Editor's note: What's EU doing with investigating Chinese electric vehicles? This episode of Reality Check breaks down the logic behind that action and the self-serving intention that's hiding under the purported "fairness" that EU has been talking about.

Hey guys, welcome to Reality Check. I'm Huang Jiyuan and I have a question: What do you look for when you buy a car? The brand, perhaps? How it looks? Its performance? The model of the engine? Or simply, how much would you need to pay?

I think for a lot of us, it is a combination of everything mentioned above, or more. You pick the ones you value most, compare them, look at the price, then bang, you make a decision. That brings us to today's topic – the European Union's probe into China's electric cars.

Ursula von der Leyen, the European Commission President, announced the investigation with the argument that "fairness in the global economy is so important because it affects lives and livelihoods. Entire industries and communities depend on it. So, we have to be clear-eyed about the risks we face." 

So, the EU is talking about fairness? Umm.

Maybe I didn't do enough research, or I missed something, but I don't see any EU investigation into Tesla over this. The company received a $456 million preferential loan from the U.S.’s Department of Energy in 2010. Through 2020, the cost of Tesla vehicles was reduced by $4,000 dollars to $7,500 due to tax credits. All in all, state and local incentives had amounted to $3 billion. Or maybe, for the European Union, $3 billion doesn't qualify as "huge" state subsidies. This is not about fairness.

It is true that there are many Chinese EVs in the global market. According to the International Energy Agency, 35 percent of exported electric cars came from China in 2022, up 10 percent from 2021. Within the last five years, the EU's imports of Chinese EVs quadrupled. The EU’s own estimate shows that China's share of EVs sold in Europe stands at 8 percent and could reach 15 percent by 2025.  And the reason is simple: The Chinese do have an advantage here.

A recent report published by McKinsey and Company showed that in Europe's automotive industry, the share of the labor force who have a knowledge of software account for 20 percent maximum. But in the United States and China, that share reaches 45 percent. Chinese manufacturers have a 20 to 30 percent advantage when it comes to the production cost of EVs. In contrast, the energy cost for Europe's automotive industry is two to three times that of the U.S. and China’s.

Renault's CEO Luca de Meo said that Europe needs to catch up.

He said that  one of the commitments Renault is thinking is to slash the cost by 40 percent generation-on-generation. "And this is about a lot of investment in technology, in development, in manufacturing techniques. We think we have the argument and the competence to do it. It will take some time, because Chinese OEMs (Original equipment manufacturers) started a generation before the Europeans because market conditions were different in China," de Meo said in an interview.

I particularly like this description by the South China Morning Post : "The European Union is scrambling to answer SOS calls from its hi-tech industries to fend off the challenge of China's manufacturing juggernaut." You see, what the Europeans are doing is very self-centered. It is about protecting its own industry from being overrun by more able competitors. Particularly, it is about reserving its EV market, which we know will be huge by 2030 and 2035, for its own companies.

Jim Holder, a UK automotive expert, pointed out that "Europe has set a course towards electric vehicles only by 2030 and another step in 2035. So, we know that 100 percent of vehicles sales have to be electric cars by that date. And of course, all the car makers are scrambling to take a part of that market. As I said, China moved early on electric vehicles. It has some advantages around the technology and the price it can offer that technology at."

So, that’s what von der Leyen's "risks" were about – the risk of Europe losing its edge on making cars. Maybe by this point you are wondering: What about Tesla? Well, Von der Leyen invented "de-risking from China." She hasn't said "de-risking from the United States" yet, has she?  So her way to deal with it is to say to the Europeans: "Look, you may like this Chinese car, it may have great performance, and it is not expensive, but I'm going to impose a tax on it so that you can't afford it."

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