(1)

On 4 October 2023, the European Commission (‘the Commission’) initiated on its own initiative an anti-subsidy investigation with regard to imports into the Union of new battery electric vehicles (‘BEVs’) designed for the transport of persons originating in the People’s Republic of China (‘the country concerned’, ‘the PRC’, or ‘China’) pursuant to Article 10(8) of Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not member of the European Union (‘the basic Regulation’). It published a Notice of Initiation in the Official Journal of the European Union (2) (‘the Notice of Initiation’).

(2)

The Commission initiated the investigation on the grounds that imports of BEVs originating in the PRC are being subsidised and are thereby causing injury (3) to the Union industry.

(3)

After an in-depth analysis of recent market developments and considering the sensitivity of the electric vehicle sector and its strategic importance to the EU economy in terms of innovation, value added and employment, the Commission collected market information from various independent sources. This information tended to show the existence of subsidisation by the PRC which negatively affects the situation of the Union BEV industry.

(4)

On the basis of readily available information, there was sufficient evidence demonstrating that imports of the BEVs originating in the PRC benefit from countervailable subsidies provided by the Government of the People’s Republic of China (‘the GOC’). Those subsidies have allowed the subsidised imports to rapidly increase their market share in the Union to the detriment of the Union industry.

(5)

The available evidence showed the likelihood of substantially increased subsidised low-priced imports that would pose an imminent threat of injury to an already vulnerable Union industry. Such a surge of low-priced imports, gaining significant market share in a rapidly growing market in which a significant and sustained rate of investments is needed as the Union market transitions to full electrification, would lead the Union industry to incur heavy losses which could become rapidly unsustainable.

(6)

In these special circumstances, since the Commission was in possession of sufficient evidence tending to show the existence of subsidisation, threat of injury and causal link required for the initiation of an anti-subsidy investigation, it decided, in accordance with Article 10(8) of the basic Regulation, to proceed with such an initiation without having received a written complaint by or on behalf of the Union industry.

(7)

Prior to the initiation of the anti-subsidy investigation, the Commission notified the GOC that it had decided to initiate an ex officio proceeding concerning imports of new BEVs from the PRC and invited the GOC for consultations in accordance with Article 10(7) of the basic Regulation. The GOC accepted the offer for consultations, which were held on 2 October 2023. During the consultations, due note was taken of the comments submitted by the GOC. However, no mutually agreed solution could be reached.

(8)

The Commission, on its own initiative, made imports of new BEVs designed for the transport of persons, originating in China, subject to registration as of 7 March 2024 by Commission Implementing Regulation (EU) 2024/785 of 5 March 2024 (‘the registration Regulation’) (4) .

(9)

The investigation of subsidisation and injury covered the period from 1 October 2022 to 30 September 2023 (‘the investigation period’ or ‘the IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2020 to the end of the investigation period (‘the period considered’).

(10)

In the Notice of Initiation, interested parties were invited to contact the Commission in order to participate in the investigation. In addition, the Commission specifically informed the known Union producers, the known exporting producers and the GOC, the known importers, suppliers and users, as well as associations known to be concerned by the initiation of the investigation and invited them to participate.

(11)

Pursuant to Article 11(11) of the basic Regulation, Union producers of the like product were requested to cooperate with the Commission.

(12)

A number of Union producers requested the Commission to keep their identity confidential (‘anonymity’ or ‘anonymous treatment’) due to a risk of significantly adverse effect in the form of retaliatory actions. The Commission individually examined the merits of each anonymity request. The Commission established that the companies showed good cause within the meaning of Article 29(1) of the basic Regulation and that there was evidence of a significant possibility of retaliation in each individual case. The Commission therefore accepted that the identity of those companies should not be disclosed.

(13)

Other Union producers which came forward did not request anonymity. The Commission considered that there could be the risk that the Union producers, which requested and showed good cause for anonymous treatment of their identity, be identified by deduction. In order to ensure that the identity of the Union producers requesting anonymity is effectively treated as confidential, anonymity was extended also to all Union producers.

(14)

Furthermore, a number of interested parties other than the Union producers (such as suppliers and importers) requested anonymity claiming a risk of significantly adverse effect in the form of retaliatory actions. The Commission carefully analysed the requests received and considered that all the parties concerned showed good cause within the meaning of Article 29(1) of the basic Regulation. Therefore, anonymous treatment was also granted to the interested parties in question.

(15)

The GOC requested the Commission to clarify the factual and evidentiary basis of the Union producers’ claim of a risk of retaliation on the basis of which certain Union producers have been granted confidentiality. The GOC also requested the Commission to make available the submissions filed by the Union producers requesting confidential treatment of their names. The GOC also argued that it did not have any opportunity to comment on the granting of anonymity to the Union producers and on the supposed good cause in the confidentiality requests of the Union BEV producers, even though the alleged risk of retaliation supposedly targeted the GOC. Furthermore, the GOC claimed that the granting of anonymity to Union producers who did not request it was WTO inconsistent as well as in breach of Article 29(1) of the basic Regulation as the granting of anonymity is contingent upon the demonstration of good cause by those producers. The China Chamber of Commerce for Import and Export of Machinery and Electronic Products (‘the CCCME’) claimed that the confidentiality granted to the Union producers was inconsistent with Article 29(1) of the basic Regulation as the Commission did not demonstrate good cause in this regard.

(16)

The Commission considered that it already provided sufficient information in this respect in the Note to the file of 25 October 2023 (5) whose content is reproduced in extenso in this recital. It was explained therein that Union producers claimed a risk of significantly adverse effect in the form of retaliatory actions. The Commission considered that the disclosure of further details on the factual and evidentiary basis of each Union producer’s claim would be liable to reveal the identity of the cooperating Union producers by deduction because of the low number of groups manufacturing BEVs on the Union market and the significant amount of public and subscription-based information available about these groups. For this reason, the Commission could not make available in any format the anonymity requests filed. Furthermore, as it was explained in recital (13) the Commission had to grant the anonymity also to Union producers that did not request it, in order to protect the identity of the Union producers which requested and showed good cause for confidential treatment of their identity as they could be identified by deduction. Therefore, the request and the claims were rejected.

(17)

The GOC claimed that there was no information or evidence in the non-confidential file of the investigation regarding the registration of the Union BEV producers as interested parties within the 7-day time limit. Furthermore, the CCCME stated that the failure to make available the registration information and provide clarity as regards the cooperation of the Union BEV producers stands in stark contrast to the treatment of the registration forms and correspondence as well as submissions of the Chinese exporting producers which were made available in the non-confidential file without delay. CCCME further claimed that this impinges upon its rights of defence to make meaningful comments on the support of the Union industry in the investigation.

(18)

The Commission noted that according to the Notice of initiation (6) there was no such 7-day time limit for Union producers or other categories of parties to register as interested parties. The 7-day time limit that the Commission understands the GOC referred to was for the Union producers to submit a sampling form. In this respect, the Commission recalled that according to Point 5.6 of the Notice of initiation, Union producers which submitted sampling information will be considered as interested parties as from the moment they submitted such information. This was the case in this investigation.

(19)

Furthermore, contrary to the anonymity granted to the Union producers, anonymity was not requested by any Chinese exporting producers. Therefore, the information available in the non-confidential file regarding the registration and cooperation of Union producers was not comparable with the respective information available for the Chinese exporting producers. In particular, given that non-confidential submissions by parties who were granted anonymity must first be thoroughly checked to ensure that anonymity was preserved, the availability of these submissions in the non-confidential file was slightly delayed. Nevertheless, interested parties had enough time to comment on the respective documents once they were added to the non-confidential file and therefore no rights of defence were breached. As concerns the support of the Union industry, as explained in recital (45), in an ex officio investigation, the notion of support of the Union industry is not relevant.

(20)

Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings. Hearings with the Commission services were held with the GOC, the CCCME, Tesla (Shanghai) Co., Ltd. (‘Tesla’), Smart Europe GmbH (‘Smart’), Company 24, Company 22 and Green World Mobility B.V. (‘Green World Mobility’) (7).

(21)

The CCCME claimed that the Commission hampered the CCCME’s rights of defence by the undue delay of granting interested party status to the CCCME and imposing a heightened administrative burden on the CCCME from an overly detailed examination of Powers of Attorney by the Commission.

(22)

In this case, the CCCME got the status of an interested party on 10 October 2023. The CCCME was requested to demonstrate that it was representing companies having an objective link between their activities and the product under investigation. Therefore, the Commission carefully assessed the Power of Attorney documents provided by the exporting producers to the CCCME. The Commission concluded that this assessment did not hamper the rights of defence of the CCCME as the CCCME received sufficient opportunity to provide comments during the provisional stage of the investigation. In particular, an extension of the deadline to provide comments on initiation was granted so as to ensure that the CCCME had the same time for comments as other interested parties. Therefore, the claim was rejected.

(23)

In the Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 27 of the basic Regulation.

(24)

To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all Union producers to provide the information specified in the Notice of Initiation.

(25)

Several Union producers provided the requested information and agreed to be included in the sample.

(26)

Pursuant to Article 27 of the basic Regulation, the selection of the sample was based on the largest representative volume of sales and production in the Union of the like product during the investigation period. The Commission also considered the geographical spread of Union producers within the Union as well as ensured the inclusion of a wide range of BEVs models. The provisional sample consisted of four Union producers. The sampled Union producers accounted for 38 % of sales and 34 % of total production volume of the Union industry in the investigation period. The Commission invited interested parties to comment on the provisional sample.

(27)

The Commission received comments on the provisional sample and cooperation of Union producers from Company 21, the GOC and the CCCME.

(28)

The GOC claimed that there was no “save date” in the header of the sampling forms as was the case for the sampling forms of the Chinese exporting producers. Furthermore, the GOC, the CCCME and Company 21 stated that as the identity of the Union producers was not disclosed and there was a lack of detail on the sampling criteria used by the Commission, they could not comment on the sample of the Union producers and cross check the information provided by the Commission. Therefore, the GOC requested the Commission to: (i) clarify how many Union producers timely registered their interest in the investigation and were cooperating; (ii) indicate how many Union BEV producers that were cooperating were not members of the European Automobile Manufacturers’ Association (‘ACEA’); (iii) clarify whether companies 2, 4, 6, 10, 23 and 25 filed sampling forms and why their sampling forms were not available in the non-confidential file of the investigation – this request was also made by CCCME who added also companies 30 and 31 in this regard; (iv) clarify whether any of the sampled companies belonged to the same group; (v) whether the Commission was applying the single economic entity principle with regard to the sampled Union producers and whether all related parties of the sampled producers were being required to provide the relevant information; (vi) clarify what was implied by the inclusion of models in the context of the sample selection and how did the models relate to the supposed ‘segments’ since for the Chinese exporting producers, undefined ‘segments’ were used as a sampling criterion; (vii) whether or not the Union producers with the highest production and sales volumes in the investigation period were included in the sample and if not included, to explain on which basis and for what reasons the Commission decided not to include those companies in the sample; (viii) clarify the weight and relevance of each criterion in the selection of the Union producers’ sample.

(29)

The CCCME also requested some of this information during the investigation. Company 21 claimed that one more Union producer should be included in the sample to enable the Commission to carry out an objective injury examination based on positive evidence, taking into account the overall relevance of the criteria put forward by the Commission for the sampling selection.

(30)

The Commission noted that the “save date” that appears on documents in the non-confidential file of the investigation was automatically generated by the TRON.tdi application used by the Commission and interested parties in trade defence investigations. However, due to the anonymity granted to the Union producers, the cooperating Union producers submitted the sampling forms via email and not via the TRON.tdi platform as the Chinese exporting producers did. Furthermore, all sampling replies of the Union industry were added in the non-confidential file together in a zipped folder following a thorough check in order to preserve the confidentiality of the cooperating Union producers. The TRON.tdi application cannot add a “save date” on a zipped folder. Therefore, such “save date” is not visible on the sampling form of the Union producers.

(31)

The Commission noted that all the sampling forms submitted by the Union producers were made available in the non-confidential file of the investigation on 30 October 2023 (8). As indicated in the non-confidential file, the sampling forms were submitted by the Union producers between 11 and 13 October (following a short deadline extension granted to some Union producers of two days due to the complexity of the sampling form). However, the Commission added them to the non-confidential file after having checked that the non-confidential versions of the sampling replies did not inadvertently disclose the identity of the Union producers who were granted anonymity, as explained in recitals (12) to (14). Furthermore, as anonymity was granted to the Union producers, the Commission could not disclose whether the sampled Union producers belonged to the same group and whether they were members of ACEA, as this could render the respective entities recognisable and thus jeopardise their anonymity.

(32)

Moreover, for the same reasons, the Commission could not disclose whether the Union producers with the highest production volumes and sales were sampled. Nevertheless, the Commission recalled that Article 27 of the basic Regulation contains no obligation to select only the largest producers in terms of production and sales volumes, nor does it contain any ranking in the criteria listed therein. This provision is meant to ensure that the Commission selects the most representative sample that can be reasonably investigated within the time available by applying such criteria. The selection of the sample in this investigation fully complied with this rationale while taking into account the specificities of this case.

(33)

The Commission also ensured the representativeness of the sample by including a wide range of BEV models which could be compared on the Union and export sides. As regards the question whether the Commission was applying the single economic entity principle with regard to the sampled Union producers and whether all related parties of the sampled producers were required to provide the relevant information, the Commission noted that the single economic entity principle applies to exporters for the calculation of the export price for exports made via traders/importers located in third countries and therefore it was not clear what the GOC was requesting in this regard. Furthermore, as it was specified in the sampling form for the Union producers, the sampling form was requested to be submitted at production legal entity level and not at group level. Therefore, each legal entity with production in the Union was requested to submit a sampling form.

(34)

The Commission, after having carefully analysed all comments, considered that the sample was consistent with EU and WTO law. The sample represented adequately the Union producers of the like product. At the outset, the Commission recalled that the relevant sampling provisions are laid down in Article 27 of the basic Regulation. The relevant provisions provide for a broad discretion in choosing the sample according to the relevant criteria listed therein. In particular, Article 27(2) of the basic Regulation clearly states that ‘the final selection of parties […] shall rest with the Commission.’ Furthermore, the Commission recalled that the WTO Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’) does not contain provisions on sampling, which again confirms the broad discretion of the Commission on this matter. As explained in recital (26), based on the information provided in the sampling replies, the proposed sample amounted to 38 % of sales and 34 % of production in the Union in the investigation period. The Commission considered these percentages representative under Article 27 of the basic Regulation. The sampling methodology was explained in detail in the Note on the provisional sample of 30 October 2023.

(35)

In order to ensure the largest representativity of Union producers of BEVs, in addition to volumes, the Commission also considered the geographical spread of Union producers within the Union and ensured the inclusion of a wide range of BEVs models. The geographical spread was considered, like in other anti-subsidy investigations to confirm the representativeness of the sample representativity in line with Article 27 of the basic Regulation.

(36)

Moreover, a wide range of BEVs models was taken into consideration by the Commission in order to ensure a large degree of representativity when comparing them with the corresponding models exported by the Chinese exporting producers in accordance with the margin of discretion it has in selecting the final sample.

(37)

Therefore, the Commission considered that the sample was representative (including geographically) while a larger sample could not be reasonably investigated within the time available. Therefore, the claim was rejected.

(38)

The CCCME claimed that the non-confidential replies of the sampling forms of the Union producers did not comply with Article 29(2) of the basic Regulation as the Union producers did not reply to all the questions included in the sampling form. In particular, the CCCME stated that the Company 11 replied only to five of the 22 questions included in the sampling form. Furthermore, the CCCME argued that Company 11, Company 12 and Company 15 did not provide the information regarding employment, while Company 7, Company 8, Company 9 and Company 13 provided only indexed figures on employment during the investigation period, but no data on employment for the previous years while the sampling form indicated production during those years. Furthermore, the CCCME claimed that none of the Union producers justified the existence of ‘exceptional circumstances’ in any context and redacted the entire information.

(39)

The Commission disagreed with these claims. The sampling form included 10 main questions. In addition, questions 5 and 6 each included one additional sub-question which, in view of the anonymity granted to the Union producers, were confidential by nature as it requested the names of the related companies involved in the production and sales of the like product produced in the Union and by the sub-contractors. It is also clear that if a company did not have related companies involved in the production and sales of the like production produced in the Union or sub-contractors, it did not need to reply to the respective sub-question. This was the case of Company 11, who reported under question 6 that it did not have sub-contractors. Therefore, in this case it was not clear why the CCCME considered that Company 6 did not reply to the sub-question 6(1). Furthermore, questions 8 and 9 included 5 and 4 additional sub-questions respectively. However, as it was explained in the Note for the file of 25 October 2023 (9), question 8 and 9 which had to be filled in with a yes/no reply, could reveal the identity of the respective Union producer, based on market knowledge about the structure of the Union industry and therefore, the Commission concluded that replies to these questions (together with the sub-questions indicated) could not be summarized in the non-confidential version of the sampling form without risking revealing confidential information within the meaning of Article 29(2) of the basic Regulation, thus jeopardising the anonymity granted to the Union producers. Therefore, the Union producers did not need to provide a non-confidential reply to these questions. Company 11 replied to question 1, 2, 4, 5, 6 and 7. The reply to question 3 which requested the Union producers to report the BEV models that were produced and sold in the Union, in view of the anonymity granted, was confidential by nature as it could render the respective entities recognisable and thus jeopardise their anonymity.

(40)

As concerns the number of employees, the Commission noted that Company 11 manufactured BEVs only in the investigation period and in small volumes. Furthermore, the number of employees is not a criterion for the sampling selection. As explained in recital (26), the criteria used for the sampling of Union producers was production and sales volume, geographical spread and the BEV models. Therefore, the fact that one Union producer did not report the number of employees in the investigation period, or some Union producers reported the number of employees only in the investigation period, did not invalidate their reply to the sampling form. Therefore, the claim was rejected.

(41)

As regards the claim that the Union producers did not justify the existence of ‘exceptional circumstances’ in any context and redacted the entire information, the Commission noted that it was not clear which information the CCCME referred to. In case the CCCME referred to the contact information of the companies, as anonymity was granted to the Union producers as explained in recitals (12) and (13), the Union producers did not need to invoke ‘exceptional circumstances’ for the reply to the sampling form. Furthermore, the Union producers could not report their contact information as this could render the respective entities recognisable and thus anonymity would be jeopardised. Therefore, the claim was rejected.

(42)

The GOC and the CCCME claimed that according to a MLex press report, the German BEV producers such as Volkswagen, BMW and Mercedes-Benz had not been sampled. The GOC and the CCCME argued that this was the second time since the initiation of the investigation that MLex had information regarding the sampling of Union producers, which was not available to the CCCME and those Chinese exporting producers that were cooperating in the investigation. The CCCME and the GOC argued that MLex was aware of the anonymity requests of the Union producers on 13 October 2023 whereas interested parties became aware of this issue around two weeks later. Therefore, the CCCME argued that if the press report regarding the sample of the Union producers was accurate, the CCCME expressed it strong objection with the groups of exporting producers selected arguing that the Commission should use a sample which was statistically representative. It referred in this regard to the Judgment of the Court of Justice in Fliesen-Zentrum Deutschland (10). Furthermore, the CCCME argued that excluding the major Union producers from the sample represented a significant departure from well-established Commission practice wherein the largest producers are typically sampled for a comprehensive and representative analysis.

(43)

The Commission cannot comment on the content of press reports, since what matters for the present investigation is the information available on file. Furthermore, as explained in recitals (12) and (13), anonymity was granted to Union producers and therefore the Commission cannot disclose the names of the sampled Union producers. Moreover, as explained in recital (26), the proposed sample amounted to 38 % of sales and 34 % of production in the Union in the investigation period and these percentages were considered to be representative under Article 27 of the basic Regulation. Therefore, the claims were rejected.

(44)

The CCCME claimed that the Commission should disclose the level of cooperation of the Union BEV producers as this was a factual issue at the core of any threat of material injury assessment to be made by the Commission. The CCCME claimed that if the Union industry BEV producers did not want protection, no measures on imports of BEVs from China should be imposed.

(45)

The Commission noted that the level of cooperation in an investigation is required for the standing exercise only. As the current investigation was initiated ex officio the Commission did not need to disclose the level of cooperation. There was enough cooperation of the Union producers at the sampling stage in order for the Commission to select a representative sample of Union producers and continue the investigation. As explained in recital (26), the sampled Union producers accounted for 38 % of sales and 34 % of total production volume of the Union industry in the investigation period which was considered representative. Finally, in the section “Union interest” below, the Commission assessed whether it was in the interest of the Union to impose countervailing measures on imports of BEVs from China. Therefore, the claims were rejected.

