Closed-door meeting between Chinese and European car companies: The European Commission is spying on the inside story of China's technology under the guise of an investigation

Yuyuan Tan Tian

2024-06-19 15:28Published in Beijing, senior political and economic reporter

The European Commission's proposed imposition of tariffs on electric vehicles in China is being increasingly opposed by a growing number of people.

Tan Zhu learned that on June 18, Chinese and European new energy vehicle companies held a closed-door meeting together at the Ministry of Commerce. At the meeting, there were four Chinese car companies, six European car companies, as well as related business associations and research institutions.

At the meeting, both Chinese and European car companies opposed the EU's imposition of tariffs on China.

Mr. Tan learned that some Chinese companies have asked the Chinese government to take the most stringent measures against the European side. It is proposed that within the scope of WTO rules, higher provisional tariffs should be imposed on large-displacement gasoline vehicles imported from Europe, and import tariffs can be increased to up to 25%, which is also in line with the goal of green and low-carbon development.

At the meeting, Chinese automakers also revealed more EU abuse of investigative powers to wantonly expand the scope of investigations, and even peek into the inside story of China's new energy vehicle technology.

Tan Zhu mentioned in a previous article that Chinese companies reported that the European side asked them to provide battery formulas in the countervailing investigation.

In fact, this is just one of the many unreasonable demands made by the Commission in this inquiry. After listening to what happened to Chinese car companies, Tan Zhu believes that the European Commission's actions are to spy on the inside story of China's technology in the name of investigation.

The first is that the European Commission has asked Chinese companies to provide core secrets such as battery formulations.

Tan Zhu learned that the European Commission requires Chinese companies to provide detailed information on the composition of battery raw materials, including chemical composition and formulation, and even accurate to the amount of each major raw material used, such as lithium ferrous phosphate, graphite, copper, and aluminum.

Not only that, but the European Commission has also asked Chinese companies to provide information on the suppliers and purchases of these raw materials.

Battery information is seen as the "lifeline" of the electric vehicle industry. The leakage of this information will not only seriously threaten the technical security of enterprises, but also affect the security of related industries in China.

In addition to technology-related data, the Commission also requires Chinese companies to provide core trade secrets. This information includes:

Five-year production capacity, output and a list of all fixed assets of the enterprise;

Plans to increase production capacity in China, the EU or third countries in the future;

All parts and raw material inputs, energy and electricity, labor costs, and equipment depreciation information of the enterprise;

Sales model, sales terms, pricing strategy of the enterprise;

Even the names and contact details of all the company's customers in the EU are wanted by the European Commission.

As if it weren't enough, the Commission also asked Chinese companies to provide core operational secrets. This information also includes the minutes of the shareholders' meeting, the board of directors, the board of supervisors and the joint venture agreement, including the company's credit line, loans, bonds, export credits, bank acceptance bills and other information.

This is not so much a countervailing investigation, but rather a "big survey" of the core competitiveness of China's new energy vehicle companies.

At the meeting, some Chinese companies asked rhetorically, "There are many European brands here, what would you do if you were asked for such information in some form by the Chinese government?" ”

Do unto others as you would have them do to you. The European Commission should also ask itself about this issue of Chinese car companies.

The second is that, in addition to the information of the car companies themselves, the European Commission also wants data on the entire Chinese new energy vehicle industry.

The European Commission is so brazen because this is the first time that the Commission has launched a countervailing investigation into the emerging industry of electric vehicles, and neither the Commission nor the companies under investigation have any previous precedents to rely on.

Previous countervailing investigations have mostly focused on simple manufactured goods. The production chain of simple manufactured products is not long, and the investigation margin and standards are clear, while the electric vehicle industry chain is long, involving thousands of suppliers in the first, second and third levels.

The European Commission may not be sure where the competitive advantage of Chinese electric vehicle companies comes from, but it is precisely in the name of the investigation that it is clear.

For this reason, the European Commission has asked Chinese companies to provide far more information in this countervailing investigation than any previous one.

Tan learned that the European Commission requires Chinese companies to provide information such as the names of suppliers of all parts and raw materials such as steel and aluminum.

In the course of the survey, the Commission asked a total of 204 companies, including three sampled companies and their affiliates, to fill out a questionnaire, and the amount of information submitted by the companies was as high as 21GB. As if this was not enough, since the beginning of January this year, the European Commission has issued more than a dozen rounds of supplementary questionnaires to three sample companies.

Some of this information is required by the European Commission to be completed by Chinese companies within 7-10 days, or even immediately at the site of on-site verification.

If the Chinese company doesn't pay, that's okay, the Commission will find that the company doesn't cooperate. And, in the subsequent process, the Commission will use the information it collects itself to make a "judgment".

