European autos slump on China probe

European Commission President Ursula von der Leyen revealed Wednesday that the European Union is starting an inquiry into the financial support provided by China for electric vehicles (EVs). She pointed out that significant state subsidies in China are intentionally keeping the prices of Chinese EVs artificially low, a situation that could potentially disrupt the European Union market.

“For German OEMs, the risk of retaliation in China should not be ignored,” wrote UBS analysts on Thursday.

Following the announcement, German car stocks, highly exposed to China, dragged down Europe’s auto index. GMT, the STOXX Europe 600 Auto index led fallers, down 1.4%, while the broader market was steady. Porsche, which counts China as its largest market, saw a drop of 2.99%. BMW (ETR:), which exports the iX3 from China and plans to export the Mini from 2024, fell 2.18%, with Mercedes-Benz (OTC:) down 1.9% and Volkswagen (ETR:) down 1.6%.

French automakers have a smaller footprint in China, reducing the risk of potential consequences if political leaders adopt a more aggressive stance.

Stocks for French carmakers Renault (EPA:) and Stellantis (NYSE:), which are less exposed to the Chinese market than their German counterparts, saw a smaller dip of 1.13% and 0.9% respectively.

President Emmanuel Macron of France has consistently advocated for the European Union to bolster its independence from China and advocate for a fairer competitive environment.

Nevertheless, it’s worth noting that Renault ranked as the second-largest exporter of electric vehicles from China in the previous year, trailing only Tesla (NASDAQ:). This was primarily due to their shipment of the Dacia Spring EV to Europe. This positioning could potentially expose Renault to punitive tariffs if such measures are imposed.