(46)

To decide whether sampling was necessary and, if so, to select a sample, the Commission asked unrelated importers to provide the information specified in the Notice of Initiation.

(47)

No unrelated importers cooperated and therefore sampling was not necessary.

(48)

To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in the PRC to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the People’s Republic of China to the European Union to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(49)

Twenty-one exporting producers/group(s) of exporting producers in the country concerned provided the requested information and agreed to be included in the sample. The Commission provisionally selected a sample of three cooperating producer groups. In addition to absolute volume of exports to the Union, the Commission further considered the sales of BEVs models in different ‘market segments’ (understood as in terms of different ‘product types’) in order to properly ensure the largest representativity of the industry of the product under investigation. The Commission also considered the potential eligibility of the groups of exporting producers for the subsidy schemes included in the Memorandum on sufficiency of evidence on the basis of the replies to the sampling questionnaires. Given the nature and effects of the subsidisation at issue, leading to increased production of BEVs and the threat of injury potentially suffered by the Union industry thereof, the availability of spare capacities was also taken into account for the selection. The sampled groups were:

(50)

The sampled groups of exporting producers (‘the sampled exporting producers’) represented in pieces 43 % of the production, 51 % of the domestic sales, and 39 % of the estimated total export volume from the PRC to the Union in the investigation period.

(51)

In accordance with Article 27(2) of the basic Regulation, all known exporting producers, and the GOC were consulted on the selection of the sample.

(52)

Comments on the proposed sample were received from the GOC, the CCCME, and three groups of exporting producers, one included in the sample (BYD), two not included namely Tesla and Great Wall Motor Company Limited (‘GWM’) and one Union producer (Company 24).

(53)

All these parties enquired about the reasons for deviating from the Commission’s standard practice of just using the largest representative export volume to the Union as a decisive criterion to sample exporting producers. Additionally, they claimed that in using elements other than the largest volume of exports in the sampling process, such as the eligibility of the exporting producers for the subsidy schemes and the variety of models sold in different market segments, the Commission failed to select a sample in accordance with the requirements set out under Article 27(1) of the basic Regulation and under Article 6.10 of the WTO Anti-Dumping Agreement in absence of a provision on sampling in the SCM Agreement. Tesla requested to be included in the sample given the Commission’s practice to rely on the “largest representative volume of exports to the Union”.

(54)

In this respect, the Commission noted that Article 27 of the basic Regulation contains no obligation to select only the largest producers in terms of volume, nor does it contain any ranking in the criteria for the purpose of sampling. In order to ensure the effectiveness of the investigation, the Commission enjoys a margin of assessment (11) to select a sample based on criteria such so as to ensure that it is representative of the eligibility of the subsidies alleged in the Notice of Initiation. In particular, Article 27(2) of the basic Regulation states that “the final selection of the parties […] shall rest with the Commission”. Accordingly, the Commission has considered other elements which were also considered in past anti-subsidy investigations (12) to guarantee the sample representativity of the BEVs industry in China.

(55)

The sample selection of exporting producers not only relied on the volume of exports, but also on the variety of BEV models sold in different market segments (i.e. product types), the representativity of the companies/groups in terms of potential eligibility of the schemes included in the Memorandum on sufficiency of evidence, and overall production capacity including spare capacity. Considering all these factors together, the sample selected was deemed to be the most representative sample that could be reasonably investigated within the time available. The selection of the sample fully complied with the provisions of Article 27 of the basic Regulation, taking into account the specificities of the case. Considering the strong representativity of the sample in view of the criteria listed in recital (49) and the time available for the investigation, the Commission did not consider that the selection of an additional exporting producer in the sample was appropriate. Therefore, Tesla’s request to be selected in the sample was rejected.

(56)

Furthermore, the GOC claimed that the Commission did not provide the requested clarification on the sample selection of the exporting producers, especially regarding the consideration and relative weights of the four criteria taken into account for the sample selection, the basis for determining the export sales of the different market segments, the basis for assessing the potential eligibility of the groups of exporting producers for the subsidy schemes and availability of spare capacities, and the meaning of the Commission’s decision to rely on the sampling forms replies for the purpose of the sampling exercise, without prejudice to and regardless of whether they may be linked to other groups of exporting producers.

(57)

The Commission considered its selection of three company groups to be the most representative volume it could investigate within the time available, for which it did not solely look at absolute figures of production, sales, and exports, but considered a number of additional elements to assess the representativity of the sample, including the variety of BEV models sold in different market segments, the representativity of the companies/groups in terms of potential eligibility of the schemes included in the Memorandum on sufficiency of evidence, and overall production capacity including spare capacity based on the information provided in the sampling form. A comprehensive approach was taken in assessing these elements, where none of the individual elements was considered to be of decisive nature. The market segments were considered based upon publicly available information of the models sold by the exporting producers on the Union market. As set out in the Note on the definitive sample of exporting producers, the Commission considered the eligibility of subsidy schemes of the sampled exporting producers to be an objective criterion meant to ensure that the sample is representative of the level of subsidisation in the country concerned. The selection was based upon the sampling forms received from the cooperating exporting producers, which should include all their related parties relevant for the investigation. Since these replies are self-declared, the Commission made it explicit that any further assessment with regard to related parties of these sampled exporting producers might be warranted.

(58)

According to the GOC and the CCCME, no justification was provided in the final sample decision for the exclusion of the largest Chinese exporting producer Tesla from the exporting producers’ sample.

(59)

Tesla was indeed one of the largest exporting producers in terms of exports to the Union during the investigation period. However, contrary to CCCME’s claim, and as explained in recitals (54) and (57), the selection of the sample should not solely be based on the largest volume of production, sales or exports, but on the largest representative volume. As set out in the Note on the definitive sample of exporting producers, the final sample selection was considered to be adequately representing the exporting producers of BEVs operating in China and was based on the largest representative volume of production, sales or exports to the Union during the investigation period that could reasonably be investigated within the time available, taken into consideration the elements as set out in recital (57). Therefore, the Commission rejected the claim of the GOC and the CCCME.

(60)

Further, Tesla argued that the Commission did not sample full groups, but only selected some of the exporting producers and related companies within the sampled group.

(61)

This comment is factually incorrect. The Commission did not make its sample on the basis of individual entities but on the basis of groups identified in the information provided in the replies to the sampling forms. All producing entities belonging to such groups are part of the sample, irrespective of whether they are individually mentioned in the Note on the definitive sample of exporting producers.

(62)

Additionally, both the GOC and the CCCME raised that by selecting three Chinese-owned companies and not sampling any foreign-owned companies or joint ventures, Chinese brands are discriminated against. The GOC, BYD, and Tesla pointed out that the Memorandum on sufficient evidence on which the Commission based its assessment on potential eligibility for the subsidy schemes and sample selection is biased and purposefully identified and targeted certain producers in the PRC. The GOC, the CCCME, Tesla, and GWM claimed that, by selecting a sample on criteria likely to reach an affirmative conclusion of threat of injury, the Commission did not comply with the obligation to carry out an objective examination of injury set out under Article 8(1) of the basic Regulation. All commenting parties stressed the lack of sufficient disclosure in the methodology and the analysis followed to select the sample.

(63)

The Commission rejected the argument that it acted in a discriminatory manner. As explained in the Note to the file on the selection of a definitive sample, first, some of the sampled groups have joint ventures with European car manufacturers. Second, any measure imposed as a result of the investigation would apply to all BEVs produced and exported from the PRC, irrespective of the ownership of the exporting producers. Third, most of the companies/groups that came forward to be sampled are either fully or partly Chinese owned and/or have joint ventures agreements with foreign partners.

(64)

The potential eligibility of the schemes included in the Memorandum on sufficiency of evidence was one amongst several elements that the Commission considered to ensure the largest representativity of the BEV producers and to substantiate the representativity of the sample in accordance with Article 27 of the basic Regulation. In addition, the potential eligibility of subsidy schemes is an element which, far from being biased, is an objective criterion meant to ensure that the sample is representative of the level of subsidisation in the country concerned. Thus, when using potential eligibility as a criterion to choose among cooperating exporting producers, the Commission did not select companies with the highest subsidisation since, at the time of the sampling decision, the specific amounts received by those companies were unknown. Moreover, the fact that a company may be a priori potentially eligible to receive a subsidy from a specific scheme does not automatically mean that such a company benefited from such a scheme during the investigation period. Therefore, the Commission considered that the companies failed to demonstrate how the Commission made a manifest error of assessment (13) in selecting the sampled exporters, which would have led to misleading results and constituted an infringement of the obligation to carry out an objective examination of injury – in which the Commission recalls it also enjoys a broad discretion (14).

(65)

Finally, contrary to the arguments made by some parties, the sampling methodology was already explained in detail in the note on the provisional sample released on 25 October 2023.

(66)

The exporting producer GWM requested to be included in the sample and to have one sampled company to be removed, arguing that the selected company was not representative enough of the entire BEVs industry in the PRC in terms of the brand, technology, and pricing of its main BEV model exported to the Union. GWM argued that it should be included in the sample, because it was one of the few exporting producers that had timely submitted the requested sampling information and one of the largest representative BEV exporters in the PRC in view of the significantly different BEV models it exported to the Union, its geographical location, its compliance with products safety and environment technology, its significant R&D investment, and the vertical integration of its supply chain system.

(67)

All companies that came forward in the sampling exercise submitted their replies within the deadline set in the Notice of initiation or within the agreed deadline following justified extension requests. As set out in recitals (53) to (57), the Commission considered the sample selected to be the most representative sample that could be reasonably investigated within the time available. The selection of the sample fully complied with the provisions of Article 27 of the basic Regulation, while taking into account the specificities of the case. Since none of the arguments made by GWM invalidated the choice of sample by the Commission, GWM’s request to be selected in the sample was rejected.

(68)

The CCCME, BYD, GWM, and Tesla further argued that spare capacity could not be considered a factor to be used to establish a sample but is a factor that should be evaluated during the course of the investigation.

(69)

This investigation is based on a threat of injury. Therefore, information about the level of potential sales of exporting producers in the near future was considered to be of importance in selecting a representative sample. Having the spare capacity as one of the elements underpinning the Commission’s decision on the sample did not exclude evaluating this factor in the course of the investigation for the purpose of establishing a threat of material injury to the Union industry.

(70)

In light of the aforementioned reasons, the Commission decided to retain the proposed sample as the final sample.

(71)

In their comments following the sample decision, NIO requested additional clarifications vis-à-vis its specific situation amongst the not sampled producers.

(72)

The Commission addressed their comments in a separate submission sent only to the company.

(73)

After the sampling exercise, on 8 November 2023, a hearing took place with Smart, which requested not to be considered as part of the Geely Group, but as a separate exporting producer. For this claim, Smart notably relied on findings from the European Commission’s Directorate General for Competition in a merger procedure with regard to the production of Smart BEVs in the PRC (15).

(74)

The Commission rejected this claim. First, merger decisions are taken on the basis of a different legal basis than the basic Regulation, which sets up different objectives and requires different types of assessment. Second, the merger decision provided that the joint venture between Daimler and Geely is a fully functional joint venture but did not reach any conclusion as to its dependence from the Geely Group. In fact, the decision showed that Smart’s manufacturing and distribution operations in the PRC are conducted from a joint venture with Geely. Moreover, the sales and marketing for the Union also fall under the joint venture. Besides, considering the existing business relationship between Smart and the Geely Group, the two parties clearly appeared related within the meaning of Article 127 of Commission Implementing Regulation (EU) 2015/2447 (16). On this basis, the Commission concluded that Smart should be treated as part of the Geely group.

(75)

The CCCME deemed the reporting requirements on the sampled Chinese exporting producers to be overly burdensome, especially regarding the information requested from related input suppliers and the translation of annual reports.

(76)

The Memorandum on sufficiency of evidence set out that subsidisation by the GOC spread to the entire production and supply chain of the BEV industry, among others, by the provision of parts and components for less than adequate remuneration. The Commission considered the requested information from related parties of the sampled exporting producers necessary to assess the existence of countervailable subsidies regarding BEV parts and components, including batteries and therefore rejected the claim made by the CCCME.

(77)

The Commission sent questionnaires to the GOC, the three groups of sampled exporting producers, the four sampled Union producers and two users.

(78)

The Commission received questionnaire replies from the GOC, the three groups of sampled exporting producers, the four sampled Union producers and the two users.

(79)

The Commission sought and verified all the information deemed necessary for a determination of subsidy, resulting injury (including threat of injury) and Union interest.

(80)

Verification visits under Article 26 of the basic Regulation were carried out at the premises of the following companies:

(81)

As highlighted in section 3.3, the Commission faced issues of cooperation whereby several Chinese sampled groups failed to provide questionnaire replies for certain companies or submitted incomplete or no information concerning their company structure or cost of production. On this basis, the Commission did not have a complete overview of the companies that should provide a questionnaire reply nor of the share that they represented as part of the total cost of production.

(82)

Hence, based on the information on file, the Commission decided to focus on BEV producers, suppliers of main inputs and other companies that were involved in financing and research and development activities, that provided a questionnaire reply and could be verified in the period preceding the imposition of provisional measures.

(83)

While the Commission also received questionnaire replies from other related companies whose activities fell within the scope of activities that required the submission of a questionnaire reply, the Commission was not able to assess these replies in the period preceding the imposition of provisional measures. The Commission reserves the right to assess the replies in question until the definitive stage of this proceeding.

(84)

According to the GOC, the fact that MLex seemed to have more information about the sample of the Union BEV producers than the interested parties confirmed that the investigation was not transparent and impinged on the interested parties’ due process rights.

(85)

The Commission disagreed with this claim. As noted above in recital (43) the Commission cannot comment on the content of press reports, and the relevant information is contained in the file of the present investigation. The Commission added to the non-confidential file of the investigation all the relevant information in due course and allowed the parties ample opportunities to comment. All comments received were duly assessed by the Commission in the course of the investigation and are explained in the relevant section of this Regulation.

(86)

The CCCME claimed that the Commission delayed the inclusion in the non-confidential file of the investigation the questionnaire replies of the Union industry which was in sharp contrast to the speed with which the Commission uploaded the non-confidential versions of the questionnaire replies submitted by the Chinese exporting producers. The CCCME claimed that these delays contributed to the lack of transparency as regard the Union BEV industry and the injury aspects of the investigation.

(87)

The Commission disagrees with this claim. As explained in recitals (12) and (13), the Union producers were granted anonymity. Therefore, the Commission needed to check carefully that the documents submitted by the Union industry did not inadvertently disclose the identity of the Union producers and therefore jeopardise the anonymity granted. Such checks were time consuming. The CCCME and other interested parties had ample time to comment on the questionnaire replies once they were added to the non-confidential file of the investigation.

(88)

The CCCME claimed that the absence of correspondence in the non-confidential file between the Commission and ACEA was a clear indication of lack of transparency in the investigation as the data on macroeconomic indicators was usually submitted by trade associations. The CCCME requested the Commission to clarify how macroeconomic data will be gathered and evaluated in the investigation.

(89)

The Commission disagreed with this claim. There is no legal requirement for the Commission to obtain the data on macroeconomic indicators from a trade association such as ACEA. The Commission can use also other sources of information. These sources and the assessment of the macroeconomic indicators are provided in the section “Injury”. The Commission could not disclose the source and the methodology of the assessment of the macroeconomic indicators before the investigation was finalised at provisional stage.

(90)

The CCCME noted that Company 29 submitted certain information only in a confidential version and that, as a consequence, the interested parties were prevented from understanding and commenting on the information submitted by Company 29. Therefore, the CCCME asked the Commission to make this information available in the non-confidential file.

(91)

The Commission checked this information and concluded that it was not susceptible of meaningful summarisation. Furthermore, the Commission did not use this particular information in the current investigation. Therefore, the request was rejected.

(92)

The non-confidential version of the main information requested in the tables of the questionnaire for the sampled Union producers was added – on an indexed and consolidated basis (i.e. the data of the sampled Union producers was aggregated) in the non-confidential file of the investigation by the Commission. The Commission considered it appropriate not to add a non-confidential version of the respective tables of each Union producer separately in order to protect the anonymity of the identity of the sampled Union producers as there was a risk that the trends of the indexes on a per company basis could inadvertently reveal the identity of the sampled Union producers and therefore jeopardise the anonymity.

(93)

In this regard, the CCCME asked the Commission for clarification as to (i) how the justification for the change in practice of the Commission explained in recital (92) was supported by facts on the case record because each of the sampled Union producers provided their individually indexed data for several of the economic indicators (including for production capacity, production, sales volume and value to related and unrelated parties and employment) for the period considered in the sampling form responses that were made available in the non-confidential file of the investigation, (ii) how the individually indexed data and trends thereof pertaining to the remaining injury indicators could reveal the identity of a Union BEV producer, and (iii) how the individually indexed data of the four Union producers could result in their identities being revealed when the data pertaining to the economic indicators and specifically pertaining to BEVs was not publicly available in the annual reports or other filings of the Union BEV producers while most of the BEV Union producers also producer other vehicle types than BEVs.

(94)

Therefore, the CCCME asked the Commission to add in the non-confidential file of the investigation the indexed data on a per company basis of the four sampled Union BEVs producers as there was no risk of identification of the Union BEV producers based on that data. Furthermore, CCCME recalled that this information was relevant for the presentation of the CCCME’s defence due to the following reasons: (i) the identity of the sampled Union BEV producers has been kept confidential and there was no way of knowing how the companies were actually performing and whether they faced a threat of injury on account of the Chinese BEV imports, (ii) the aggregated indexed data made available by the Commission did not provide any meaningful information and seemed to be in fact incorrect, (iii) the company specific indexed data would permit CCCME to understand the economic situation of the sampled Union producers as their data will be the basis for the assessment of the microeconomic indicators and undercutting/underselling, and (iv) while the CCCME had no way to check the accuracy of the data reported by the Union BEV producers, with company specific indexation at least CCCME would be in a position to compare the data provided originally in the sampling form responses and subsequently in the questionnaire responses.

(95)

The Commission noted that the Union BEV market is made of a small number of groups of producers. There is a significant amount of public information as well as very detailed information available based on a paid subscription regarding the Union BEV industry that CCCME could have access to. Therefore, there is a high risk that the trend of the economic and financial information requested by the Commission in the questionnaire together with certain public and paid subscription-based information could render the respective entities recognisable and thus anonymity would be jeopardised.

(96)

Furthermore, the information requested in the sampling forms was significantly less detailed than the information requested in the questionnaire. For example, as concerns economic and financial information the sampling form asked information about (i) volume of production, (ii) production capacity, (iii) the total volume and value of sales in the Union, (iv) the volume and value of sales to related companies and (v) the number of employees. In addition to this information, the respective file with consolidated indexes that was added in the non-confidential file of the investigation included also information about (i) average selling price of total sales, of the sales on the Union market to unrelated customers and related customers, (ii) the volume, value and prices of export sales to unrelated and related customers, (iii) average unit cost of production, (iv) profit before tax in the Union to unrelated and related customers, (v) capacity utilisation, (vi) closing stock quantity, (vii) labour cost for the BEVs, (viii) cash flow, (ix) total fixed assets used for the production of the product under investigation, (x) return on investment, (xi) total investment in the product under investigation, and (xii) total depreciation in the product under investigation.

(97)

Moreover, the Commission added the file in question in the non-confidential file of the investigation after the sampled Union producers submitted their questionnaire reply. Therefore, the file in question was based on unverified data. Once the data was verified the Commission added to the non-confidential file of the investigation a revised file. The Commission analysed this claim in view of the revised information and found that it was not applicable anymore. Furthermore, the Commission also added in the file the representativity percentages based on sales and production of the sampled Union producers after the data submitted by the sampled Union producers was verified.

(98)

Therefore, based on the above the request was rejected.

(99)

The CCCME also requested that in alternative to the request made in recital (94), the Commission should provide the aggregate data of the four sampled Union producers for each of the injury indicators in absolute numbers or in numerical ranges.

(100)

As explained in recital (95) the Commission has presented the microeconomic indicators in absolute values in section “Injury”. The remaining macroeconomic indicators that the Commission also presented in section “Injury” are not based only on the data of the sampled Union producers, but of the entire Union as explained in section “Injury”. Therefore, the request was rejected.

(101)

As regard the sales volume of the sampled Union producers, the CCCME asked the Commission to provide (i) the percentage of sales of the four sampled Union producers directly to independent customers and to related companies during the period considered in the Union and outside the Union; (ii) the geographical coverage of the sales of the Union producers to related and unrelated parties; (iii) whether all EU sales to the related parties were to related entities that have completed Annex I of the questionnaire; and (iv) what percentage of the total EU production of the four sampled Union producers was exported in each year of the period considered. Furthermore, the CCCME claimed that if not all the related companies have completed Annex I, this would imply that the sales to the independent customers would not be equal to 38% of the sales in the Union as indicated by the Commission in the note to the file concerning the sample of the Union producers.