At this meeting, some Chinese companies said that because they did not provide relevant data, the European Commission determined that the company did not cooperate, and finally the European Commission set an abnormally high subsidy rate for the company.

So, what does the European Commission want to do with these data?

Sun Xiaohong, Secretary-General of the Automotive Internationalization Committee of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, analyzed the mentality of the European Commission to Tan Zhu - the European Commission knows that China's new energy vehicle development is successful.

In the face of China's success, the European Commission is not thinking about learning and cooperating, but about snooping and suppressing. Such an investigation is the best way for the European Commission to concoct itself.

According to the confidentiality regulations of countervailing duty investigations, normally speaking, no third party will know the data and conclusions obtained by the European Commission in the course of the investigation, and it is under this banner that the European Commission requires Chinese companies to provide various core information.

But Sun reminded Tan that don't forget that the European Commission is not only the initiator of this investigation, but also a stakeholder. It is unclear how the Commission will use this information in the future. Even if it is not directly disclosed to local car companies, it is not impossible to use it for "reference".

So why did the European Commission go to such lengths to spy on China's new energy vehicle industry?

Behind this, there is a deeper problem:

The EU's current policy route will not help the development of Europe's new energy industry. The battery industry is a good example.

As early as 2017, the European Union noticed the importance of the battery industry and established the European Battery Alliance (EBA) for this purpose, which is one of the few industry alliances organized by the EU at the official level.

You know, until today, the EU has not organized such a coalition for the automotive industry, which is enough to see the importance of the battery industry.

At that time, the European Battery Alliance had a plan to capture the 250 billion euro global battery market by 2025. To achieve this goal, it is indispensable to build new battery plants in European countries.

Europe's largest battery manufacturer, Northvolt, was the first to receive the EU project. In order to build Europe's first battery gigafactory in Sweden, the EU has provided Northwater with around 300 million euros in subsidy support.

As a result, deliveries did not begin at the plant until 2022.

Behind this, there is an objective technology gap - since 2015, the top ten global power battery companies have been occupied by Chinese, Japanese and South Korean companies. Whether it is in terms of technology accumulation or industrial chain structure, Europe has lagged behind.

As a result, many of the follow-up battery super factory projects were built by European companies through cooperation with foreign companies, including Chinese companies.

However, there is a phenomenon that some of these foreign companies will choose to avoid this EU project when cooperating with European companies and invest directly in the corresponding countries.

Pan Yuanyuan, an international investment expert at the Chinese Academy of Social Sciences, told Tan that this is because investment in Europe involves two levels of regulation – the EU level and the specific member state level. In the case of China, if it goes through the EU project, in addition to the investee country, other relevant parties such as the EU can put forward their opinions on the project. In some cases, investment reviews have even become a tool to "deal with" China in areas that the EU has identified as having technology competition with China, exposing Chinese investors to above-average risk.

It is worth noting that many of the reasons for such non-host country reviews are initiated on non-economic factors such as "national security". The EU, which is supposed to be the coordinator of European interests, has now become a hindrance to the development of industry in Europe.

Today, these non-economic factors in the EU have not only not been curbed in time, but are still accumulating further, and the European Commission is unscrupulous in order to achieve a so-called competitive advantage.

But it is clear that such an act is not in the interests of the majority of EU member states and most companies.

Because of this, many European countries and European car companies are the first to oppose the EU's practice of imposing tariffs on China.

Insiders who attended the closed-door meeting of Chinese and European car companies also revealed to Tan Zhu that European companies are more worried about tariffs than Chinese companies. He said that in the stage of new energy transformation, the technical cooperation between these traditional car companies and China is in full swing, and many products are ready to be sold in Europe and around the world.

At the same time, these European car companies have been deeply involved in China for decades, and the Chinese market has always been an important source of revenue for them in the field of traditional fuel vehicles. Volkswagen, for example, has long been the largest market share of fuel vehicles in China, with two large manufacturers in joint ventures with China accounting for nearly 20 percent of the market.

In this context, China's imminent countermeasures against European large-displacement gasoline vehicles will undoubtedly hit the market of these traditional European car companies again.

If the European Commission really imposes tariffs on Chinese electric vehicles, European car companies will face a "double blow".

The European Commission has no right to override the concerns of real stakeholders, and the European Commission should listen to the common voice of Chinese and European companies.

As called for by Chinese and European enterprises at the meeting, it is now necessary for Chinese and European enterprises to work together to oppose trade protectionism, maintain free trade and fair trade, jointly promote the development of the electric vehicle industry in China and Europe, and make positive contributions to addressing global climate change and reducing carbon emissions.

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