The European Commission, the EU executive’s arm, said this week it has found “sufficient evidence” that the imports of new battery electric vehicles from China received subsidies including direct transfer of funds, tax breaks, or public provision of good or services below market prices.

The EU launched the inquiry in October, meaning provisional tariffs would need to be introduced by July, with definitive duties hitting by November. In recent probes of other sectors such as e-bikes and fiber-optic cables, the EU discovered subsidy margins ranging from 4% to 17%.

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The investigation is part of a broader EU effort to protect supply lines and bring production closer to home, particularly in key sectors like semiconductors and pharmaceuticals. The announcement tested already fragile relations with Beijing, which subsequently launched its own anti-dumping investigation into brandy imported from the EU, a move seen as a retaliation against France, which supported the electric-vehicle probe.

The commission said it found evidence of massive imports of the Chinese vehicles in a relatively short period of time, including a “substantial increase” of 14% since the investigation was launched compared with the prior year, according to the regulation published March 5.

“At this stage it is possible that, on the basis of the data collected during the investigation, the injury, which would be difficult to repair, started to materialize even before the end of the investigation,” according to the document.

The EU warned that manufacturers could suffer from diminishing sales and production levels if the imports of Chinese electric vehicles continued at the current levels. China exported about $12.7 billion of electric vehicles to the EU in 2023 through November.

As a result, the commission has instructed customs authorities to start registering the import of the electric vehicles from China so they may be subject to the countervailing duties decided at the end of the investigation retroactively from this date to repair the injury already caused.

The China Chamber of Commerce to the EU voiced its disappointment with the proposed mandate for customs registration and expressed worries regarding potential retroactive measures. It said the recent surge in imports reflected increasing demand in Europe.

EU investigators have sampled a number of Chinese brands that they say best reflect the subsidies the sector has allegedly received. Those firms could be hit with higher tariff rates, while other exporters such as Tesla Inc. and other European companies could face an average of those duties.

The EU inquiry doesn’t name specific producers, but the probe will focus on all manufacturers in China that export to the EU, including Tesla and major Chinese brands such as BYD Co., SAIC Motor Corp. and Nio Inc.

The trade tensions come as the EU toughens its economic stance toward Beijing, with the bloc increasingly wary of China’s use of massive public support in critical sectors.

If the EU does impose duties, that would curtail one of the last major markets for Chinese EV exports, and raises the prospect of a cascade of defensive moves in places like the UK to protect their markets being flooded by vehicles redirected from the EU.

— With assistance from Albertina Torsoli and Tom Hancock