(102)

As regards the sales to unrelated and related companies in the Union, the Commission provided additional clarifications in the Note for the file of 4 June 2024 (17) where it stated that it collected these sales at the level of the price to the first unrelated customer and consolidated these sales with the sales to unrelated customers of the sampled Union producers. As concerns the sales outside the Union, it is recalled that the purpose of the investigation is, inter alia, to assess the economic and financial situation of the production and sales of the Union industry in the Union and not outside the Union. The impact of the exports of the Union industry was explained in recitals (1183) to (1185). Furthermore, the geographical coverage of the sales of the sampled Union producers was confidential by nature and also the Chinese exporting producers were not requested to submit such information in the non-confidential file. Furthermore, the CCCME did not explain why this particular information was relevant.

(103)

The CCCME also requested the Commission to provide the ratio of the production capacity and production of BEVs and other vehicle types during the period considered.

(104)

The Commission recalled that the current investigation covered only BEVs and therefore the production capacity and production of other vehicles of the sampled Union producers was irrelevant. Therefore, the request was rejected.

(105)

The CCCME requested the Commission to provide the list of Member States covered by the sampled Union producers arguing that the geographical location of the sampled Union producers has been disclosed in cases where Union producers were granted anonymity.

(106)

The Commission recalled that there was a small number of groups of producers of BEVs in the Union. Furthermore, the location of their production is public information. Therefore, in this case, the Commission could not disclose the location of the sampled Union producers as this could render the respective entities recognisable and thus anonymity would be jeopardised. The request was, therefore, rejected.

(107)

The CCCME also requested the Commission to provide (i) a combined list of PCNs sold by the four sampled Union producers during the period considered in the Union and outside the Union, distinguishing between sales to related companies and to unrelated companies, (ii) market segments covered by the sales of the Union BEV producers to related and unrelated entities in the Union and outside the Union and (iii) product characteristics requested in the table titled “product characteristics” in the questionnaire for the Union producers.

(108)

The Commission noted that in the questionnaire it asked information at the PCN level only for the investigation period and not the entire period considered. This was done for both the sampled Union producers and sampled Chinese exporting producers. Therefore, the Commission could not provide to the CCCME information that it did not have. Furthermore, the information regarding PCNs and product characteristics for each sampled Union producer and Chinese exporting producer is confidential by nature and therefore it could not be added in the non-confidential file of the investigation. The PCNs are normally disclosed in the individual disclosure to the sampled Chinese exporting producers and Union producers when the PCNs are not confidential. As concerns market segments, as explained in recitals (1040) to (1048), the Commission did not consider it necessary to carry out a market segmentation analysis. Therefore, the request was rejected.

(109)

Comments on initiation of the investigation were received from the GOC, the CCCME and Company 24.

(110)

The GOC claimed that the investigation is purely political and discriminatory, and that the EU has itself granted billions of euros of subsidies to build a BEV supply chain over the past years and will continue to subsidise its BEV industry in the future. The GOC considered this investigation harmful for the development of the global BEV industry, especially since the Chinese and Union BEV supply chains are interdependent and deeply integrated and will create obstacles to bilateral efforts to combat climate change.

(111)

Not all subsidies are countervailable under the SCM Agreement, and the present investigation is limited to subsidies provided in China for the benefit of exporting producers of the product concerned. In any event the allegations of the GOC do not affect the Commission’s provisional findings that the GOC has provided subsidies to the exporting producers of BEVs, which are countervailable according to the SCM Agreement and the basic Regulation. Contrary to the claim of the GOC, the Chinese countervailable subsidies create unfair competition that would only hamper the development of the global BEV industry, especially the Union industry. Bilateral efforts to combat climate changes cannot be built upon unfair competition by low-priced subsidised BEVs but should be based upon a level-playing field where fair competition and innovation will drive the green transition. Therefore, the claims were rejected.

(112)

The GOC argued that it was not provided with a meaningful and proper opportunity within the meaning of Article 13.1 of the SCM Agreement for pre-initiation consultations, since the Commission did publicly announce the launching of the investigation before inviting the GOC for consultations, which were scheduled during a national holiday period in China, jeopardising the GOC’s ability to conduct proper consultations. The GOC further claimed that it was not provided with any information or evidence with regard to the product scope, the special circumstances justifying the ex officio investigation, the composition of the Union industry, the information and evidence underlying the allegations of subsidisation, data with regard the threat of injury, and data underlying the causal link. Moreover, the pre-initiation consultations did not cover all alleged subsidy schemes.

(113)

In line with Article 10(7) of the basic Regulation and Article 13.1 of the SCM Agreement, the Commission invited the GOC for consultations with the aim of clarifying the situation with regard to the alleged subsidies before the initiation of the investigation. The announcement made by the President of the Commission in the State of the Union speech on 13 September 2023 that the Commission was launching an anti-subsidy investigation into electric vehicles coming from China did not constitute the initiation of the investigation. The GOC received on 22 September 2023 a Note Verbale where the GOC was notified of the European Commission’s decision to initiate an ex officio anti-subsidy proceeding. This was ahead of the national holiday period in China. Together with this Note Verbale the GOC was provided a summary of subsidisation and threat of injury, providing sufficient evidence of the existence of countervailable subsidies, injury and causal link. Neither Article 11(8) of the basic Regulation nor Article 13.1 of the SCM Agreement required the Commission to send the full ex officio file to the GOC before the initiation of the investigation. The schemes that were allegedly not covered by the consultations are not other subsidies identified but fall within schemes that were discussed between the Commission and the GOC during the consultations. Therefore, the claims were rejected.

(114)

The GOC alleged that its rights of defence were affected by the Commission’s denial of a proper deadline extension while the GOC provided a number of reasons for such an extension.

(115)

The Notice of Initiation set out in Section 9 that extensions to the time limits should only be requested in exceptional circumstances and will only be granted if duly justified upon good cause being showed. It moreover specified that regarding time limits for the submission of information other than questionnaire replies, extensions will be limited to 3 days unless exceptional circumstances are demonstrated. The GOC did not demonstrate circumstances of such exceptional nature that would justify a deadline extension of more than 3 days. Due to the weekend that fell within this 3-day extension, the GOC was provided an extension of 4 calendar days. Therefore, the claim was rejected.

(116)

Moreover, the GOC and the CCCME claimed that the requirements to initiate an ex officio investigation pursuant to Article 10(8) of the basic Regulation were not met. According to the GOC and the CCCME, the Commission failed to establish the presence of any special circumstances that would justify the initiation of an investigation without having received a written complaint by or on behalf of the Union industry. The GOC argued that the Union BEV industry could have filed a complaint itself and the fact that it did not was clear proof that there were no exceptional and special circumstances justifying the ex officio initiation of the investigation. The GOC further argued that, according to press reports, the Union BEV producers publicly opposed the current investigation and that this was clear proof that there were no exceptional and special circumstances justifying the ex officio initiation of the case.

(117)

In the Initiation document, the Commission justified sufficiently the ex officio initiation. In particular, the Commission considered the rapid market penetration by the Chinese low-priced and subsidised imports of BEVs, which threatens to irreparably damage the Union industry, to be of a special nature justifying the initiation of an ex officio investigation. The subsidisation of the Chinese BEV sector caused a large and accelerating influx of imports of Chinese produced BEVs on the Union market at prices that depress prices or prevent price increases which otherwise would have occurred, threatening to cause material injury to the Union BEV industry, which might be irrevocable because of the technological development and level of R&D financing required. The possibility that the Union BEV industry could have filed a complaint itself does not affect the Commission’s finding that in this specific case, since special circumstances existed justifying the ex officio initiation of the investigation. Furthermore, the Commission does not comment on press reports. Therefore, the claims were rejected.

(118)

The GOC claimed that the Initiation document contained no evidence of preferential lending and export credit insurance, insufficient evidence of the provision of grants, no evidence of provision of goods and services at less than adequate remuneration, no evidence to investigate government revenue foregone or not collected, and an incorrect understanding of export tax rebates.

(119)

The evidence included in the Initiation document constituted the information reasonably available to the Commission before the initiation of the investigation. As shown in the Memorandum on sufficiency of evidence, which contains the Commission’s assessment on all the evidence at the disposal of the Commission concerning China, and on the basis of which the Commission initiated the investigation, there was sufficient evidence at initiation stage tending to show that the alleged subsidies were countervailable in terms of their existence, amount and nature. For all different schemes alleged in the Initiation document, the Commission provided the legal basis, the specificity of these subsidy schemes to the BEV sector, and, to the extent the Commission had access to it, detailed information from publicly available sources on amounts of subsidies provided by the GOC to the BEV exporting producers. Therefore, the Commission considered that it had sufficient evidence of countervailable subsidisation in accordance with the basic Regulation and the SCM Agreement.

(120)

The GOC stated that in investigations initiated based on a complaint from the Union industry, the questions concerning imports by the Union producers from the country under investigation and their relationships with the exporting producers as well as their activities in the Union are generally verified by the Commission in the course of the standing exercise which is carried out before the initiation of the investigation. Therefore, the GOC requested the Commission to (i) clarify whether the Commission considered in the definition of the Union BEV industry in the Initiation document the fact that some Union producers have production in China, some are owned by Chinese companies or have small production in the Union, (ii) provide the composition of the Union BEV industry in terms of the number of producers and producer groups, the total volume of Union BEV production and the total volume and value of the Union BEV industry sales in each year of the period considered, (iii) clarify whether any Union BEV producers were excluded by the Commission from the list of 12 producers mentioned in the Initiation document, (iv) provide the total volume and value of the imports by the Union BEV producers from China and countries other than China, and (v) provide the volume and value, even if in ranges, of the imports by the Union BEV producers from China in comparison to their total EU production and sales.

(121)

The Commission noted that the current investigation was initiated on its own initiative and not based on a complaint. Therefore, in the current investigation the Commission did not need to carry out a standing exercise. It follows that the GOC’s clarification requests, and the requests of information linked to the Initiation document were not relevant in this regard and therefore were rejected.

(122)

The GOC and the CCCME claimed that in the Initiation document the Commission used selectively and unjustifiably several databases such as Global Trade Atlas (‘GTA’), Eurostat and S&P Global Mobility for different aspects of the injury assessment without trying to reconcile the information or explain how or why a specific data set was appropriate for a specific part of the injury assessment.

(123)

The Commission disagreed with this claim. In the Initiation document the Commission used the information that it had at its disposal before the initiation of the investigation. Apart from Eurostat, the other two databases are not owned by the Commission and therefore the Commission could not fully reconcile the information in these databases. Furthermore, in the Initiation document the Commission explained that when it was possible, it cross-checked the information in these databases and adjusted such information when necessary, with other information it had at its disposal. The Commission also explained that the S&P Global Mobility data provided a more granular view of the types of BEVs sold on the Union market and explained the two modules of data it used. Moreover, the Eurostat database was used for the volume of imports of BEVs from China, while GTA was used for the volume of exports of China to the Union. The volume of imports of BEVs from China into the Union and volume of exports of BEVs from China into the Union are not the same as they are based on data reported by different customs authorities. Furthermore, irrespective of the source of information, the conclusion was the same, i.e. the volume of imports/exports of BEVs from China increased during the period covered by the Initiation document. Therefore, the claim was rejected.

(124)

The GOC claimed that in the Initiation document the Commission had compared the half-year data for 2023 to previous full years such as 2020, 2021 and 2022 to draw conclusions about the Chinese import prices and market share and their price effects on the Union BEV industry, to estimate the future price effects of these imports as well as with regard to the situation of the Union BEV industry, and that such assessment was not objective.

(125)

In the Initiation document the Commission used as a period of assessment the full years 2020, 2021 and 2022 and the first half of 2023 considering that the investigation was initiated in October 2023 as explained in recital (1). For the assessment of the trend of the volume injury indicators such as volume of imports, sales, exports, production, and consumption, the Commission calculated an index only for the full years considering 2020 as a base year. The Commission did not calculate an index for the first half of 2023 using the base year the full year 2020 since for a volume indicator the period of assessment and the base year should be identical (i.e. a half year cannot be compared with a full year). Average prices are not a volume indicator and therefore the Commission calculated an index also for the first half of 2023 using the full year 2020 as a base year. Such assessment is perfectly objective for industries such as the BEV industry whose selling price does not vary per season and as long as the respective period of time is disclosed. As concerns market shares, the Commission calculated the market shares in each full year (2020, 2021 and 2022) as well as the first half of 2023 and explained how the market share evolved during this period. As concerns the conclusions reached by the Commission in the Initiation document regarding the Chinese imports’ price effects on the Union BEV industry and the estimated future price effects of these imports, the GOC did not explain why exactly in its conclusions the Commission was not objective. Therefore, the claim was rejected.

(126)

The GOC claimed that the Union industry’s sales volume and sales prices data were based on different data sources and sets and, therefore, that the Commission’s assessment was not objective. The CCCME claimed that the fact that the Commission used different sets of data for different aspects of the injury assessment made it impossible to obtain an accurate picture of the situation of the Union BEV industry.

(127)

The Commission disagreed with these claims. The information included in the Initiation document is based on information reasonably available to the Commission before the initiation of the investigation. In the Initiation document the Commission had to use several databases such as Eurostat, GTA and S&P Global Mobility as there was no single database that included all the information the Commission needed in its assessment. The fact that the sales volume of the Union industry was not based on the same database as the sales prices, does not make the Commission’s assessment not objective. As it was explained in the Initiation document the database used by the Commission for the assessment of the price trend of the Union industry did not indicate the origin of the car. This was particularly important for the BEVs manufactured by the Tesla group for which certain models of BEVs could be manufactured both in China and the Union. Therefore, the claims were rejected.

(128)

The GOC and the CCCME requested the Commission (i) to provide further details regarding the data modules and reports from S&P Global Mobility used by the Commission in the Initiation document namely regarding the methodology of S&P Global Mobility sales volume and value data collection including the basis of data collection, the source and whether the data includes any estimates and if so the nature of the estimates; and (ii) to disclose the underlying S&P Global Mobility data which the Commission has sorted/selected based on specific parameters. It was further stated that although the S&P Global Mobility was a paid publication, it could be equated to the GTA and that as in anti-dumping investigations the Commission discloses detailed data from the GTA (in the context of the representative country selection), similar to the GTA, the Commission should provide the detailed data with regard to the S&P Mobility modules. The CCCME further argued that the underlying S&P Global Mobility data and information regarding the source and methodology used for data collection as regards the volume and the value of the BEV sales and their origin are key to enable interested parties to verify the credibility and reliability of the data that is being used by the Commission. The CCCME claimed that it was not clear if the S&P Global Mobility data matches between the two modules used by the Commission and covers all sales of Chinese and EU-produced BEVs in the Union in the first place.

(129)

As it was explained in the Initiation document the Commission used two modules of data from the S&P Global Mobility in order to assess the imports of Chinese BEVs into the Union. One module of data (module 1) was based on data regarding production volume for sales on the Union market. In this module the Commission was able to identify the exact manufacturing location of a particular BEV model that was meant to be sold on the Union market. This was particularly relevant for those BEV models that were sold on the Union market but produced in several countries (not only in China) like, for example, Tesla group’s models. Another module of data (module 2) was based on data regarding sales of BEVs on the Union market. However, in this module it was not possible to identify the exact location where a particular car model was manufactured. As highlighted by the GOC, the S&P Global Mobility is a paid publication and therefore the Commission cannot disclose the underlying data. The level of data in the S&P Global Mobility (production for sales in the Union per each producer, model of vehicles etc.) is not comparable with the information that the Commission is disclosing from GTA (import data) for the selection of the representative country in anti-dumping investigation. Nevertheless, the GOC and CCCME can purchase the data from S&P Global Mobility. In any event, the Commission noticed that CCCME already had access to the data from S&P Global Mobility, module 2, as this data was used in the analysis submitted in the Annex I of CCCME’s submission of 20 December 2023. Therefore, the request was rejected.

(130)

The CCCME claimed that in the Initiation document the Commission classified the Union BEVs into various segments, but it did not provide any information regarding the Chinese BEVs and whether they are comparable to the Union BEVs in each segment. Furthermore, the CCCME claimed that in the Initiation document there was no consideration of the competition and substitutability between Chinese BEVs and the BEVs produced by the Union producers in the Union within each segment. Moreover, the CCCME claimed that within each segment, there could be different models and body-types of the BEVs such as cars and SUVs and this difference in body types affected price comparability and the difference in the body types among other factors, also makes BEV models within a specific segment likely incomparable.

(131)

The segments (in terms of product types) used by the Commission for the price comparison were not created by the Commission in the current investigation. The information regarding segments was available in the data retrieved from S&P Global Mobility as all BEVs sold on the Union market are classified in such segments by other third parties such as producers, dealers of cars, renting companies etc. These segments apply to both BEVs manufactured by the Union industry and the BEVs imported from China. Furthermore, in the Initiation document the Commission was not required to make an in-depth comparison assessment between Chinese imported BEVs and the BEVs produced by the Union industry. Such comparison is made in the course of the investigation based on PCNs that the sampled Chinese exporting producers and sampled Union producers are requested to submit. Therefore, the claim was rejected.

(132)

The GOC and the CCCME argued that for the evolution of Chinese prices of BEVs on the Union market the Commission had used the data from Eurostat which included self-imports by the Union industry and concluded that the prices decreased by 2% during the period 2020 and first half of 2023 but ignored the fact that the S&P Global Mobility data showed a 3% increase in the weighted average sales price of the Chinese BEV imports between 2022 and first half of 2023. Furthermore, the GOC also claimed that because the majority of the imports from China were made by the Union industry at transfer prices no meaningful assessment of the Chinese BEV import prices can be made on the basis of the Eurostat data.

(133)

The Commission noted that the GOC provided contradictory claims. On one hand it claimed that it was not objective for the Commission to compare average prices in a half year period with average prices of one year as explained in recital (124) and on the other hand it criticised the Commission for not taking into account in its analysis the increase in prices in the first half of 2023 as compared to 2022. Furthermore, in the assessment of the trend of import prices, the Commission must take into account all imports from China even if some of them were made at transfer prices. Moreover, the data of S&P Global Mobility did not report the import price from China, but the weighted average price to the end-consumer of BEVs imported from China. Therefore, the claims were rejected.

(134)

The GOC claimed that the weighted average unit import price based on Eurostat was disconnected from the actual sales price of the BEVs to the consumer as reported by S&P Global Mobility and therefore this indicated that the assessment of prices in the Initiation document was not objective or based on positive evidence.

(135)

The prices in the two databases Eurostat and S&P Global Mobility are different as they are prices to different type of customers and at different level of trade. Therefore, the claim was rejected.

(136)

The GOC claimed that the Commission's statement in the Initiation document that module 2 of S&P Global Mobility used for price comparison between Union industry and Chinese imports included most of the sales of all BEVs on the Union market in the main Member States puts into doubt the scope and coverage the S&P Global Mobility data. This claim was repeated by CCCME who further requested the Commission to explain its choice of data sources and the representativity of the data used.

(137)

The Commission disagreed with this claim. In the Initiation document the Commission was not required to make a price comparison of all the BEVs of the Union industry and Chinese BEVs. As it was explained in the Initiation document the module 2 of S&P Global Mobility included most of the sales of all BEVs on the Union market in the main Member States and therefore they were representative. Furthermore, as the investigation was initiated ex officio, the Commission did not have data from the Union industry in the Initiation document and therefore resorted to the best available information for the price comparison, that is, the data from S&P Global Mobility which is a reliable source of information used by cars producers.

(138)

Furthermore, the GOC and the CCCME stated that as the Commission did not disclose the volume of Chinese and Union BEVs considered for the price effects as a whole and per segment, they could not understand whether the segment specific as well as the overall price difference calculated was representative.

(139)

In the Initiation document, the Commission did not carry out a price assessment per segment in the sense of segmentation of the market. The Commission used the segment factor for price comparison in the sense of product types in order to make the comparison meaningful in view of the different models of BEVs sold on the Union market in the absence of other available information in this regard. Therefore, the Commission did not need to disclose the volume of Chinese and Union BEVs considered for the price effects. The claim was, therefore, rejected.

(140)

Furthermore, the GOC argued that the Commission did not specify whether the passenger car segments indicated by the Commission and considered for the price comparison were created by the Commission or were also used by the S&P Global Mobility.

(141)

The Commission recalled that the information regarding the segments was available in the module 2 of S&P Global Mobility.

