Chinese EV ADRs slid premarket. Nio fell 2.57%; XPeng fell nearly 2%; Li Auto fell 0.84%.
The European Union is launching an antisubsidy investigation into China's electric-vehicle makers, opening a new front in the battle for leadership of the global clean-technology industry.
The probe, announced Wednesday, reflects growing concern in Europe about the impact of low-price products from China on the bloc's domestic industries. It could result in tariffs if officials from the European Commission, the bloc's executive body, conclude that Chinese EV manufacturers are receiving subsidies that are hurting Europe's auto industry.
"Global markets are now flooded with cheaper Chinese electric cars," European Commission President Ursula von der Leyen said in a speech on Wednesday. "Huge state subsidies" are keeping prices artificially low and distorting the European market, she said.
The move comes as the EU puts growing emphasis on what it refers to as fair competition. The bloc has introduced new rules to expand its options for dealing with what it perceives as unfair trade practices, including measures aimed at pushing back against trade or investment-related coercion and tackling foreign subsidies that it considers to be distortive.
However, divisions remain within the bloc over how forcefully the EU should respond to trade frictions with China, the bloc's biggest trading partner. Some member states, including France, have placed a greater emphasis in recent months on the impact of U.S. subsidies to clean-technology companies under the Inflation Reduction Act.
The EU has also aligned itself more closely with the U.S. in recent years on its approach to China, with some officials voicing increasing concern about the risks the bloc faces from a geopolitical rival.
Europe's top trade official, Valdis Dombrovskis, said Wednesday that he plans to travel to China next week to discuss trade and the economy. "We want to keep dialogue open; to de-risk, not decouple," Dombrovskis said Wednesday on X, the social-media platform formerly known as Twitter.
He said the EU was launching the antisubsidy investigation because the bloc is open to competition, but not to what he called "unfair practices."
Von der Leyen said in her speech that Europe hasn't forgotten the impact of Chinese subsidies on the continent's solar-power industry, which was an early leader in manufacturing but whose output is now dwarfed by Chinese producers.
Antisubsidy investigations don't necessarily result in the imposition of tariffs. After completing an initial probe, EU officials can decide to impose provisional tariffs, continue the investigation without tariffs or drop the matter altogether. Tariffs can also be imposed or extended once an investigation is finished.
Chinese EV makers have managed to build competitive vehicles at lower cost and with a significantly lower price tag than their Western competitors in their home market. Now, analysts think China's main EV makers, such as BYD, XPeng and NIO, could begin flooding European markets with models well below the cost of their European rivals.
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