Earlier this month, the European Union (EU) began an investigation into the subsidies that China gives to EV (electric vehicle) makers. According to the latest reports, non-Chinese EV automakers might also fall under investigation by the EU. This includes brands like BMW and Elon Musk’s Tesla.
The EU launched its investigation after gathering evidence of distortions in the European market. It was found that vehicles produced in the EU were facing steep competition from cheaper vehicles produced in China. According to European data, sales of Chinese-produced cars in Europe rose to 8% this year. This figure could reach 15% by 2025. According to Valdis Dombrovskis, the Executive Vice President of the European Commission, “There’s a lot of speculation, but at this stage, the scope of this investigation is not decided yet.”
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Dombrovskis added that they are currently doing pre-initiation consultations with Chinese authorities. He added that the investigation announcements so far “do not cover only Chinese-brand electric vehicles.” Last Friday, Dombrovskis traveled to China and held discussions with Chinese authorities in Shanghai and Beijing. He stated,
“This topic was extensively raised by the Chinese side during my visit, so I was reassuring Chinese authorities that this is a well-established process.”
According to reports, the investigation could last up to 13 months. Chinese authorities have labeled the move “protectionist.”
Deutsche downgrades Elon Musk’s Tesla
With a possible EU investigation, Tesla stocks was downgraded by Deutsche Bank on Wednesday to $285 a share. This represented a 5% drop from its earlier target of $300. The bank warned that the EV maker‘s earnings could face strong headwinds in 2024.
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Deutsche predicted that Tesla would report 440,000 deliveries in Q3, lower than its earlier prediction of 455,000. This, in turn, might lead to lower quarterly earnings. The bank estimates Q3 earnings to fall to $23.3 billion from its previous forecast of $24.1 billion. At press time, Tesla was trading at $240.50.