(142)

The GOC and the CCCME also claimed that no price comparison had been provided for certain segments in the Initiation document and no explanation was provided regarding their exclusion. The GOC and CCCME further argued that in case Chinese BEVs were not sold in those segments on the Union market, then those BEV types should be excluded from the product scope.

(143)

As explained in recital (139) the Commission did not make a price comparison per segment in the sense of segmentation. Furthermore, the investigation covered all battery electric vehicles and therefore whether the Chinese exporting producers were not exporting to Union market BEVs in certain segments was irrelevant. Therefore, the claims were rejected.

(144)

The GOC and the CCCME claimed that in its price comparison the Commission should have taken into account other factors that affect the comparability such as the differences in sales volumes to the customers and the level of trade.

(145)

In the Initiation document the Commission is not required to make a price comparison that takes into account all factors that affect comparability as before the initiation of the investigation the Commission does not have access to such detailed information. Such calculation is carried out in the course of the investigation based on the detailed information submitted by the sampled Chinese exporting producers and sampled Union producers. Therefore, the claim was rejected.

(146)

The GOC, CCCME and Company 24 claimed that the price comparison made by the Commission in the Initiation document was not objective as it excluded the sales of Tesla group while these sales were significant.

(147)

The Commission disagreed with this claim. As it was explained in the Initiation document the origin of the sales of Tesla group on the Union market was not reported in the database from S&P Global Mobility that the Commission used for the price comparison. Furthermore, in the Initiation document the Commission was not required to make a price comparison for all export sales and all Union industry sales. The information in the Initiation document is based on the information reasonably available to the Commission before the initiation of the investigation. Therefore, the claim was rejected.

(148)

The GOC claimed that in the Initiation Document, the Commission made a price comparison for 2022 and first half of 2023 and did not consider the data for 2020 and 2021, and also did not consider how prices of the Chinese and Union BEVs interacted over time and referred in this regard to the Appellate Body reports in China – HP-SSST (EU and Japan) (18). CCCME repeated this claim in its submission of 20 December 2023 and referred also to the Panel report in Morocco – Definitive AD Measures on Exercise Books (Tunisia) (19).

(149)

The Commission noted that the two WTO reports refer to the price analysis made during an investigation and not to the one made in a complaint or Initiation document, where the standard of evidence is lower. The Commission considered that before initiation of the investigation the price analysis presented in the Initiation document was sufficient. A more in-depth analysis is made in the course of the investigation based on the data submitted by the sampled Chinese exporters and sampled Union producers. Therefore, the claim was rejected.

(150)

The GOC and the CCCME also claimed that for the price comparison the Commission did not take into account the imports by the Union BEV producers and that the pricing strategy of the Union producers for the BEVs manufactured in China was likely affected by the overall business strategy of the Union producers.

(151)

For the price comparison, the Commission only excluded from the price comparison the sales of Tesla as the information it had at its disposal could not differentiate between Tesla BEVs manufactured in China and the ones manufactured in the Union as explained in recital (147). Furthermore, the Commission noted that the GOC and the CCCME did not substantiate their claim regarding the pricing strategy of the Union industry. Therefore, the claims were rejected.

(152)

The GOC and the CCCME also claimed that for the price comparison the Commission did not take into account the brand factor without explaining how the Commission should take such factor into account in its price comparison. Furthermore, the GOC and the CCCME also claimed that the rise in sales prices of the Union industry in conjunction with the rising sales volume raises questions about the extent to which Chinese branded BEVs are competing with the Union industry and that the allegedly lower prices of the Chinese BEV imports are not in themselves indicative of price suppression or depression. The GOC and the CCCME stated that the Panel in Morocco – Definitive AD Measures on Exercise Books (Tunisia) (20) noted that a price effects examination requires an investigating authority to take into account the differences between the three price effects, as the elements relevant to the consideration of significant price undercutting differ from those relevant to the consideration of significant price depression and suppression. The GOC and the CCCME further noted that no independent analysis of price depression and suppression was carried out and that the assertion of price depression was unfounded as the prices of the Union industry increased throughout the period considered. Company 24 also added as factors not taken into account by the Commission in the Initiation document for the price analysis (i) market segments, and (ii) other factors that influence competitive dynamics in the automotive sector, without specifying those factors.

(153)

The Commission considered that it provided sufficient information regarding prices in the Initiation document which was based on the information reasonably available to the Commission before the initiation of the investigation. In the course of the investigation, the Commission will carry out an in-depth analysis of prices based on the information submitted by the sampled Chinese exporting producers and sampled Union producers.

(154)

As regards the assessment of the alleged vulnerability of the Union BEV industry, the GOC and the CCCME claimed that (i) in the Initiation document the Commission selectively focused on specific economic indicators of the Union industry such as production volume, sales volume, market share, sales prices and employment, while overlooking other indicators crucial for the evaluation of the situation and the prospects of the Union BEV industry such as production capacity, capacity utilisation, production costs, factors influencing sales prices, profitability and return on investments, (ii) the indicators used by the Commission in the Initiation document showed a healthy Union industry as the Union industry held the majority market share during the period considered and that the marginal decrease in the market share observed over a six-month period did not serve as a reliable indicator of vulnerability as the Union BEV producers were successfully selling their entire and increasing production and concurrently experiencing substantial sales growth in an expanding market, (iii) the sales of the Union industry increased between 2020 and 2022 at a rate higher than the rate of increase of the Union consumption, (iv) the sales prices of the Union industry which increased by 30% suggest that the Union producers were able to maintain their market share and raise prices notwithstanding the Chinese BEV imports and (v) the growing employment shows that the Union industry is optimistic about its future prospects, and (vi) exports of the Union industry increased. Company 24 also argued that the Union industry was not in a vulnerable position, that it was in fact growing as the data on sales volume, production and exports show a positive trend, while the data on market share does not indicate any clear trend although there had been a market improvement since 2021.

(155)

In the Initiation document the Commission presented the information that was publicly available considering that the investigation was initiated ex officio. The Commission considered that it provided sufficient information in the Initiation document regarding the vulnerability of the Union industry. In particular, the Commission explained that the situation of the Union industry did not point to the existence of material injury that would be caused by imports from China. However, the Chinese exporters have significantly increased their penetration on the Union market in a very short period of time, at prices significantly lower compared to the prices of the Union industry, thereby depressing prices or preventing price increases which otherwise would have occurred and, consequently, placing significant pressure on Union sales, market shares and profit margins. This was especially relevant in a context where the Union industry will need to achieve higher volumes of sales in the BEV market to absorb the heavy investments it needs to spend to remain competitive in the transition to full electrification. The surge of low-priced imports of BEVs originating in China gaining significant market shares in a growing market would lead the Union industry to incur heavy losses which could become rapidly unsustainable.

(156)

As regards the threat of injury, the GOC and the CCCME claimed that the Commission had not provided any evidence and explanation regarding the legal requirement in the “chapeau” of Article 8(8) of the basic Regulation regarding the change in circumstances resulting in a situation in which injury is clearly foreseen and imminent and that the Commission did not carry out any prospective analysis.

(157)

In the Initiation document the Commission did provide sufficient evidence tending to show that the development of the subsidised imports would pose an imminent threat of injury to an already vulnerable Union industry. In particular, the Commission provided evidence that the combination of high volumes and market shares at very low prices of Chinese BEVs could put the survival of the Union BEVs industry at risk. The Chinese BEVs exporting producers consider the Union market very attractive in view of the clear roadmap to electrification, size and prices. Furthermore, regarding the prospective analysis the Commission noted that a threat of injury analysis is prospective by nature and that the elements analysis in section 6 of the Initiation document constitute a prospective analysis. Therefore, the claim was rejected.

(158)

The GOC and the CCCME claimed that to evaluate the rate of increase of Chinese imports in the Initiation document the Commission only considered the Chinese brands’ market share, while it should have included all imports from China.

(159)

The Commission disagrees with this claim. In the Initiation document the Commission calculated the market share of all imports from China in the injury section. In the threat of injury section, the Commission complemented the information regarding market share specified in the injury section and explained that the imports of BEVs from China could be broken down into three categories such as European brands, American brand, and Chinese brands, and it provided also the market share of the Chinese brands. Therefore, the claim was rejected.

(160)

Company 24 claimed that the Commission did not explain properly in the Initiation document the methodology for the calculation of the significant rate of increase of subsidies imports into the Union market. In particular, Company 24 argued that the Commission relied heavily on export data of Chinese BEVs from the GTA database and it did not explain the underlying methodology of the GTA database in view of the significant differences between the data from GTA and other sources such as Eurostat and S&P Global Mobility.

(161)

The Commission did not agree with Company 24’s unsubstantiated conclusion that it heavily relied on the data of GTA for the assessment of the rate of increase of subsidies imports into the Union. Furthermore, it is not clear what methodology the Commission was supposed to explain as concerns GTA. The Commission used three sources that it had at its disposal before the initiation of the investigation for assessing the increase of imports/export of Chinese BEVs into the Union: Eurostat, S&P Global Mobility and GTA. The Commission did not give a particular weight to any of these databases in its assessment. As highlighted by Company 24 itself, GTA reported the data of Chinese exports to the Union market. Eurostat reported the data of imports from China into the Union market. The volume of exports can differ from the volume of imports especially in cases when the data is provided by different customs authorities. Therefore, the claim was rejected.

(162)

The GOC claimed that the market share calculated by the Commission of the Chinese brands based on a mixture of data sources seemed to purposefully overestimate the share of Chinese brands in order to create the fake impression of a significant rate of increase of imports of Chinese brands in the Union as the market share calculated by the Commission was higher than the respective market share reported by ACEA.

(163)

The Commission disagreed with this claim. The Commission cannot comment on the market share data submitted by ACEA and its sources and methodology as it did not have access to the detailed set of data used by ACEA in this regard. Nevertheless, by comparing the market share reported by ACEA with the one calculated by the Commission for the Chinese brands, it appears that ACEA did not include in this calculation the imports from the Chinese group Geely, in particular the sales of Polestar.

(164)

The GOC and CCCME claimed that the Commission’s assessment was not objective as the self-imports by the Union industry were excluded in the assessment of the rate of future increase of the Chinese imports and from the assessment of the Union sales volume.

(165)

The imports made by the Union industry were not excluded in the assessment of the future increase of Chinese imports. Furthermore, in the injury analysis the sales volume of Union industry must include only the volume of BEVs manufactured in the Union, the volume of BEVs imported from China are in fact resales of the Union industry on the Union market as for this type of sales the Union industry acts as a trader on the Union market and not producer. Therefore, the claim was rejected.

(166)

The GOC and Company 24 claimed that the Commission did not do an objective examination as the assessment of the Chinese BEV imports had not been done on a segment-basis as was done for the price effect analysis.

(167)

In the Initiation document the Commission did not carry out a price effect analysis on a segment basis. The Commission simply compared prices of Union industry’s BEVs with the Chinese BEVs in different segments in the sense of product types in order to make the price comparison meaningful in view of the several types of BEVs sold by the Union industry. Therefore, the claim was rejected.

(168)

As regards the market share of Chinese brands based on the S&P Global Mobility in the Initiation document, the GOC requested the Commission (i) to confirm whether the market share ranges provided are correct, (ii) clarify as to why ranges have been provided when in fact, according to the Initiation document, the Commission had the exact data, and the exact market share of Chinese brands has been provided for 2021 (i.e., 3%).

(169)

The market share for Chinese brands was provided in ranges as the Commission used two modules of data from S&P Global Mobility whose basis for collection of data was different as it was clearly explained in the Initiation document. The ranges provided by the Commission indicated the result of the calculation of the market shares based on these two modules. For 2021 the Commission did not provide a range as the result of the calculation of the market share was the same for both modules of data.

(170)

The GOC and the CCCME also claimed that the Commission’s allegations of Chinese overcapacity were inaccurate and that a substantial portion of BEV production capacity in China could be attributed to Union BEV production. Company 24 claimed that the Commission’s analysis of spare capacity in China lacked granularity as it did not take into account the different segments in the market and policy developments in China and in third countries that will increase the demand of BEVs in the future in all segments. Furthermore, the GOC and the CCCME argued that the Commission did not assess the expected growth in the Chinese domestic demand even though China is the world’s largest market for BEVs, that the majority of the production of BEVs in China was for the Chinese domestic market and the absorption capacity of other markets. Company 24 argued that the Commission made an insufficient assessment of developments and trends in BEV markets in third countries.

(171)

The Commission considered that it provided sufficient information regarding capacity and spare capacity in China in the Initiation document. In particular, the Commission explained that several sources stated that the spare capacity is around 50% in China and it is expected to increase in the future as more factories are being built. While indeed China is the largest market for BEVs, it is also export oriented. A large number of Chinese BEV companies have expressed publicly their interest to exports BEVs to the Union and they are building BEV models specifically for the Union market as it was explained in the Initiation document. Furthermore, in the Initiation document the Commission explained that the third largest market for BEVs after China and the Union, was the US which was effectively closed to the Chinese exporting producers in view of the 27,5 % total import duties (2,5 % custom duties and 25 % duties (21) based on Section 301 of the Trade Act of 1974 (22)). Other smaller markets such as Türkiye and India also had high import duties for imports of BEVs from China. During the investigation the Commission will assess in depth the absorption capacities of other markets for the Chinese spare capacity.

(172)

The CCCME claimed that the Commission did not evaluate whether the Chinese BEV imports and the Union BEVs are in a competitive relationship and substitutable with one another, such that the former could have the effect of causing a threat of injury to the Union BEV industry. The CCCME referred in this regard to the Appellate Body reports in China – HP-SSST (Japan and EU) (23).

(173)

The Commission noted that this report referred to the respective assessment that the Commission has to carry out during an investigation and not in a complaint or Initiation document where the level of evidence is lower than during an investigation. Furthermore, in the Initiation document under section 5.4.2 the Commission showed the price comparison between Chinese BEVs and Union BEVs based on segments in the sense of product types, in the section 5.4.4 the Commission explained the components of the cost of production of BEVs which are the same for the Chinese exporting producers and the Union producers, in section 5.5 the Commission concluded that the Chinese BEV producers have significantly increased their penetration on the EU market in a very short period of time, at prices significantly lower compared to the prices of the Union industry, then in sections 6.2 and 6.3 the Commission explained why the Union market is attractive for Chinese producers especially for particular Chinese exporting producers that the Commission presented in section 6.3. Furthermore, in section 7.1 on causation, the Commission explained that the presence of the Chinese cars on the Union market in high volumes at significant lower prices than the Union industry’s prices will not allow the Union industry to build a proper BEV industry on the Union market. Therefore, at initiation stage there was sufficient evidence tending to show that the Chinese BEVs and the Union BEVs are in direct competition and are substitutable with one another. The claim was therefore rejected.

(174)

Company 24 claimed that there was no evidence showing that the imports of the allegedly subsidised BEVs from China would cause a threat of material injury to the Union BEV industry, taking into account (i) the growing Union BEV industry, which was, according to Company 24, not in a vulnerable position, (ii) the expected growth of the Union BEV market, and (iii) the evolution of imports from other third countries. Company 24 also claimed that the Commission failed to take into account the segmentation of passenger cars market while this element is relevant as it would explain that low prices of Chinese BEVs in one market segment cannot cause any alleged threat of injury to the Union industry which operates in different market segments. Furthermore, Company 24 claimed that even if there was a threat of injury to the Union industry, such threat was not attributable to the imports of BEVs from China, as (i) large parts of the EU industry focused on ICE cars where they had a competitive edge and only started to invest recently in the BEV market, (ii) low investments in a global electric batteries supply chain, and (iii) the lack of affordable raw materials for battery production and high energy prices aggravated by external shocks, most notably the Russian aggression in Ukraine.

(175)

The GOC claimed that the Commission did not assess properly (i) the imports from third countries, (ii) the self-imports of BEVs from China by the Union BEV producers – this was raised also by the CCCME, and (iii) the changes in patterns of consumption.

(176)

The CCCME claimed that the Commission failed to adequately consider other known factors that risk injuring the Union BEV producers in the future such as (i) the reliance of the Union BEV producers on batteries and other components in third countries which affects their competitiveness in general and in case of supply chain disruptions such as during Covid-19 pandemic and the Russian – Ukraine war, (ii) the inflationary pressure and high energy prices in the Union, (iii) the EU policy to promote biofuels, (iv) competition between ICE cars and BEVs, (v) the start-up situation of several Union BEV producers and their limited production scale, and (vi) the pricing policy of traditional EU automotive brand producers manufacturing BEVs as well and the intra-EU producer competition.

(177)

The Union BEV industry was indeed increasing in line with the Union market that is progressively transitioning from ICE vehicles to the BEVs. However, in the Initiation document the Commission further explained that the available information showed that the Union BEV industry would be at around breakeven point on their BEV business and was expecting to reach profitable levels around 2025. The low performance of the industry was mainly attributable to the high battery costs and the expensive R&D efforts over still relatively low volumes. The Union BEV industry needed to continuously invest especially in batteries plants and research and development for new BEVs models to stay competitive. While the situation was currently sustainable as most Union BEVs producers could cross-compensate with the higher margins they achieve from the sale of ICE vehicles, this possibility would however gradually subside as the Union market transitions to full electrification. In other words, the future profitability of the Union BEV industry will heavily depend on them securing high production and sales volumes of BEVs. Furthermore, as it was explained in the Initiation document, the Union industry needed to continue to increase its sales of BEVs on the Union market in high volumes. The presence of the Chinese BEVs on the Union market in high volumes at significantly lower prices than the Union industry’s prices will not allow the Union industry to build a proper BEV industry on the Union market.

(178)

The data provided in the Initiation document was based on the information publicly available to the Commission before the initiation of the investigation. Before the initiation of the investigation, the Commission did not have information that indicated that a segment analysis was needed. The Commission further investigated this issue in the course of the investigation and reached the conclusion that a segment analysis was not warranted nor appropriate in this case as explained in recitals (1041) to (1049) .

(179)

Furthermore, the Commission did not need to include in the Initiation document an exhaustive list of factors that could cause a threat of injury to the Union industry as the level of evidence needed in the Initiation document is significantly lower than during the investigation that imposes countervailing measures. In the Initiation document the Commission assessed the evolution of imports from third countries and other factors affecting the performance of the Union industry such as the shortage of semiconductors, difficulties in sourcing enough raw materials and the charging infrastructure. During the investigation, the Commission will assess in detail such factors as showed in section 6.2. Therefore, these claims were rejected.

(180)

As regards the Union interest, while admitting that the Commission did not usually consider Union interest for the initiation of an investigation, the GOC claimed that in the current investigation such assessment would have been relevant and appropriate as the investigation was initiated ex officio and it did not seem to be supported by the Union BEV producers. The GOC considered that the initiation of the present investigation was counterintuitive for the EU and that the imposition of measures would be against the Union interest as: (i) the investigation would not benefit the Union BEV industry and if measures were imposed it would create problems of affordability and availability of BEVs in the Union, and (ii) the investigation was inconsistent with the EU’s climate and green energy goals.

(181)

There is no legal requirement to include a Union interest assessment either in a complaint or in an Initiation document for investigations initiated ex officio. Furthermore, the Commission strongly disagreed with GOC’s claims stated in recital (180). The Commission addressed in detail the aspects of the Union interest in the course of the investigation and presented its findings in the section ‘Union interest’.

(182)

The evidence included in the Initiation document constituted the information reasonably available to the Commission before the initiation of the investigation. As the investigation was initiated ex officio, the Commission did not have access to the same information as in the case when an investigation is initiated based on a complaint. Certain information such precise data on cost of production and therefore profitability is not publicly available. Nevertheless, the Initiation document contained sufficient evidence tending to show the existence of a threat of injury to the Union industry and causal link between the threat of injury to the Union industry and the Chinese BEV imports, which was caused by the subsidised imports. Therefore, the Commission considered that it had sufficient evidence of a threat of injury resulting from subsidised imports in accordance with the basic Regulation and the SCM Agreement.

(183)

Tesla (Shanghai) Co., Ltd, an exporting producer in the PRC, submitted a request for individual examination under Article 27(3) of the basic Regulation. Subsequently, it also submitted a questionnaire reply. This request is being considered at this stage of the proceeding.

(184)

The product under investigation is new battery electric vehicles principally designed for the transport of nine or less persons, including the driver, excluding L6 and L7 categories of vehicles according to Regulation (EU) No 168/2013 (24), propelled (regardless of the number of wheels set in motion) solely by one or more electric motors, including those with an internal combustion range extender (an auxiliary power unit) currently falling under CN code ex 8703 80 10 (TARIC code 8703801010) (‘the product under investigation’). Motorcycles are excluded from the present investigation.

