for the clean economy, with huge potential for Europe.”

“But global markets are now flooded with cheaper Chinese electric cars and their price is kept artificially low by huge state subsidies. This is distorting our market,” she said.

Despite longstanding and deep economic ties between Europe and China, political and diplomatic ties between the two sides have deteriorated because of China’s support of Russia despite the invasion of Ukraine.

A flurry of diplomatic visits this year has underscored that European Union members don’t have a clear united policy on China. Ms. von der Leyen has been pushing for the concept of “de-risking” the Europe-China relationship by becoming less economically dependent on Beijing, rather than severing ties.

The inquiry would be part of a European Union push against what it calls anti-competitive behavior by China throttling European businesses, including in innovation and manufacturing, costing Europe jobs and revenue.

“Many young businesses were pushed out by heavily subsidized Chinese competitors. Pioneering companies had to file for bankruptcy,” Ms. von der Leyen said.

Trying to keep China at bay is of vital strategic importance, Ms. von der Leyen said, including in global supply chains for key components to make goods like semiconductors and solar panels.