MILAN, Sept 14 (Reuters) – German auto stocks, heavily exposed to China, dragged European auto indexes on Thursday, after Beijing’s government warned the European Commission that its investigation into state subsidies in China on electric vehicles could harm trade relations.
At 0.09 GMT, the STOXX Europe 600 Auto index led decliners, down 1.4%, while the broader market was firm.
Porsche, which counts China as its biggest market, recorded a drop of 2.99%. BMW, which exports the iX3 from China and plans to export the Mini from 2024, fell 2.18%, with Mercedes-Benz down 1.9% and Volkswagen down 1.6%.
Shares of French carmakers Renault and Stellantis, which are less exposed to the Chinese market than their German counterparts, recorded a slight decrease of 1.13% and 0.9% respectively.
German carmakers, which rely on China for about a third of passenger car sales, reacted with restraint to the EU’s announcement to investigate whether Chinese state subsidies to electric vehicle manufacturers unfair competition in Europe.
While German Economy Minister Robert Habeck welcomed the move, the VDA car association warned that the EU should focus on creating the conditions for European players to succeed, from reducing electricity prices to the reduction of bureaucratic obstacles.
“For German manufacturers, the risk of Chinese retaliation should not be ignored,” UBS wrote in a research note on Thursday.
French carmakers have a much smaller presence in China, reducing the risk of a hit to the industry if politicians take a stronger stance.
French President Emmanuel Macron has long called on the EU to strengthen its autonomy from China and demand a higher level playing field.
However, Renault was China’s second largest exporter of electric vehicles last year after Tesla, with the delivery of the Dacia Spring EV in Europe potentially putting it in the line of fire for even which are punitive tariffs.