(185)

In the Notice of initiation, the explicit reference to the range extender was not included in the definition of the product under investigation. However, the Commission considered it necessary to clarify that a type of BEVs are also the vehicles that have a range extender (an auxiliary power unit) consisting of a small internal combustion engine coupled with an electric generator which is used to re-charge the battery while the vehicle is propelled. This type of BEVs have the same physical characteristics and uses and competes with the other types of BEVs that do not have a range extender. In the period considered this type of BEVs was imported from China and produced in the Union in small volumes. Thus, the Commission’s analysis included, since the initiation, data concerning this type of BEVs.

(186)

The product concerned is the product under investigation originating in China (‘the product concerned’).

(187)

The investigation showed that the following products have the same basic physical and technical characteristics as well as the same basic uses:

the product concerned when exported to the Union;

(188)

The Commission decided that, for the purpose of this investigation, those products are therefore like products within the meaning of Article 2(c) of the basic Regulation.

(189)

Comments on product scope were received from Shanghai Yoyao Technology Co., Ltd. (‘XEV’) and Green World Mobility.

(190)

XEV is a Chinese exporting producer of quadricycles marketed under the brand ‘XEV’ and exported to the Union. Its main model is the XEV YOYO.

(191)

XEV submitted that the XEV YOYO is a fully electric category L7 quadricycle, according to the vehicle categories defined in Annex I of Regulation (EU) No 168/2013 (25). As such, according to XEV, it differs from motor vehicles for the carriage of passengers and their luggage, referred to as category M vehicles according to the vehicle categories defined in Article 4 of Regulation 2018/858 (26). Moreover, XEV claimed that category L7 quadricycles bear no similarities to the BEVs targeted by the investigation, because of physical and technical differences. Amongst these, XEV showed that the XEV YOYO had lower power performance, battery capacity, maximum range, kerb weight and maximum speed than some small category M BEVs, in addition to different license requirements and different dimensions of the license plate. XEV also identified different uses and consumer perceptions.

(192)

Therefore, XEV requested the Commission to confirm that quadricycles, such as the XEV YOYO, are not considered as BEVs for the purposes of the current investigation and therefore were not covered by the definition of the product under investigation.

(193)

The Commission’s analysis confirmed that indeed quadricycles (category L6 and L7) do not have the same physical and technical characteristics as the battery electric vehicles covered by the investigation. In particular, amongst the physical and technical characteristics, quadricycles are defined by limits in terms of maximum speed, weight, motor power and seats while the battery electric vehicles covered by the scope of the investigation do not have such limits. Thus, the Commission concluded that quadricycles were not part of the product under investigation and, therefore, they were not covered by the investigation. As a consequence, the exports of quadricycles into the Union from, inter alia, XEV were found not to be concerned by this investigation. ()

(194)

Green World Mobility imports from China electric mopeds and certain electric vehicles designed for persons with disabilities. Green World Mobility submitted that such vehicles were different from the product under investigation. Indeed, mopeds fell in the category L6 as defined by Regulation (EU) No 168/2013, whereas electric vehicles designed for persons with disabilities imported by Green World Mobility had been classified in the past under CN code 8713 90 00. However, the customs authorities of the Netherlands subsequently reclassified them under CN code 8703 80 10. Such vehicles can carry a maximum of two people only and can travel at a maximum speed of 45 km/h on the public road. Finally, Green World Mobility confirmed that they were also classified within the category L as defined by Regulation (EU) No 168/2013.

(195)

The Commission’s analysis confirmed that mopeds and the type of electric vehicles designed for persons for disabilities imported by Green World Mobility did not have the same physical and technical characteristics as battery electric vehicles covered by the scope of the investigation. Thus, the Commission concluded that these products were not part of the product under investigation and, therefore, they were not covered by the investigation.

(196)

Before analysing the alleged subsidisation in the form of subsidies or subsidy programmes, the Commission assessed government plans, projects, and other documents, which were relevant for the analysis of the investigated subsidy programmes.

(197)

As a preliminary remark, the Commission pointed out that China’s overall economic setup is characterised by a particularly strong role of the State, with the State authorities being in turn controlled by the Chinese Communist Party (‘CCP’), the ruling political entity of the country. As a result, businesses in China operate in a specific environment which - unlike the Western economies where market forces represent the dominant organizing principle – features numerous mechanisms that provide the GOC with substantial degree of control over any aspect of the economic activity in the country. This tight control prevents economic operators from acting as rational market operators seeking to maximise profits, and in fact forces them to act as an arm of the government in implementing its policies and plans.

(198)

The following features are most significant in transmitting the GOC policy decisions into the day-to day business conduct of economic operators: (i) doctrine of socialist market economy, (ii) leadership of the CCP, (iii) system of industrial planning, (iv) financial system.

(199)

The socialist market economy doctrine, embodied in the Chinese Constitution (27), grants the State an inherent and all-encompassing control over the economy, which goes way beyond the traditional standards of setting a regulatory framework within which market players are free to operate. In particular, according to Article 6 of the Constitution: “The basis of the socialist economic system of the People’s Republic of China is socialist public ownership of the means of production […]. In the primary stage of socialism, the State upholds the basic economic system in which the public ownership is dominant and diverse forms of ownership develop side by side and keeps to the distribution system in which distribution according to work is dominant and diverse modes of distribution coexist.” Moreover, pursuant to Article 15 of the Constitution: “The State practices socialist market economy. The State strengthens economic legislation, improves macro-regulation and control. The State prohibits in accordance with law any organization or individual from disturbing the socio-economic order.” Moreover, Article 11 of the Constitution assigns to the State an interventionist role that goes beyond protecting the rights and interests of the non-public sectors, in that the State shall “encourages, supports and guides the development of the non-public sectors of the economy and, in accordance with law, exercises supervision and control over the non-public sectors of the economy.”

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These constitutional fundamentals are reflected in all relevant pieces of legislation (28) which emphasize the socialist market economy as the leading principle on which the Chinese economy is based. Moreover, the State, under the leadership of the CCP, indeed makes extensive use of a variety of instruments – both incentivizing and restricting - to guide the economy towards socialist modernization, i.e. towards objectives (including industrial policy objectives) set by the GOC.

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The leadership of the CCP - while formally enshrined in the country’s Constitution (29), as well as in relevant secondary legislation and in the Constitution of the Party (30) itself – takes various forms in practice; in particular, as separation of powers does not exist in China and the Party exercises full control over the legislative (31), executive (32), as well as judicial (33) branches of the State apparatus; moreover, the Party oversees crucial areas of the economy, including the financial sector and industrial sectors considered strategic, notably through ownership and/or by appointing and rotating key personnel; in addition, setting up Party cells is mandatory in all enterprises with more than a three members of the Party (34) (see also recital (785)), state-owned and private alike, and Party structures within undertakings claim frequently the right to participate in operational decision-making of companies (see also recital (786). All these controlling mechanisms provide the CCP with a tight grip over the country’s economy and allow the Party to formulate and implement its economic policies in line with its strategic considerations and priorities.

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The direction of the Chinese economy is to a significant degree determined by an elaborate system of planning which sets out priorities and prescribes the goals the central and local governments must focus on. Relevant plans exist at all levels of government and cover all economic sectors. The objectives set by the planning instruments are of binding nature and the authorities at each administrative level monitor the implementation of the plans by the corresponding lower level of government. Overall, the system of planning in the PRC results in resources being allocated to sectors designated by the government as strategic or otherwise politically important, rather than being allocated in line with market forces (35).

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To allocate resources in line with the GOC’s policy priorities, instrumentalizing the financial sector is of essence for the Chinese authorities. China’s financial system remains dominated by the banking sector and the State controls the banking sector (see also section 3.5.1, in particular sub-section 3.5.1.3), through ownership (see recital (465)), as well as through personal ties. Accordingly, the GOC, in its capacity as the majority/controlling shareholder, has the power to appoint the most important positions within the management state-owned policy banks (see recital (454), as well as of banks partially or fully owned by the State itself or by State-held legal persons (see recital (468)).

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Moreover, articles of association of major Chinese banks regularly contain a dedicated chapter on the creation of a Party committee (36). For example, according to the articles of association of the Industrial and Commercial Bank of China (‘ICBC’), “the chairman of the board of directors of the Bank and the secretary of the Party Committee shall be the same person” (37). Article 53 lists the duties of the Party committee, including the monitoring of the practical implementation of Party and State decisions in the bank. The Party committee is also playing a role in the selection and evaluation of personnel, together with the board of directors. Finally, the Party committee is to be involved in the discussion of “major operational and management issues and major issues concerning employee interests and put forth comments and suggestions” (38). Moreover, according to the provisions concerning the board of directors, the Party committee has to be consulted before material issues are decided upon (39). The articles of association of the Agricultural Bank of China contain identical language on establishing the Party committee in Article 58 and on the Committee’s involvement in the discussion of major issues in Article 161 (40).

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Beside GOC’s ability to control the banking sector through ownership and organisational setup, the GOC exercises control over the sector also in view of the applicable Chines legislation (see 3.5.1.5 for the analysis of the relevant regulatory documents) which requires the banks to align with the country's industrial policy objectives when making financial decisions.

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In conclusion, all these elements show that the structure of the legal and political system in the PRC relies on a tight grip by the government on all aspects of the economy and trade, as they are centrally managed and monitored by the GOC. The economic operators are integral part of this system not as free market actors aiming to take business decisions purely driven by economic logic and profit maximisation, but rather as one of the integral actors to implement the overarching policies and their specific objectives set by the GOC at central level.

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Against this background, the Commission found that all subsidies or subsidy programmes under assessment form part of the implementation of the GOC’s central planning to encourage the BEV industry for the following reasons.

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The BEV industry is regarded as an industry of strategic importance by the GOC, and the GOC has consistently emphasized at least since 2010 the political support for the accelerated developments of the sector. Such categorisation is of significant importance as it qualifies given sectors for coverage by a variety of specific policies and support measures designed to spur development in each sector (41).

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This is evident from a number of industrial policy documents which have been successively put in place since at least 2010 and which are listed below.

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Decision No. 40 of the State Council of the People’s Republic of China is a legal document issued in 2005 aiming to promote industrial structure adjustments in China by encouraging the development of high-tech industries and the elimination of outdated production capacity. The ‘Guidance Catalogue for the Industrial Structure Adjustment’, which is an implementing measure of Decision No 40, sets the basis for guiding investment directions by designating industrial sectors which should benefit from privileged access to credit. It also guides the GOC to administer investment projects and to formulate and enforce policies on public finance, taxation, credit, land, import and export. The National Development and Reform Commission (‘NDRC’) released, and later amended, a guidance catalogue for industrial structure adjustment in February 2013 and in 2019.

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The 2013 and 2019 documents both refer to the NEV industry, which includes BEVs, as an encouraged industry.

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In the 2010 State Council Decision on Accelerating the Development of Strategic Emerging Industries (42), the GOC identified the NEV sector among the industries to be upgraded as a matter of priority.

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Under Art. II of the Decision, the GOC took the commitment to “give priority to fostering and developing such industries as energy conservation, environmental protection, new generation information technology, biology, high-end equipment manufacturing, new energy resources, new materials, new energy automobiles, etc.”

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The Decision also contained an explicit long-term development goal for the industry, entailing also the formation of globally active large-scale enterprises: “By 2020, [...] new energy resources, new materials and new energy automobile industries will have become the pioneer industries of the national economy. The innovation ability will have been substantially improved, a batch of key and core technologies will have been controlled by us, and the world leading level will have been reached in some fields. A group of large enterprises having international influence and a group of vigorous small- and medium-sized enterprises will have been formed.” (43)

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Designating NEVs as a strategic industry indicated to all levels of government the importance that the GOC attaches to the sector, thereby making it clear that additional policies in support of the industry would follow at the central level and are expected on the lower levels of the country’s administration.

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Support to the development of the NEV industry found its way already into the 12th national Five-Year Plan (“FYP”) (44) for the period from 2011 to 2015 and was articulated more specifically in the Energy-saving and New Energy Vehicle Industry Development Plan (2012-2020) (45) which indicated that “the new energy vehicles referred to in this plan mainly include pure electric vehicles, plug-in hybrid vehicles and fuel cell vehicles. Energy-saving vehicles refer to vehicles with the internal combustion engine as the main power system [...].” (46)

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The Plan further specified that while “China's new energy vehicles basically have the foundation for industrialization development, and key technologies such as batteries, motors, electronic control and system integration have made significant progress and pure electric vehicles and plug-in hybrid vehicles have begun to be put on the market on a small scale” major obstacles for the development of the sector remained in place: “the key technologies of China's new energy vehicles and some core components have not yet broken through, the product cost is high, the measures to support the NEV industry are not perfect, and the industrialization of the NEV industry and its evolution towards a market-based are restricted; the key core technologies of automobile energy conservation have not been fully mastered [...]”.

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Against this background, the GOC formulated the overall industrial policy objective for the sector as follows: “we must seize the opportunity, foster the deployment, accelerate the cultivation and development of energy-saving and new energy automobile industry, promote the optimization and upgrading of the automobile industry, and realize the transformation from a large automobile industry to an automobile industry power.”

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The methods – relying primarily on government support mechanisms - to achieve these objectives were also laid down into the Plan: “Adhere to the combination of government guidance and market drive. In the industrial cultivation period, we will actively play the role of planning guidance and policy incentives, gather scientific and technological and industrial resources, encourage the development and production of energy-saving and new energy vehicles, and guide market consumption. After entering the mature period of the industry, give full play to the driving role of the market in industrial development [...].” (47)

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This Article in the Plan set out that the market guidance by the GOC was applicable not only to the production of finished NEVs but also to their parts: “Adhere to the combination of cultivating industries and strengthening supporting facilities. With the whole vehicle as the leader, cultivate and drive the accelerated development of the industrial chain such as power batteries, motors, automotive electronics, advanced internal combustion engines, and high-efficiency transmissions”. (48)

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Having specified the objectives and the methods to achieve them, the Plan went to set specific (output) targets: “By 2015, the cumulative production and sales of pure electric vehicles and plug-in hybrid vehicles will reach 500 000 units; by 2020, the production capacity of pure electric vehicles and plug-in hybrid vehicles will reach 2 million units, and the cumulative production and sales will exceed 5 million units [...].” (49) Eventually, the Plan listed the government support mechanisms to which the NEV sector would be eligible, encompassing areas such as assistance related to international standard-setting or recruitment and talent cultivation, the government support centred around various forms of financial support, subdivided into:

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In 2014, the State Council released the “Guiding Opinions on Accelerating the Promotion and Application of New Energy Vehicles” (50) (Guobanfa [2014] No. 35) (also referred to as ‘NEV Guiding Opinions’ ). The NEV Guiding Opinions intend to “combine market dominance with government support”  (51), and envision different forms of government support for the development of the industry, such as local plans for the promotion of NEVs, subsidies purchases, financial support, bonds, etc.

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The goals and instructions contained in 14th Five-Year Plans are often complemented by implementing plans, action plans, guiding opinions, guidelines, etc. Guiding Opinions are documents issued by the government, with the aim to guide industry behaviour to achieve the GOC’s policy objectives in specific sectors. Although the Guiding Opinions are considered within the Chinese legal system to be guidance documents, they point to concrete state intervention to shape different sectors of the Chinese economy (52). This holds particularly true for the NEV Guiding Opinions, which includes both top-down instructions to local government to formulate plans and incentives for the promotion of NEVs, and also directives at central levels on the allocation of funds to reward cities and enterprises which score particularly well in the promotion of new energy vehicles, as well as fiscal, financial, and investment incentives by government authorities, financial institutions, etc. Consequently, Guiding Opinions are another tool used by state authorities to exercise their direct control on the way the NEV industry develops The Chinese 13th National Five-Year Plan

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Similar language concerning the support of the sector can be found in all recent government policy documents, starting with the 13th National Five-year Plan (’13th FYP’ ) for the years 2016 to 2020 (53). According to Section 1 of Chapter 23 of the 13th FYP, the GOC intended to “support the development of next generation information technology, new-energy vehicles, biotechnology, green and low-carbon technology, high-end equipment and materials, and digital creative industries.”

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Moreover, the same chapter of the 13th FYP listed a number of policies which the GOC planned to employ in support of the full development of the sector, including from vital inputs to the end product, namely: (i) “Promote the use of new-energy vehicles; (ii) Encourage the use of new-energy vehicles for urban public transport and taxi services; (iii) Develop all-electric vehicles and hybrid electric vehicles with a focus on making advancements in key technological areas such as battery energy density and battery temperature adaptability; (iv) Facilitate the development of a network of charging facilities and services that are compatible with each other and come under unified standards [...]; (v) Ensure the cumulative total production and sales figures for new-energy vehicles in China reach five million; (vi) Strengthen efforts to recover and dispose of used batteries from new-energy vehicles.” (54)

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In 2015, the GOC published its long-term comprehensive industrial strategy known as Made in China 2025. (55) This strategy set milestones for upgrading the country’s selected manufacturing sectors by 2020 and 2025 and reiterated the GOC’s intention to “[c]ontinue to support the development of electric vehicles and fuel cell vehicles, master the core technologies of low-carbon, informatized, and intelligentized automobiles, [improve the engineering and industrialization capabilities of core technologies such as starter batteries, drive motors, high-efficiency internal combustion engines, advanced transmissions, lightweight materials, and intelligent controls, form a complete industrial system and innovation system from key components to complete vehicles, and promote the integration of energy-saving and new energy vehicles with independent brands at internationally advanced levels” (56) and, accordingly, to “[o]rganize and implement a number of special projects and major projects for innovation and industrialization for large aircraft, aircraft engines and gas turbines, civilian aerospace, intelligent green trains, energy-saving and new energy vehicles, marine engineering equipment and high-tech ships, complete sets of equipment for smart grids, high-end CNC machines, nuclear power equipment, and high-end medical equipment.” (57)

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To achieve these goals, Made in China 2025 emphasised the need to “[d]eepen the reform in the financial field, expand the financial channel for manufacturing industry, and reduce financial cost, [to g]ive play to the advantages of policy finance, development finance, and commercial finance, and increase the support to the new generation of information technology, high-end equipment, new material, [to s]upport the Export-Import Bank of China to increase the service to manufacturing industry going out within its business cope, encourage the China Development Bank to increase the loan to manufacturing enterprises, and direct financial institutions to innovate products and businesses which are suitable for the characteristics of the manufacturing enterprises.” (58)

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The strategy further foresees the use of fiscal instruments: “Make full use of existing channels, strengthen the support of financial funds to the manufacturing industry, focus on key fields in transformation and upgrade of the manufacturing industry such as […] high-end equipment, […] and create a favourable policy environment for development of the manufacturing industry. Use the public-private partnership […] mode to direct social funds to take part in the construction of major projects, enterprise technological innovation, and construction of key infrastructures of the manufacturing industry. Innovate the means of financial support, transform from “construction support” to “operation support”, and improve the use efficiency of financial funds.” (59)

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The Commission also found that in 2015, the Ministry of Industry and Information Technology issued the “Regulation on the Standards of the Automotive Power Battery Industry” (60) (‘the Regulation on the Standards’), to “guide and regulate the healthy development of the automotive power battery industry. […] The State encourages automotive power battery enterprises to become better and stronger, establish product production specifications and quality assurance systems, strengthen technological and management innovation, improve product research and development and manufacturing levels, and enhance product performance and quality to meet the needs of the development of the new energy vehicle industry” . (61) The Regulation lays out the requirements for automotive power batteries enterprises to apply for inclusion on the catalogue of enterprises that meet the requirements, one of which being a producer and supplier of “automotive products within the territory of the People's Republic of China (except Taiwan, Hong Kong, and Macao)”  (62) . As a result, “[t]he list of enterprises included in the announcement will serve as the basic basis for relevant policy support”  (63) . Following this announcement, four batches of catalogue of enterprises that meet the conditions set out in the Regulation on the Standards have been published, and no foreign power battery producer has been included in it (64). Despite the fact that the requirements were abolished in 2019 by Announcement No.22 of the Ministry of Industry and Information Technology of the People's Republic of China (65), the existence of the catalogue of power battery enterprises can be assumed to have given Chinese battery manufacturers a competitive edge over foreign producers when the power battery industry was in its initial development.

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The Action plan for promoting the development of the NEV battery industry (66) of 2017 explains that power batteries are the heart of electric vehicles and the key to the development of the new energy vehicle industry. After more than ten years of development, the country's power battery industry has made great progress. However, the current performance, quality and cost of power battery products do not yet meet the needs of the promotion and popularization of new energy vehicles, especially in basic key materials, system integration technology, manufacturing equipment and processes, etc. The plan was drawn up to accelerate the improvement of the development capabilities and level of the country's automotive power battery industry and promote the healthy and sustainable development of the new energy vehicle industry.

