Tesla may have benefited from subsidies in China, according to a European Union investigation, which could potentially result in fines or corrective actions to level the competitive landscape.
In early trading, shares of Tesla Inc. (TSLA, +0.38%) declined by 0.4%, reflecting the broader weakness in the technology stock market on Tuesday, attributed to concerns about rising bond yields.
The revelation regarding Tesla's potential subsidy benefits emerged during the data collection phase leading up to the surprise investigation publicly announced by European Commission President Ursula von der Leyen on September 13th, as reported by Bloomberg, citing insider sources.
The investigation's primary objective is to assess the extent of these subsidies granted to Tesla, with other companies such as BYD Co. (002594, -2.97%), SAIC Motor Corp. (600104, -0.73%), and Nio Inc. (NIO, +1.38%) also named as recipients of such incentives.
Shares of NIO experienced a 0.3% decline.
Subsequently, the European Union will determine whether it needs to implement measures to ensure fair competition within its own industry.
According to Schmidt Automotive Research, as reported by Bloomberg, Tesla sold 93,700 electric vehicles (EVs) in Western Europe that were manufactured in China, constituting approximately 47% of total deliveries. Tesla's exclusive privileges in China encompass full ownership of domestic operations, along with tax incentives and reduced-interest loans.
In her announcement of the probe, von der Leyen remarked, "Global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies. This is distorting our market." Notably, this investigation has drawn criticism from Beijing, which characterized it as a "protectionist" move.
While certain countries, including France, have advocated for the European Union to adopt a tougher stance toward China, others, such as Germany, are more cautious about disrupting the global economic engine. France, Spain, and Italy have expressed interest in hosting a Tesla factory. Gigafactory Berlin-Brandenburg, which commenced operations in 2019, marked Tesla's inaugural manufacturing facility in Europe. Turkey has also expressed its desire to host a Tesla factory.
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