China Files Complaint Against US Over Discriminatory Electric Vehicle Subsidies: What It Means for the Global EV Industry

China set to oppose Biden administration’s electric vehicle strategies at the World Trade Organization

The Chinese Commerce Ministry has filed a complaint against the U.S. with the World Trade Organization (WTO), alleging discriminatory requirements for electric vehicle subsidies. The U.S.’s new rule, which took effect on January 1, renders electric car buyers ineligible for tax credits of $3,750 to $7,500 if critical minerals or battery components were made by Chinese, Russian, North Korean, or Iranian companies. These tax credits are part of President Joe Biden’s climate legislation known as the 2022 Inflation Reduction Act.

The complaint did not specify what prompted it but criticized the U.S. for enacting discriminatory subsidy policies for new energy vehicles under the act. According to the statement, these policies unfairly excluded Chinese products and distorted fair competition while disrupting the global supply chain for new energy vehicles. Members of the WTO can file complaints about trade practices of other members and seek relief through a dispute settlement process.

The impact of this case is uncertain as the functioning of WTO’s Appellate Body has been blocked since late 2019 by China and the U.S., a dominant player in batteries for electric vehicles, has an expanding auto industry with strengths in electric vehicles and battery technology. The European Union (EU) has also launched its own investigation into Chinese subsidies for electric vehicles, concerned about potential threats to its auto industry due to growing competition from China’s rapidly expanding EV market in Europe.

Under the new rule, only 13 out of over 50 electric vehicles on sale in the U.S are eligible for tax credits, down from about two dozen models in 2023. Automakers are working hard to source parts that would make their models eligible for these credits as they try to adapt to changing market conditions and maintain competitiveness in an increasingly competitive global EV marketplace.

In conclusion, China’s complaint against the US with WTO highlights how trade tensions between major players like China and US can have far-reaching effects on global industries such as EV manufacturing and sales. It is important that both countries work towards finding amicable solutions that promote fair competition while also benefiting consumers and ensuring a sustainable future for our planet.

The EU’s investigation into Chinese subsidies for electric vehicles adds another layer of complexity to this issue as it raises questions about whether these subsidies are consistent with international trade rules and whether they give an unfair advantage to Chinese manufacturers at the expense of European ones.

As automakers adapt to changing market conditions and work towards sourcing parts that meet new eligibility requirements for tax credits, it will be interesting to see how this unfolds over time and what impact it will have on global EV sales and manufacturing trends going forward

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