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The implementation of power battery upgrade project by the MIIT and the Ministry of Science and Technology (MST) relies on national science and technology plans (special projects, funds) and other overall types of support for power battery research and development to achieve a single specific energy of more than 300 Wh/kg in 2020, continuously improve product performance, and accelerate the realization of high-level product installation and application. The aim was to encourage leading power battery companies to collaborate with upstream and downstream superior resources, concentrate on breakthroughs in key technologies of materials and components, battery cells and systems, greatly improve the performance and safety of power battery products, and strive to achieve a single unit of 350 Wh/kg and industrialization and vehicle application of new lithium-ion products with a system of 260 Wh/kg.

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The plan also envisions an increase in policy support, relying on the guiding role of government investment in social capital, encouraging the use of social capital to establish power battery industry development funds, and increasing support for power battery industrialization technology. According to the plan, if power battery products meet the conditions, they will be exempted from the consumption tax according to regulations; if power battery companies meet the conditions, they will enjoy preferential tax policies for high-tech enterprises, technology transfer, and technology development according to regulations.

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Not deviating from the Made in China 2025 strategy, the 14th national FYP (67) for the period from 2021 to 2026 shows that the GOC’s policy of prioritising and supporting the NEV sector continued and, in fact, is growing. Under Art. IX of the Plan, the Chinese authorities pledged to “raise the added value of strategic emerging industries to more than 17% of GDP”. For the NEV sector, as one of the strategic emerging industries, that commitment entails “mak[ing] breakthroughs in key technologies such as high-safety power batteries, high-efficiency drive motors, and high-performance power systems for new energy vehicles and accelerate the R&D of key components such as the basic technology platforms for intelligent (connected) vehicles, software and hardware systems, steer-by-wire chassis, and smart terminals.”  (68)

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Given the nature of the Chinese planning system, higher level plans – such as the 12th, 13th or 14th national FYPs – are to be followed-up and implemented by all relevant authorities. The national plans set out explicit obligations in that respect, such as Art. LXV of the 14th national FYP, according to which the GOC “will strengthen the organization, coordination, and supervision of the implementation of this plan and establish and improve planning and implementation monitoring and evaluation, policy assurance, and assessment and supervision mechanisms.” Accordingly, lower-level authorities “must create a favorable policy environment, institutional environment, and legal environment. The annual plans shall implement the development goals and key tasks proposed in this plan.” (69)

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Crucially, the GOC unequivocally commits to provide financial support, as well as support in the form of other factors of production – such as land – to projects and sectors identified in the Plan: “[w]e will adhere to the principle of the plan setting the direction, with fiscal spending as a guarantee, finance as support, and coordination with other policies. […] We will persist in making public fiscal spending obey and serve public policy, enhance financial support for major national strategic tasks, strengthen the coordination of mid-term financial plans and annual budgets, government investment plans, and the implementation of this plan, and prioritize central fiscal funds for the major tasks and major engineering projects identified in this plan. We will insist that projects follow the plan and funds and factors of production follow projects, develop a list of major engineering projects based on this plan, simplify the approval procedures for the projects in the list, and ensure that the priority is given to planning site selection, land supply, and capital needs. The land needs for individual major engineering projects are guaranteed by the state in a unified manner.” (70)

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This implementation mandate therefore results in an entire network of additional policy instruments being put in place by the relevant government authorities, in particular the long-term national sectoral plan, namely the New Energy Vehicle Industry Development Plan (2021-2035) (71) which replaced the corresponding 2012-2020 Plan as set out in recitals (216) to (224).

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The New Energy Vehicle Industry Development Plan sets the following vision: “By 2025, the competitiveness of China's new energy vehicle market will be significantly enhanced, major breakthroughs will be made in key technologies such as power batteries, drive motors, and vehicle operating systems, and the safety level will be comprehensively improved. The average power consumption of new pure electric passenger vehicles has dropped to 12.0 kWh/100 km, the sales volume of new energy vehicles has reached about 20% of the total sales of new vehicles, and highly autonomous vehicles have achieved commercial application in limited areas and specific scenarios, and the convenience of charging and swapping services has been significantly improved.” (72)

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To achieve this objective, the Plan lists various steps which need to be undertaken. Some of them foresee horizontal government support for the industry, such as to “improve the support capacity of public services such as technology transfer, information services, talent training, project financing, and international exchanges” (73), to “effectively undertake financial subsidy policies” (74) or to “[i]mplement preferential tax policies related to new energy vehicles” (75). Other focus on specific vehicle components or individual elements of the NEV value chain, such as “[e]ncourage enterprises to improve the ability to guarantee key resources such as lithium, nickel, cobalt and platinum”, “strengthen the energy interaction between new energy vehicles and the grid“ (76), “[a]ccelerate the construction of charging and replacing infrastructure“ (77), or “[s]upport the use of existing sites and facilities to carry out integrated oil, gas, hydrogen, and electricity supply services” (78).

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In January 2024, the NDRC published reform recommendations on the integration of NEVs into China’s power grid planning. Aside from vehicle-network interaction, these recommendations also include the encouragement of innovation and unification of standards in the NEV sector to “promote the research of key technologies and core equipment, strengthen the main role of enterprise innovation, and lead development with innovation. Accelerate the formulation and revision of standards, and lead the collaborative and standardized development of the industry.” (79)

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The support measures specified in the New Energy Vehicle Industry Development Plan (2021-2035) are reflected – and translated into more precise directions – in the corresponding provincial and municipal plans (80).

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The provincial plans provide more details on how the objectives of the central plans should be translated into policies within individual provinces, taking the form of measures as given as examples below.

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The general governmental control over the industry is provided for example the 14th FYP development plan for the new energy vehicles industry in the Anhui province: “Government guidance, market leadership. Give full play to the role of the government in various aspects such as top-level design, platform construction, demonstration, application and promotion, etc. Strengthen policy support and further create an environment guiding high-end production factors to concentrate towards the new energy automobile industry. Guided by market demand, give full play to the decisive role of the market as regards resource allocation, strengthen the key position of enterprises in the selection of technological paths and product manufacturing capacity layout, foster a better combination of an efficient market with a favourable government, and establish a dynamic development environment” (81).

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This provincial plan further provided detailed production targets: “Strive to ensure that by 2025, the scale of the city’s new energy automobile industry exceeds RMB 700 billion and the production capacity of complete vehicles exceeds 3 million, to foster 10 enterprises with a scale of RMB 10 billion and to ensure that the output value and output volume rank first in the country; Develop a new energy vehicle and parts industry system with a comprehensive layout and a reasonable structure, the annual production capacity of batteries shall exceed 300GWh, and the annual production capacity of drive motor systems shall exceed 3 million sets” (82) and investment support in facilities and projects: “Strive to build by 2025, at national level 1 new energy vehicle industry innovation center, 5 public innovation centers, and to foster 1 business model innovation project as well as 10 new innovation platforms above the provincial level by 2025” (83).

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Furthermore, the 14th FYP high-quality development plan for the automobile industry in the province of Anhui sets out investment support in industrial parks: “Accelerate and promote the construction of the Xinqiao Smart Electric Vehicle Industrial Park, and create a world-class smart electric vehicle industrial cluster with a complete industrial chain and integrating R&D and manufacturing, demonstration and application, as well as industry and supporting services. Support NIO’s long-term development planning and layout around Xinqiao Industrial Park, and establish R&D, manufacturing, marketing and management teams within the park. Establish NIO R&D and Innovation Center, carry out innovative research and development concerning complete vehicles, core components and autonomous driving, create a globally competitive and leading innovation chain; attract R&D staff and technical workers and strive to form an innovative place gathering high-level talents. (…) After completion of the park, it is estimated that the final vehicle production capacity will be 1 million vehicles per year, and the battery production capacity will be 100GWh per year” (84).

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It further expanded on export promotion: “Support the e-commerce of component supplying companies, build public overseas warehouses for export products, share channels to overseas markets and service support systems. Create tools such as import and export trade platforms, overseas industry parks as well as trade parks and guide the development of clusters of Chinese overseas investment enterprises. (...) By 2025, Chery Automobile shall export 500,000 vehicles with an export value of USD 5 billion. Foster Chery to further enhance its international competitiveness, (…) focus on expanding on strategic markets such as Europe, North America, and ASEAN countries (…). Support NIO to expand on the European market. Foster NIO to implement the “Marco Polo Plan”, adopt a differentiated development path and turn the “NIO China Model” into the “NIO Overseas Model” according to local conditions. (…) Support NIO to continue to expand on the European market, to expand on 5 national markets by 2025, and to select opportunities to build factories overseas” (85).

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The 14th FYP for high-quality development of the manufacturing sector of the province of Guangdong provides for the governmental control of the NEV geographical industry distribution: “Rely on Guangzhou, Shenzhen, Zhuhai, Foshan, Zhaoqing, Dongguan, Huizhou, Zhanjiang, Maoming, Shanwei, Yunfu and other cities and speed up the development pace of new energy vehicles. Guangzhou shall speed up the construction of new energy vehicle production bases and promote the quick industrialization of new energy vehicle models. Shenzhen, with Pingshan District as the core, shall build a national-level new energy vehicle industry base. Zhuhai, with Jinwan District as the core, shall focus on developing the manufacturing of complete new energy vehicles, lithium battery materials, powertrain, charging equipment and key components of new energy vehicles” (86).

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The 14th FYP development plan of the New Energy Automobile Industry of the province of Guizhou further sets out support for key projects related to parts and components: “Support the building of key projects. Speed up and foster the Guiyang BYD’s power battery project with an annual output of 10GWH, the Evergrande new energy power battery project (first phase), Dongfang Electric’s hydrogen fuel cell project, Anda Technology’s 30 000- ton/year lithium iron phosphate and supporting construction projects as well as its 20 000-ton/year lithium iron phosphate smart manufacturing technical transformation and expansion project, Anda Technology’s 50 000 tons/year new energy vehicle waste battery recycling technical transformation project, Wuchuan Automobile’s annual production of 1 million tons of automotive aluminium alloy die-casting projects, Baike automobile brake molds production line project, a number of key projects such as the Guizhou Aerospace Smart Manufacturing Industry Cluster Base Project in Guiyang Economic and Technological Development Zone, Zhenhua New Materials Production Line Construction Project with an annual output of 12 000 tons of lithium-ion battery cathode materials (Shawen Phase II)” (87).

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Also other provincial and municipal plans mention the development of strategic emerging industries, among which electric vehicles are mentioned, such as Bejing (88), Shanghai (89), Tjianjin (90), Jiangsu (91), and Shaanxi (92).

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There is also support for specific NEVs companies in some of the provincial FYPs, such as in the Implementation Plan for Accelerating the Development of the New Energy Automobile Industry in Shanghai: “Support SAIC Motor to develop new energy vehicles. By 2025, the sales of self-owned brand passenger vehicles and new energy vehicles will account for more than 30%, and the group’s new energy vehicle sales will account for more than 20%, ensuring that the core technology is under independent control and a comprehensive position of strength and domestic leadership. Encourage domestic and foreign strong companies with leading technology to invest in complete vehicle manufacturing and R&D projects in Shanghai” (93).

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Leading NEV and specifically BEV companies are often identified in provincial and municipal plans as models for further development of the industry through government support. In the Brand-building Plan for the New Energy Automobile Industry in Pingshan District, Shenzhen, (94) BYD and Kaiwo New Energy Automobile Group are identified as the base for the implementation of the “Headquarters R&D + High-end Manufacturing” layout: “Relying on the research and development strong capacities of high-quality new energy automobile enterprises in the Pingshan District, such as BYD and Kaiwo, strengthen the building of colleges and universities, research institutions, national key laboratories, national engineering laboratories and engineering centers and improve innovation at the regional level. Complement the innovation chain around the new energy vehicle industry chain, improve the upstream and downstream industry chains of new energy vehicles, batteries, communication power supplies, (UPS), charging guns, wires and cables, supercapacitor chemicals, semiconductor chemicals, etc.so as to form a complete industry chain. Ensure a high degree of clustering of the new energy vehicle industry, continue to build and introduce a number of technology Industry innovation platforms that closely support new energy vehicles R&D and manufacturing, and accelerate the construction of a technological innovation system that deeply integrates production, academics, research and application. Focus on "integrating headquarters, R&D and production", develop actions for listed companies to take root, actions for key enterprises to stabilize growth, and accelerate the formation of a functional layout of "headquarters R&D + high-end manufacturing”. (95)

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In August 2023, the MIIT and seven other departments issued the Automotive Industry Stabilizing Growth Work Plan (2023 – 2024) (96), with the purpose of laying down the main goals for the economic development of the automobile industry. Among the measures, the first one concerns the new energy vehicle consumption tax, and it mandates the implementation of “existing preferential policies such as vehicle and vessel tax and vehicle purchase tax for new energy vehicles, do a good job in clearing and reviewing new energy vehicle subsidy funds, and actively expand the proportion of personal consumption of new energy vehicles” . In addition to that, the notice also contains instructions on increasing policy support for new energy vehicles, such as: “Implement preferential vehicle purchase tax policies for new energy vehicles to stabilize industry expectations. Encourage the use of social capital to establish automobile industry development funds and increase support for core technology research. Use various financial instruments such as credit, bonds, and insurance to support enterprise development” .

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Consequently, there is ample documented evidence showing the political support for the accelerated developments of the BEV industry.

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Considering the above-mentioned plans and programmes, the BEV industry is thus regarded as a key/strategic industry, whose development is actively pursued by the GOC as a policy objective. The BEV sector is shown to be of paramount importance for the GOC and receives political support for its accelerated development. Including from vital inputs to the end product. On the basis of the policy documents referred to in this section, the Commission concluded that the GOC intervenes in the BEV industry to implement the related policies and interferes with the free play of market forces in the BEV sector, notably by promoting and supporting the sector through various means and key steps in their production and sale.

(254)

Although the GOC responded to certain information requests from the Commission during the investigation, there were notable instances of low cooperation. Specifically, in its reply to the government questionnaire, the GOC failed to provide essential information related to the preparation, monitoring, and implementation of various schemes. All these critical elements were meticulously documented in the Article 28 letter sent to the GOC. The GOC responded with comments, which the Commission addressed in the sections below.

(255)

In order to obtain the necessary information from the financial institutions in China effectively and for administrative convenience, the Commission requested the GOC to forward specific questionnaires to any financial institution that had provided loans or export credits to the sampled companies.

(256)

The GOC considered that the Commission’s request to the GOC to forward the specific questionnaire violated Articles 12.1 and 12.9 of the SCM Agreement. It considered that the obligation to conduct the investigation and collect information from financial institutions lies with the investigating authority and it cannot request the GOC to forward the questionnaires to financial institutions on a presumption that these entities are public bodies. It argued that this presumptive approach is inconsistent with Article 1.1(a)(1) of the SCM Agreement. The GOC also argued that the Commission already had access to the list of commercial banks of the sampled exporting producers and it could have sent the questionnaires directly to the financial institutions at stake.

(257)

The GOC further stated that the financial institutions were not properly notified of the information required of them, were not given 30 days to provide the requested information and were also not provided ample opportunity to provide the relevant information in writing within the meaning of Article 12.1 of the SCM Agreement. Besides, the GOC also considered that staff members of those commercial banks are not allowed to disclose state secrets or commercial secrets that they have become aware of in the course of their employment according to Article 53 of the Commercial Banks Law, and therefore cannot respond to the questionnaire.

(258)

The Commission disagreed with this view. First, it is the Commission’s understanding that the information requested from State-owned entities is available to the GOC for all entities where the GOC is the main or major shareholder. In addition, whereas the Commission did not assume in any way that the entities are public bodies, it considered that the GOC also has the necessary authority to interact with the financial institutions even when they are not State-owned, since they all fall under the jurisdiction of the National Financial Regulatory Administration (‘NFRA’), which replaced the China Banking and Insurance Regulatory Commission (‘CBIRC’) (97) in 2023. In this regard, the fact that the Commission could have contacted the financial institutions concerned directly is irrelevant. The form and modalities to collect the necessary information remain within the discretion of the investigating authority (98). The Commission also noted that the GOC had forwarded the questionnaire to certain banks in previous investigations (99) without questioning the approach taken by the Commission. Furthermore, as far as the information requested and deadline to submit a questionnaire reply is concerned, the Commission did not receive any request for clarification or a deadline extension request from any financial institution. The Export-Import Bank of China (‘EXIM bank’), which submitted a questionnaire reply, did not request any clarification either.

(259)

The Commission further noted that the GOC forwarded the questionnaire exclusively to EXIM bank. The Commission also noted that EXIM bank was the only bank that provided a questionnaire reply after it received the questionnaire as forwarded by the GOC. EXIM bank provided a questionnaire reply within the agreed extended deadline. Although the questionnaire was deficient, the Commission noted that EXIM bank indeed had ample opportunity to provide the relevant information in writing. Thus, the Commission concluded that, had the GOC forwarded the questionnaire to other financial institutions, it is likely that the Commission would have received more replies.

(260)

The Commission did not address its questionnaire to the staff of the financial institutions but rather to the institutions themselves. In any case, the fact that certain information may be considered as State or commercial secret is irrelevant in the framework of an anti-subsidy proceeding given the confidentiality treatment given to any submitted information considered confidential. Furthermore, the sampled producers were requested to provide a bank authorization granting express permission to the representatives of the Commission to review all documents (100) pertaining to the loans provided by individual financial institutions. Some of the sampled groups provided the requested authorisation for certain types of loans.

(261)

As mentioned in recital (259), the Commission only received a questionnaire reply from EXIM bank. The questionnaire reply only contained information on corporate structure, governance and ownership. As far as ownership is concerned, EXIM bank was not in a position to provide additional shareholding information concerning one of its shareholders; i.e. Wutongshu Investment Platform Co., Ltd. which held close to 90% of its shares. EXIM bank did not provide any information on the loans (or other financing instruments) to the sampled producers. In the absence of reply by any financial institution, the Commission did not receive any verifiable company-specific information with regard to preferential financing.

(262)

In the absence of such information, the Commission considered that it had not received crucial information relevant to this aspect of the investigation. Therefore, the Commission informed the GOC that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted through preferential financing.

(263)

The sampled exporting producers reported the issuance of green bonds and asset-backed securities during the investigation. While these bonds are only a variation of the bonds already countervailed in past investigations as part of the preferential lending programme, it appeared that they were governed by a legislative and regulatory framework that was specific to green industries, to which the BEV sector belongs. The Commission identified over ten legislative and regulatory documents such as “NDRC: Guidelines on the Issuance of Green Bonds”, “the Green Bonds Supporting Project Catalogue (2021 Edition) issued by the three ministries and commissions including the People's Bank of China” and “Announcement of the People's Bank of China [2015] No. 39 on the Issuance of Green Financial Bonds in the Interbank Bond Market pertaining to these specific bonds and requested the GOC to explain the regulatory framework for the issuance and management of green funding and asset-backed securities and the role of each of the actors involved including auto finance companies. The GOC refused to provide this information arguing that the Commission’s request did not provide a complete description of the program and that the Memorandum on sufficiency of evidence did not provide any evidence of financial contribution, benefit and specificity as regards such bonds. Furthermore, during the on-the-spot verification visit, the GOC refused to engage on this particular topic and answer the Commission’s questions.

(264)

The Commission noted that the provision of preferential financing through the issuance of the bonds was listed in the Memorandum on sufficiency of evidence and that the existence of such scheme was not contested by the GOC before the initiation of the investigation. The Commission also considered that the green bonds and asset-backed securities are only a variation of this scheme, which is similar in most aspects.

(265)

On 21 May 2024, the GOC submitted comments concerning the Commission’s letter dated 8 May 2024 indicating its intention to apply facts available in accordance with Article 28 of the basic Regulation (‘Article 28 Letter’).

(266)

In response to the request to forward Appendix A to the financial institutions, the GOC claimed that the Commission should directly address its information requests to the relevant entities. Furthermore, the GOC claimed that financial institutions are independent economic entities, not affiliated with the GOC. Furthermore, the GOC claimed that Appendix A requests confidential and business-sensitive information.

(267)

The Commission disagreed with this view. First, it is the Commission's understanding that the information requested from state-owned entities (be it companies or public/financial institutions) is available to the GOC for all entities where the GOC is the main or major shareholder. Indeed, according to the Law of the People's Republic of China on State-Owned Assets of Enterprises (101), State-owned assets supervision and administration agencies established by the State-owned Assets Supervision and Administration Commission of the State Council and local people's governments perform the duties and responsibilities of the capital contributor of a State-invested enterprise on behalf of the government. Such agencies are thus entitled to receive returns on assets, to participate in major decision-making and to select managerial personnel of State-invested enterprises. Furthermore, according to Article 17 of the above-mentioned Law on State-owned Assets, State-invested enterprises shall accept administration and supervision by governments and relevant governmental departments and agencies, accept public supervision, and be responsible to capital contributors.

