Beijing on Thursday blasted the launch of a European Union (EU) probe into China's electric vehicle (EV) subsidies as protectionist and warned it would damage economic and trade relations, as shares in Chinese EV makers slid.

The investigation "is a naked protectionist act that will seriously disrupt and distort the global automotive industry and supply chain, including the EU, and will have a negative impact on China-EU economic and trade relations," the Ministry of Commerce said in a statement.

"China will pay close attention to the EU's protectionist tendencies and follow-up actions, and firmly safeguard the legitimate rights and interests of Chinese companies," it added.

Meanwhile, China's EV industrial chain is highly competitive, Cui Dongshu, secretary general of the China Passenger Car Association, said on Thursday, urging the EU to take an objective view of the industry's development.

The EU could not arbitrarily use unilateral economic or trade tools to prevent development of EV products in Europe or increase their operating costs, Cui wrote in a post on his WeChat account.

The price of China-made cars exported to Europe is generally almost double the domestic price, he said, adding that China's strong EV exports is not the outcome of hefty state subsidies.

The Chinese Chamber of Commerce to the EU also hit back, saying it was opposed to the probe and that the sector's competitive advantage was not due to subsidies.

Other analysts said the probe could slow capacity expansion by China's battery suppliers, although the move should not pose a big risk for Chinese EV makers because they could turn to other growing markets like Southeast Asia.

On Wednesday, European Commission President Ursula von der Leyen announced the investigation in her annual address to lawmakers, saying: "Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies."

EU officials believe Chinese EVs are undercutting the prices of local models by about 20 percent in the European market, piling pressure on European automakers to produce lower-cost electric vehicles.

Popular Chinese models exported to Europe include SAIC's MG and Geely's Volvo. (Reuters)
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Last updated: 2023-09-14 HKT 16:05