In a major setback for Chinese EV majors, the European Commission’s President, Ursula von der Leyen, announced an investigation into subsidies given to EV makers in China. President von der Leyen referred to the probe in her annual State of the Union address at the European Parliament in Strasbourg and commented, “Europe is open to competition but not for a race to the bottom.”
Chinese EV majors including Li Auto (LI), NIO (NIO), and XPeng (XPEV) were all trending lower following the news.
The European Commission conducts an anti-subsidy investigation after it receives a complaint from the EU industry with “prima facie evidence that a country is subsidizing companies exporting a particular product to the EU and that this is causing injury to the EU industry.” Following the investigation, the European Commission must impose any recommended measures within 13 months of the start of the investigation.
This is another bump in the road when it comes to the relationship between the EU and China. Earlier this year, the EU had called upon more nations in Europe to ban Chinese telecoms groups Huawei and ZTE. The EU is increasingly looking at reducing its dependence on China, rather than cutting ties completely.
For investors interested in getting exposure to the global EV industry, the KraneShares Electric Vehicles & Future Mobility Index ETF (KARS) offers a good option. Year-to-date, KARS ETF has gone up by 5%.