(268)

In addition, the GOC also has the necessary authority to interact with the financial institutions even when they are not State-owned, since they all fall under the jurisdiction of the Chinese banking regulatory authority. For example, according to Articles 33 and 36 of the Banking Supervision Law (102), the NFRA has the authority to require all financial institutions established in the PRC to submit information, such as financial statements, statistical reports and information concerning business operations and management. The NFRA can also instruct financial institutions to disclose information to the public.

(269)

The GOC claimed to have explained the Loan Prime Rate (‘LPR’) formation mechanism, and mentioned a lack of clarity regarding the Commission's request of information concerning the Credit Management and Loan Evaluation System. Regarding green bonds, the GOC claimed that there was also a lack of clarity and precision in the Commission's requests, which prevented them from providing an accurate reply.

(270)

The Commission considered the comments to be ill-founded. The Commission repeatedly asked specific clear and relevant questions to which the GOC refused to supply pertinent information. The GOC did not provide the necessary information that could enable the understanding of the LPR formation mechanism and support the GOC’s reply in this regard. Similarly, the GOC failed to provide the legal basis and regulatory framework of the Credit Management and Loan Evaluation System. Moreover, in its request for information, the Commission referred to several specific official documents relating to green bonds and auto finance companies, for which the GOC did not provide the legal and regulatory framework, nor was the GOC willing to explain what constitutes a green bond despite its mentioned in official documents.

(271)

With regard to the EXIM Bank, the GOC claimed that the requested information could not be deemed necessary. Additionally, the GOC claimed that the requested information contained trade secrets and could not be provided by EXIM Bank. Furthermore, the Commission should have received relevant information by the sampled exporting producers.

(272)

The Commission noted that it is for the Commission to determine what information is deemed necessary for the investigation and not for a party to make that determination. In addition, the information related to EXIM bank has a direct link to the investigated scheme. Consequently, the requested information is both relevant and necessary for the Commission to properly assess the scheme. Finally, the Commission reminded that the GOC has not only regulatory authority but also responsibilities on the management of EXIM Bank. Consequently, the GOC cannot entirely shift the responsibility of providing information to the sample producers. Consequently, the claims were rejected.

(273)

In the absence of the requested information, the Commission considered that it had not received crucial information relevant to this aspect of the investigation. Therefore, the Commission informed the GOC that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted through preferential financing, including the issuance of green bonds and asset-backed securities.

(274)

In order to obtain the necessary information from the unrelated suppliers of input materials (parts, components, and raw materials) located in China effectively and for administrative convenience, the Commission requested the GOC to forward a specific questionnaire to the suppliers of input material to the sampled exporting producers as communicated to the GOC by the sampled exporting producers.

(275)

The GOC considered that the Commission’s request to the GOC to forward the specific questionnaire violated Articles 12.1 and 12.9 of the SCM Agreement. It considered that the obligation to conduct the investigation and collect information from suppliers of input material lies with the investigating authority and it cannot request the GOC to forward the questionnaires to independent commercial entities on a presumption that these entities are public bodies. It argued that this presumptive approach is inconsistent with Article 1.1(a)(1) of the SCM Agreement. The GOC also argued that the Commission already had access to the list of suppliers of the sampled exporting producers and it could have sent the questionnaires directly to them.

(276)

The GOC further stated that the input suppliers were not properly notified of the information required of them, were not given 30 days to provide the requested information and were also not provided ample opportunity to provide the relevant information in writing within the meaning of Article 12.1 of the SCM Agreement.

(277)

Furthermore, it argued that suppliers could be discouraged to submit their replies, containing confidential information, through the GOC, and that the questionnaire did not contain instructions as to the submission of a non-confidential version.

(278)

In this respect, the Commission noted that the questionnaire sent to the GOC included instructions requesting it to provide evidence that it had indeed forwarded the questionnaire to the input suppliers. The GOC did not provide such evidence in its questionnaire reply. In the absence of such evidence, the Commission considered that the claims relating to the practical aspects pertaining to the questionnaire to be sent to input suppliers were moot.

(279)

The GOC did not provide an overview with the names and the ownership structure of Chinese suppliers of the input materials under investigation, claiming that this was confidential information or that the information was not available. Furthermore, the GOC failed to provide detailed information on most of the characteristics of the domestic market in China of input materials for BEV, among which: the share of state-owned enterprises (‘SOEs’) in the domestic production and consumption, the size of the domestic market, the State’s and/or SOEs’ pricing policies, actual prices of input materials in the domestic market, and statistics.

(280)

Since the Commission received no information from the GOC concerning all elements listed above, among which the domestic market structure, price-setting mechanisms and prices, and shareholding of companies, the Commission considered that it had not received crucial information relevant to the investigation.

(281)

In its reply to the Commission’s Article 28 Letter, the GOC objected to the application of facts available.

(282)

As regards the information on various parts and components and raw materials, the GOC reiterated its argument that it had no information on the suppliers of parts and components, that it had no control over the suppliers, that it was impossible to force them to cooperate and that it is the Commission that should address the requests. In addition, it claimed that the information requested by the Commission was too broad, not necessary for the investigation and that the scope of the investigation had been illegally expanded. Similarly, regarding the information on the China Battery Industry Association (‘CBIA’), it also claimed that it had no control over the CBIA, which is not formally affiliated with the GOC, and that the Commission should make its requests directly to the association.

(283)

Finally, with regard to information on production, consumption, the structure of the domestic supplier market and elasticity, the GOC argued that the data was not available to it.

(284)

The Commission noted that it is for the Commission to determine what information is deemed necessary for the investigation and not for a party to make that determination. The Commission also cannot accept the argument that the request for information is too broad since, given the number of suppliers and the input materials involved, the information, by definition, requires a large amount of data to be collected. Furthermore, regarding the argument that the GOC has no control over the suppliers and thus impossible to force them to cooperate, the Commission referred to the reasons explained in recital (278) above for which it considered these claims moot.

(285)

As regards the claim of extended scope, the Commission noted that this particular scheme was already part of the Memorandum on sufficiency of evidence, it was included in the Notice of Initiation and part of the consultations with the GOC. Therefore, the information requested was never extended beyond the original scope.

(286)

The Commission first observed that the GOC did not put into question that it failed to provide information regarding any of the other associations the Commission requested information about, namely CBIA, China non-ferrous metal fabrication Industry Association (‘CNFA’), China Industrial Association of Power Sources (‘CIAPS’), the China Photovoltaic Industry Association (‘CPIA’), the China Nonferrous Metals Industry Association (‘CNMIA’) and the China Nonferrous Metals Processing Industry Association (‘CNMPIA’). Furthermore, as described in recital (278), the GOC failed to provide evidence that it had forwarded the questionnaires to suppliers or CBIA. The absence of such evidence raises concerns regarding cooperation in the investigation.The Commission cannot accept either that the GOC had no information whatsoever regarding the structure of the domestic suppliers’ markets. As described in Section 3.7.2 below, the Commission established that the State has shares in a number of battery and lithium suppliers. Therefore, for the reasons explained in recital (268), the State has numerous means to collect information to collect data for State-invested enterprises. Furthermore, as evidenced by the direct role of CBIA and CIAPS on the suppliers’ markets, the State has a number of other means to collect data for all State owned and other entities operating on the suppliers’ markets. Finally, collecting overall statistics on consumption, production, market structure and prices is inherent to the functions typically exercised by a sovereign state. Since the Commission received no information from the GOC concerning the elements listed above, the Commission thus concluded that it had not received crucial information relevant to the investigation and that it had to rely on facts available for its findings concerning input materials.

(287)

The Commission requested the GOC to complete a questionnaire with specific questions concerning the Fiscal Subsidy Policy for the Promotion and Application of New Energy Vehicles scheme. In its reply, the GOC failed to provide basic information requested on various elements such as the preparation, monitoring and implementation of the scheme, as well as the estimations of the amounts of vehicles to which the scheme applied.

(288)

The GOC did not disclose any preparatory documents (feasibility, expected results), neither intermediate nor final documents (assessment of results, impact on the development of the BEV industry, distribution of benefits between producers and consumers). It neither identified nor explained the types of records maintained by the relevant authorities regarding the programme.

(289)

Similarly, the GOC failed to provide the government’s payment schedule for the BEVs sold during the investigation period. Furthermore, it did not provide the total amounts of subsidies transferred in connection with BEV applications over the past four years. Additionally, it failed to provide the basis on which the subsidy per vehicle had been reduced over the years. It neither provided the number of BEVs for which subsidies were transferred since 2018. Furthermore, the GOC was unable to explain the procedure to claim the funds in the case of imported BEVs.

(290)

Furthermore, the GOC was unable to provide the following: i) annual consolidated tables indicating the amounts paid per foreign producer per imported model for the last four years; ii) foreign companies' requests for instructions on the settlement of the application for fiscal subsidy funds in 2020-2023; iii) the number of imported BEV for which funds were transferred during the investigation period or previous years.

(291)

Finally, the GOC failed to provide an explanation on whether schemes similar exist at central or provincial level.

(292)

Since the Commission received no information from the GOC concerning all elements listed above, the Commission considered that it had not received crucial information relevant to the investigation.

(293)

In its reply to the Commission’s Article 28 Letter, the GOC objected to the application of facts available.

(294)

The GOC claimed not to have access to information relating to feasibility studies, expected results, neither intermediate nor final documents.

(295)

The GOC also claimed that information concerning the government's payment schedule for the BEVs sold during the IP, the nature of the records kept by the relevant governments in relation to the programme and the number of BEVs for which subsidies were transferred and the declared BEV sales, is irrelevant and not necessary to the present investigation.

(296)

With regard to information on the amounts paid to foreign producers under the programme per model, the GOC claimed that it did not have this information and that it was irrelevant and unnecessary for the purposes of the present investigation.

(297)

The Commission noted the extreme unlikelihood that the GOC has not retained information regarding feasibility studies or expected results of a program that has been in place for several years, which had undergone multiple revisions and adjustments on the basis of evaluations, and which, most importantly had involved significant amounts of the central budget managed by the GOC. Those re-evaluations should require some information about expected results and information about the companies benefiting from those programmes. Therefore, to the extent that the information is deemed necessary for the Commission to reach its conclusions, the Commission may, where appropriate, use facts available.

(298)

As regards the relevance of the information, the Commission noted that it is for the Commission to determine what information is deemed necessary for the investigation and not for any party to make that determination. Furthermore, the government's payment scheme to BEV producers based on their sales of BEVs, the amounts disbursed to domestic versus foreign producers, and the records kept on these disbursements have a direct link to the alleged subsidy scheme for its calculation and determination of specificity among other elements. Therefore, the information requested is both relevant and necessary for the Commission to properly assess the scheme.

(299)

The Commission thus concluded that it had to rely on facts available for its findings concerning the Fiscal Subsidy Policy for the Promotion and Application of New Energy Vehicles scheme.

(300)

The Commission requested the GOC to provide information regarding subsidy schemes at national, provincial or municipal level that conferred a benefit to producers / exporters of the product under investigation during the last three calendar years before and during the investigation period. Whereas the GOC failed to provide any information in this regard, it appeared that it did not contact any subcentral authorities whether at provincial or municipal level to gather the information that was requested.

(301)

In its reply to the Commission’s Article 28 Letter, the GOC objected to the application of facts available.

(302)

The GOC claimed that it lacked monitoring of the grants received by companies from sub-central governments. Furthermore, it argued that the lack of specificity in the Commission’s question made it burdensome for the GOC to collect extensive information from all China provinces and municipalities. Finally, it claimed that relevant documentation had been provided by Chinese exporting producers.

(303)

The Commission noted that it was unlikely that the GOC had retained no information or is not entitled to request the provinces and municipalities information regarding the transfer of cash by the GOC or on behalf of the GOC. This includes details such as the reasons for those cash transfers, the amounts involved, and the recipients of the disbursements. Therefore, to the extent that the information is deemed necessary for the Commission to reach its conclusions, the Commission may, where appropriate, use facts available.

(304)

The Commission also noted that information requests contained in the questionnaire and the deficiency letters were detailed and specific. Similarly, the Commission reminded that the GOC is actively involved in the schemes as it controls the legal framework, the decision-making process, the disbursement and the programme design of the grants. Consequently, the GOC cannot fully shift the responsibility for providing information to the sample producers.

(305)

Since the Commission received no information from the GOC concerning the elements listed above, the Commission considered that it had not received crucial information relevant to the investigation and that it had to rely on facts available for its findings concerning grants / other subsidy programmes including state / regional / local government schemes.

(306)

The Commission requested the GOC to complete a questionnaire with specific questions concerning the purchase tax exemption scheme. In its reply to the government questionnaire, the GOC failed to provide basic information requested on areas such as the preparation, monitoring and implementation of the scheme, as well as the estimations of the amounts of vehicles to which the scheme applied.

(307)

With regard to the preparation and monitoring of the programme, the GOC failed to provide an analysis of the expected results. The GOC also failed to identify and explain the types of records kept by the relevant authorities (e.g., accounting records, company-specific files, databases, budget authorisations, etc.). Additionally, the GOC failed to provide the amount of tax forgone under this policy. Furthermore, the GOC failed to provide any intermediate documents, including evaluation results, impact assessment on the development of the BEV industry, and a distribution of benefits between producers and consumers. Similarly, the GOC was unable to provide the sales of imported BEVs included in the catalogue that were eligible under this programme.

(308)

Concerning the Catalogue of New Energy Vehicle Models Exempted from Vehicle Purchase Tax, the GOC failed to provide responses regarding i) the eligibility criteria, ii) information documents concerning rejected models and model applications, and iii) communication received from producers about their applications. Specifically, the GOC failed to provide an explanation or evidence to substantiate the basis on which applications for vehicles to be included in the programme were accepted or rejected. Furthermore, the GOC did not provide information documents for rejected models, nor did it provide the model applications and the documents sent to producers regarding the rejection of these models.

(309)

Similarly, the GOC failed to provide information concerning the volume of BEVs registered in China. Furthermore, the GOC did not provide information concerning the volume of imported BEVs registered during the investigation period or previous periods. The GOC also failed to provide information concerning the registration volume of NEVs or BEVs by brand, model, and place of registration. Finally, the GOC failed to provide any research that could be used as a reference regarding price elasticity in China.

(310)

Since the Commission received no information from the GOC concerning any of the elements listed above, the Commission considered that it had not received crucial information relevant to the investigation.

(311)

In its reply to the Commission’s Article 28 Letter, the GOC objected to the application of facts available on the grounds that none of the information requested was available to the GOC.

(312)

In addition, the GOC argued that the information concerning the volume of BEV registrations was irrelevant for the purpose of the investigation.

(313)

The Commission noted that it is highly unlikely that the GOC does not have information on the number of BEVs registered in China during a given period. This is particularly the case given that BEVs benefit from special conditions at the time of registration, which need to be evaluated, controlled and monitored by the GOC. There is a comprehensive set of documents that vehicle owners must submit to the traffic authorities during the process of purchasing, registering and obtaining a license plate number for a vehicle in China. From the moment of purchase, vehicle buyers are required to comply with purchase tax regulations by submitting a Vehicle Purchase Tax Declaration. This declaration requires detailed information, including the Vehicle Identification Number (VIN), which uniquely identifies the model of the vehicle and some of its characteristics. In addition, vehicles registered in China must undergo a registration process with the Chinese traffic authority, which includes identification of the vehicle type and model. Similarly, licence plates can be linked to specific vehicles.

(314)

It is similarly unlikely that the GOC retains no written documentation pertaining to the rejection of models for inclusion in the catalogue, especially when the procedure for inclusion in the catalogue involves the submission of a significant amount of data from the producers and implies the evaluation of several technical services within the GOC. Furthermore, the Commission noted that it is unlikely that the GOC is unaware of the estimated tax revenue foregone from a long-standing programme. Indeed, this is a programme with direct impact on the budget and the potential to result in hundreds of billions of RMB of tax revenue being forgone per year.

(315)

Therefore, to the extent that the information is deemed necessary for the Commission to reach its conclusions, the Commission relied on publicly available sources.

(316)

As regards the relevance of the information, the Commission notes that it is for the Commission to determine what information is deemed necessary for the investigation and not for any party to make that determination. Furthermore, the registration of BEVs has a direct link to the alleged subsidy scheme and therefore the information requested was both relevant and necessary for the Commission to properly assess the scheme.

(317)

While, as stated in Section 3.9, the Commission provisionally decided not to issue findings on this scheme, it reserves the right to further investigate the countervailability of the program. Consequently, the Commission may have to rely on available facts for its findings regarding the purchase tax exemption scheme, should it gather sufficient elements to conclude that such scheme is countervailable.

(318)

The SAIC Group initially cooperated with the Commission by providing replies to the questionnaire. In particular, its related entities, including 6 BEV producers, sent replies to the questionnaire. However, these replies were found to be highly deficient and, on 12 December 2023, the Commission informed the SAIC Group of the Commission’s intention to apply Article 28(1) of the basic Regulation with respect to information not provided prior to the verification visits and the fact that, failing to receive this information, the Commission’s findings may be based on facts available. The missing information related inter alia to cost of production, detailed information relating to purchases of main inputs, and the absence of questionnaire replies by related companies involved in activities related to the product under investigation for which a questionnaire reply had been requested.

(319)

The SAIC Group failed to provide the missing information and argued this was due to the high number of related companies in the group, and that the application of “facts available” would not properly reflect its high level of cooperation up to that point of the investigation. It argued that the high number of deficient replies submitted being due to the, often unjustified, amount of information requested by the Commission and the high coordination burden needed between the numerous related companies.

(320)

However, the lack of cooperation was confirmed whether prior, during, and after the verification visits as crucial information including inter alia costs of production, bills of material (BOM), product specifications including the chemical composition of the raw material purchased from suppliers, supporting purchase transaction-by-transaction listing for suppliers, and information relating to grants received were not provided. The Commission explained to SAIC Group that such information was considered necessary to arrive at concrete findings with regard to the subsidies received from a variety of support measures. Furthermore, it appeared that additional related companies had also failed to provide a questionnaire reply, although their activities would have required them to do so.

(321)

The Commission found that the absence of such necessary information impeded the investigation. Hence, on 23 April 2024, the SAIC group was duly informed on the consequences of only partially cooperating with the investigation and of the Commission’s intention to apply Article 28 of the basic Regulation regarding the information not submitted or the information that could not be verified. The Commission invited the company to submit comments.

(322)

On 30 April 2024, the Commission received comments from the SAIC Group. The SAIC Group disagreed with the Commission’s assessment of the overall level of cooperation provided by the various entities part of the group and put forward several claims leading to the conclusion that the intended application of Article 28 of the basic Regulation was not justified.

(323)

The SAIC Group stated that certain aspects of the Commission’s assessment for the application of Article 28 of the basic Regulation misrepresented the facts on record and repeated that it had cooperated with the investigation to the best of its ability. The SAIC Group explained that in instances where it was unable to provide full or only partial information as requested, it provided ‘alternative documents’ to facilitate the Commission’ investigation.

(324)

In this regard, the SAIC Group referred to Article 28(3) of the basic Regulation, as well as to the Case-law of the Court of Justice of the European Union (103) alleging that even the incomplete or otherwise deficient responses should be accepted.

(325)

The SAIC Group highlighted a finding by the Court in this case (104) where it considered that “the term ‘necessary information’ refers to information held by the interested parties which the EU institutions ask them to provide in order to enable them to reach the appropriate findings in an anti-dumping investigation”. In the same case (105), the Court found that “the burden lies with those institutions to prove that the product concerned has been dumped, that there has been injury and that there is a causal link between the dumped imports and the injury and, therefore, that certain information is ‘necessary’ for the purpose of reaching the appropriate conclusions in the anti-dumping investigation”.

(326)

In the light of the Court’s finding, the SAIC Group considered “that due to the highly complex nature of this investigation (both in terms of the large scope of information requested, the great number of companies required to supply information and the short turnaround of time to provide information), the Commission should not apply the aforementioned criteria too strictly to the information submitted” and “where the information is deemed deficient, the use of facts available should be strictly limited to the necessary purpose of that information and in all circumstances be checked by reference to other independent sources, in full accordance with Article 28(5) of the basic Regulation.”

(327)

The Commission recalled that the information requested was actually provided by the other sampled group(s) and thus readily available to the SAIC Group. Hence, it was the SAIC’s Group’s choice not to provide the requested information, as evidenced by the list of non-submitted documents, which it signed and agreed to during the verification. This list demonstrates that it impeded the investigation by consciously not acting to the best of its abilities. Furthermore, the information was deemed to be necessary for the purpose of reaching appropriate conclusions in the subsidy investigation and in this regard, in line with the findings of the Court. Also, any relevant information provided by the SAIC Group as ‘alternative documents’, including the deficient one, was appropriately taken into account, when verifiable. The Commission resorted to facts available, including from independent sources as mentioned in section 3.3 concerning preferential lending, export credit insurance, purchase tax exemptions, input materials and Fiscal Subsidy Policy for the Promotion and application of New Energy Vehicles only when the information submitted was clearly deficient (and listed in the jointly signed annexes to the on-spot verification reports) and the Commission had sufficient elements to conclude on these schemes. It is incorrect to assume that the Commission applied too strictly the criteria set out in Article 28(3) of the basic Regulation.

(328)

As the SAIC Group claimed in its comments that “the benefit of the doubt should be given to the information that is on the record as supplied”, the Commission explained in the disclosure of the essential facts and considerations to the sampled exporting producer, that in using facts available withing the meaning of Article 28 of the basic Regulation, it has used the information provided by the SAIC group to the largest possible extent, and in the absence of such verified information only then reverted to public independent sources. The claim that the legal standards for applying Article 28 of the basic Regulation were not met was therefore rejected.

(329)

As mentioned in recitals (318) - (319), several unreported related companies for which the SAIC Group failed to provide a questionnaire reply were found during the investigation. These ‘new’ companies were found to be related and were involved in various key contractual relations involving activities such as the provision of input materials, capital, loans, guarantees and other types of financing within the SAIC Group. The SAIC Group repeatedly rejected the Commission’s requests to fill in a questionnaire, arguing that it was a breach of the SAIC group’s fundamental rights, without however, giving any substantiated arguments.

(330)

In its comments, the SAIC Group claimed that those related companies could not or did not have to cooperate in the investigation and in any case, the use of Article 28 of the basic Regulation to these companies was not justified or should be strictly limited. The reasons alleged by the SAIC group were related to several factors such as:

(331)

The Commission agreed that, in line with the above-mentioned clarification note, a related company with a very low transaction value representing less than 1% of purchases of the SAIC Group could indeed be exempted from providing a questionnaire reply in this investigation. However, the Commission reserved the right to apply Article 28 of the basic Regulation to the supplied parts of this related company to the SAIC Group as it had not been able to verify this information.

(332)

The Commission noted that the related supplier in question and the SAIC Group jointly operated a company to develop, produce and sell battery cells, modules and packs, and were therefore legally recognised partners in business. Therefore, they are considered related within the meaning of Article 127 of Commission Implementing Regulation (EU) 2015/2447, which warrants the legal obligation to submit a subsidy questionnaire reply as a related party, as per instructions of the questionnaire and the subsequent correspondence. The claim of the group was therefore rejected.

(333)

The SAIC Group claimed that the Commission should review its assessment and refrain from applying Article 28 of the basic Regulation to companies having refused to disclose financial or contractual links and joint ventures agreement and, in such cases, to only use publicly available information in line with Article 28(5) of the basic Regulation. The Commission repeatedly indicated to the SAIC Group that the fact that certain information was considered “core business secret” was irrelevant given the confidentiality treatment given to any information submitted in the framework of anti-subsidy proceedings in line with Article 29 of the basic Regulation. Therefore, the claim was rejected.

(334)

The SAIC Group claimed that the Commission failed to properly explain why some related companies should have filled in a questionnaire. However, in its second request, the Commission explained that according to information available in the file (organisation chart showing an important financial and/or controlling role by the related companies) these companies were related since they seemed to be involved in the provision of capital, loans, or other types of financing within the SAIC Group. However, having received a second negative reply to its request from the SAIC Group, the Commission did not reiterate its request and informed the SAIC Group of the consequences of non-cooperation on 23 April 2024.

(335)

The SAIC Group refused to provide a questionnaire reply concerning a related company found, during one of the verification visits, to be engaged in a tolling agreement. Although, the SAIC Group recognised that this related company was involved in the production of the product under investigation (‘PUI’), it also claimed that that the Commission should have “confirmed” that a questionnaire reply was needed. This comment showed the lack of cooperation of the SAIC group, who finally claimed that any use of Article 28, if any in relation to this related company, should be limited to elements not related to subsidies. The claim was rejected.

(336)

In fact, the existence of these related companies was revealed by the information provided in the initial submission of information prior to the submission of the questionnaire replies, in the questionnaire replies or during the on-spot verification visits on a casual basis. These related companies were either suppliers or customers to the SAIC Group and often appeared to be involved in activities related to the PUI whether as research institute, supplier of parts and components listed in the Memorandum on sufficiency of evidence, logistic companies, etc. Given the nature of their activities they should have provided a questionnaire reply allowing the Commission to verify the information and eventually request further evidence.

(337)

In its comments, the SAIC Group claimed that following substantial deficiency letters received from the Commission some information had effectively been provided subsequently and could be fully verified during the on-spot verification visits. However, the SAIC Group only referred to information relating to purchases and consumption tax exemption to domestic customers, thus recognising that all the other missing information remained undisclosed during the investigation. In fact, the deficiency letters highlighted key issues that the individual producers being part of the SAIC Group deliberately omitted to report (information in their questionnaire replies relating to production and sales forecasts, cost of production, purchases and consumption tax exemption on domestic sales).

(338)

The SAIC Group provided an overview of the documents not submitted before and during on-spot verification visits asking the Commission to apply Article 28 of the basic Regulation only to those documents which were not provided by individual entities. The Commission reviewed the lists and maintained its position regarding those elements in the list which had been sent to the SAIC Group which were subject to the use of facts available, such as grant programmes, provision of batteries for less than adequate remuneration, revenue foregone through Tax Exemption and Reduction programme and provision of preferential financing (such as bonds and equity injections) and missing questionnaire replies. The claim not to reject the information provided as regards the following elements listed below was rejected:

(339)

The Bills of materials (BOM) are extensive lists of raw materials, components, and instructions required to manufacture a product. The Commission repeatedly explained to the SAIC Group their importance in the investigation as they allowed to identify the main individual components and materials that make up the finished product and their origin.

(340)

In the subsidy case at hand, the BOM were equally important to identify the parts used in the assembly of the finished product (BEV or components such as batteries), the quantities used, their specification, internal material number and consequently the name of their suppliers. The BOMs also allowed to establish a direct link to the cost of production, as they could be used as a basis for the calculation of standard costs, actual costs and variances deriving from the difference between them.

(341)

The SAIC Group did not provide full data concerning, neither the BOM, nor the costs of production and maintained that the BOM was not necessary for anti-subsidy investigations, as it did not pertain to any of the elements for the calculation of the subsidy margin. The Commission disagreed with this assessment and confirmed that this information was required to be able to assess the completeness and accuracy of information related to cost of production but also to the most important parts and components.

(342)

The SAIC Group recognised that information related to product specifications could only be provided on a case-by-case basis and only in parts. Furthermore, the SAIC Group considered that the Commission could have used a different approach to be able to reconcile the data provided. In fact, by asking the same level of information regarding the BOM to each entity, the SAIC Group considered that it was an unfair treatment which constituted a breach of the Charter of Fundamental Rights, as they were other methods available to verify the information provided in the table concerning the supply of parts.

(343)

The Commission maintained that none of related battery suppliers provided the necessary supporting documents requested by the investigation team and in particular their specifications. The Commission first considered that BOM information should have been provided by each of the entities, as when requested during the on-spot verification visits, they confirmed that while having such information, it could not be provided for different reasons, mostly linked to confidentiality agreement signed with suppliers and company’s own business secrets. Furthermore, the BOM was actually used by the entities when preparing its questionnaire reply in order to determine the input materials that needed to be reported and corresponding suppliers that should provide a questionnaire reply. This is one of the reasons which prompted the Commission to renew its request after the on-spot verification visit. In fact, contrary to its normal practices, the Commission allowed each entity to provide the information regarding the BOM and other supply parts and raw material specifications, reserving however the right to disregard this information as it could not be verified on spot.

(344)

As mentioned above, the SAIC Group alleged that the chemistry and specification of the battery cell and battery system used by some of the producers could be verified without using BOM or that the information relating to the specification for certain raw materials used by some battery related producer could be verified without using a BOM. In some cases, the SAIC Group provided BOM-related information as part of the verification exhibits.

(345)

However, the fact that a company would allow the Commission to view a BOM for a unique type of PUI could, in no case, be equivalent to the provision of the requested information. In addition to the lack of completeness of the information that could be viewed (only one type of PUI in some exceptional cases), the SAIC Group confirmed that it refused to provide readily available information to the Commission when it was so requested.

(346)

The Commission first rejected the claim that the BOM were not relevant in the investigation and could not have any impact on the subsidy amount calculations. Second, having identified the batteries and other raw material as key factors which may be subject to subsidisation, in the absence of BOM information which would have allowed the Commission to assess the completeness, accuracy and specifications of the parts supplied to the sampled producers, the Commission decided to use, as fact available, other sources of information concerning raw materials.

(347)

In its comments to the application of Article 28, the SAIC Group confirmed that for confidential reasons it could not always provide T-by-T purchase listings as these elements related to production costs and were therefore business secret. However, in some cases, it claimed that the relevant table could be verified during the on-spot verification visits. The SAIC Group claimed that it had submitted a comprehensive summary of the information requested in the form of tables, which contained all the necessary information for the calculation of subsidy amount and that it could be verified by the Commission during the on-spot verification visits. However, the SAIC Group could only provide screenshot of the information showed to the Commission as the information source remained confidential and the requested purchase listing could not be provided, though readily available. The SAIC Group concluded that in any event, the information submitted was meeting the criteria of Article 28(3) of the basic Regulation.

(348)

The Commission disagreed with the claim that the information submitted was meeting the criteria of Article 28(3) of the basic Regulation. Not giving direct access to certain documents and providing screenshots or aggregated data without providing the relevant requested information can, in no case, be equivalent to the provision of the requested information in the form of an exhibit ensuring that the information can be duly verified. Deficiencies in providing the actual requested data cause difficulties in arriving at a reasonably accurate finding. Furthermore, given that the information was readily available, it cannot be considered that the party acted to the best of its abilities.

(349)

The Commission also noted that the information relating to purchases did not reflect actual cost but standard cost (budget cost recorded in the company’s Enterprise Resource Planning (‘ERP’)). On this basis, and considering the above-mentioned findings related to the BOM, the Commission was not able to verify the accuracy of the quantity and cost information relating to parts and components reported by the sampled producers of the PUI and therefore, rejected the claim that the information submitted was meeting the criteria of Article 28(3) of the basic Regulation.

(350)

In its comments, the SAIC Group alleged that in one case, it reconciled on spot a Transaction-by-Transaction list with its accounting records. It alleged that for this entity and for the other producing entities, when requested during the on-spot verification visits, it had provided the relevant purchase documents including invoices, purchase orders, entries in the ERP systems in the form of exhibits. In particular, two battery suppliers provided their contracts with customers, i.e. the BEV manufacturers within the group, as verification exhibits. Hence, the SAIC Group considered that the criteria of Article 28(3) of the basic Regulation were met and the information should be fully taken into account by the Commission.

(351)

The Commission rejected the claim that the SAIC Group had cooperated fully by providing a set of purchase framework agreements. In fact, the SAIC Group itself recognised that due to the alleged highly confidential nature of these documents it could not provide any purchase framework agreement in full for parts and components suppliers that were listed in the relevant section of the questionnaire reply. This was also confirmed by the list of documents not provided either during or after the verification visit whereby no full set of documents including documents such as framework contract and technical specifications could be provided. Furthermore, the Commission reminded the SAIC Group that such document should have been provided as part of the initial questionnaire reply. Given the confidentiality treatment given to any “sensitive” information submitted in the framework of anti-subsidy proceedings, such claim was unsubstantiated. Considering that these documents were readily available to the SAIC Group and should have been provided as part of the questionnaire reply, the Commission considered that the SAIC Group did not act to the best of its abilities. The Commission therefore rejected the claim that the information submitted was meeting the criteria of Article 28(3) of the basic Regulation.

(352)

The Commission considered that showing excel files and account ledger extracts on a screen and provide screenshots without providing the underlying information could not be a surrogate for providing the full T-by-T sales listing in order to allow a full reconciliation of the figures provided in the relevant tables.

(353)

In its comments, the SAIC Group claimed that the Commission did not take into account the diversity of accounting and financial systems existing within the SAIC Group and that it was not essential or necessary for the Commission to receive T-by-T listing in order to fully reconcile the tables concerning sales in the questionnaire. Therefore, the Commission should refrain from using Article 28 as some of the verified companies have submitted the T-by-T listing as part of verification exhibits and, in any event, the information provided by the different entities met the conditions set out in Article 28(3) of the basic Regulation.

(354)

The Commission considered that information provided only in the form of screenshots including only limited data or showing some examples would make the verification and reconciliation of essential figures unattainable and, therefore, rejected this claim. By not providing the detailed information, and only providing screenshots, the Commission could not verify the accuracy of the information provided, such as whether the individual sales transactions actually related to the product under investigation.

(355)

In its comments, the SAIC Group confirmed that it was unable to provide the original copies of the joint venture agreements with respect to some of its producing entities, arguing, however, that the content of these joint venture agreements was reflected in the Articles of Association as they were “restated” in the Articles of Association. Only one entity submitted the joint venture agreement as part of the original questionnaire reply.

(356)

As mentioned above, the Commission repeatedly indicated to the SAIC Group that the fact that certain information was considered “core business secret” was irrelevant given the confidentiality treatment given to any information submitted in the framework of anti-subsidy proceedings in line with Article 29 of the basic Regulation. The claim that the content of the missing joint venture agreements was “restated” in the Articles of Association could not be verified without receiving the joint venture agreements. Whereas one BEV producer within the SAIC Group provided a copy of the joint venture, none of the other BEV producers provided such document. Therefore, the claim was rejected.

(357)

The SAIC Group claimed that the requested documents (investment plans, approval, investment monitoring and feasibility studies 2020-2023 and sales forecasts) were not relevant for the calculation of the subsidy amount during the investigation period as these documents did not contain any elements or data necessary for the calculation of the subsidy amount. Furthermore, the requested documents were either already available in the publicly available annual reports or it contained confidential information relating to parties on which the SAIC Group had no meaningful control and therefore could not be disclosed.

(358)

The Commission did not agree with the SAIC Group and considered that information allowing to assess the nature and volume of planned investment regarding the PUI was relevant in the investigation not only for assessing the threat of material injury, but for instance to assess the production capacity of the PUI. The claim was therefore rejected.

(359)

The SAIC Group claimed that the requested forecast reports did not need to be provided as they were either not existing or they were related to the information post-IP and therefore, did not need to be verified. Therefore, the SAIC Group concluded that it would be irrelevant to apply Article 28 with respect to this element of the investigation.

(360)

Since the Commission considered that it could not verify these allegations during the on-spot verification visits, the claim that it would be irrelevant to apply Article 28 with respect to this aspect of the investigation was rejected.

(361)

The Commission highlighted that the bank authorizations provided did not cover all the banks with which the entities of the SAIC Group were in a business relation and that the questionnaire template pertaining to the bank authorization had been modified without prior notification.

(362)

The SAIC Group claimed that it modified the template to include bank acceptances and credit lines into the scope of the bank authorizations and therefore, such modifications to the template should not be in any way considered as reduction of the scope of the bank authorizations, on the contrary. The SAIC Group claimed that the requested information was provided and should be taken at face-value by the Commission.

(363)

The Commission noted that some entities within the SAIC Group failed to report information relating to bank authorizations, credit lines and debt-to-equity swaps, and therefore did not receive crucial information relevant to these aspects of the investigation. The claim was therefore rejected.

(364)

Whilst not denying the receipt of grants from the GOC, the SAIC Group claimed that it was not essential to use “the individual amounts received per grant, time of receipt of the grants, description of the grants, corresponding government notifications specifying the nature of the grants and other necessary information” for the purpose of the calculation of subsidy amount, as the amounts reported concerned the grants received for the entities as a whole and not only related to the PUI. Moreover, the amount of the grants received during the investigation period, as reported in the tables, could be directly reconciled to the trial balance and the general ledger accounts, especially the accounts concerning non-operating income and/or income from subsidies.

(365)

However, as a result, the Commission was unable to determine the underlying subsidy schemes, the amount of grants received during the investigation period, as well as whether these grants related to fixed assets or not. The Commission rejected the claim that the information relating to grants could be verified.

(366)

The SAIC Group claimed that land-use rights were not one of the areas covered in the Commission’s request for the underlying documents. Nor did the Commission have any land-use rights-related questions after the verification visits, except for two entities to which it replied on 21 February 2024.

(367)

For certain documents that were asked during the verification visits, some entities belonging to the SAIC Group explained that the requested documents were dating back one or two decades ago and have already been archived, or they were concerning a third party on which it had not authority. Therefore, the SAIC Group claimed that the amount reported for land used rights should be deemed to be accurate and used as such and the Commission should not apply Article 28. The Commission considered that all the original LUR agreements, the purchase contract and supporting documents showing the initial price paid for the LURs had been requested and found in several cases that the information received was incomplete and did not permit a complete verification of the information received. The claim was therefore rejected.

(368)

The SAIC Group claimed that the documents related to bonds and intercompany financing were not requested by the Commission. The SAIC Group noted that the information on Asset Backed Security (ABS) was not required in the Section of the questionnaire relating to provision of preferential financing by State policy banks and State-owned commercial banks and therefore rejected any intended application of Article 28.

(369)

The Commission considered that the questionnaire specifically requests information on intercompany financing and on bonds in particular. First, companies involved in the provision of capital were requested to provide a questionnaire reply; second, ABS are a type of bond for which information was requested in the questionnaire. Furthermore, the Commission found contradicting information in the public domain with regard to related companies, who did not cooperate (see recital (320)), clearly showing that crucial information relevant to the subsidies had not been disclosed and therefore the claim was rejected.

(370)

The SAIC Group commented that the R&D deduction agent reports are normally prepared by the tax agents as per the companies’ instructions; However, their preparation is not mandatory and therefore, the request for such reports was not applicable. Furthermore, these reports were not necessary or essential to verify any R&D deduction amounts, as the relevant amounts declared in the enterprise income tax return were prevailing. The SAIC Group objected to any intended application of Article 28 of the basic Regulation.

(371)

The Commission considered that as found in one on-spot verification visit, the redaction of the information in an R&D deduction tax agent report, which allowed additional deduction of the R&D expenses as was the case in one of the entities, could not be considered as full cooperation. By not providing such information, which allegedly did not relate to the product under investigation but was readily available to the SAIC Group, the Commission was not in a position to assess the specificity aspect of the tax reduction scheme at stake. Consequently, the claim was rejected.

(372)

In the course of the investigation, the Commission found that the absence of certain necessary information impeded the investigation, namely:

(373)

As a result, on 23 April 2024, the Commission notified the Geely Group of its intention to apply Article 28 of the Basic Regulation with regard to the information not submitted. The Commission invited the company to submit comments.

(374)

On 30 April 2024, the Geely Group submitted comments concerning the Commission’s intention to apply facts available on the information covered in the recital (372) and the letter of 23 April 2024.

(375)

Firstly, the Geely Group argued that it cannot be requested to submit confidential information from an unrelated supplier which it cannot instruct, and, in any event the Commission has been provided with reasonably relevant information. The Geely Group did not own that supplier or had any power over its supplier’s business and management.

(376)

The Commission noted, however, that a supplier in question and Geely Group jointly operated a company to develop, produce and sell battery cells, modules and packs, and were therefore legally recognised partners in business. Therefore, they are considered related within the meaning of Article 127 of Commission Implementing Regulation (EU) 2015/2447, which, as per the instructions of the questionnaire and the subsequent correspondence, warrants the legal obligation to submit a subsidy questionnaire reply as a related party. The claim of the group was therefore dismissed.

(377)

Secondly, the Geely Group claimed that it was not in a position to provide more information from financing companies that raised funds for its BEV business. All Geely Group entities involved in financing in connection with BEVs have submitted the required responses to Sections A and E of the initial questionnaires. In addition, the Geely Group argued that the request was too wide, not precise enough and not of direct relevant for the investigation.

(378)

Nonetheless, through publicly available sources the Commission found a number of asset-backed securities (including green asset-backed securities) applicable in the investigation period (‘IP’) issued by at least one of the Geely Group’s companies, for which no information had been provided by the group, even after sending a specific request for it, while ABS was a type of bond for which information had been requested in the initial questionnaire. The claim of the Geely Group was therefore dismissed.

(379)

Thirdly, regarding the provision of complete information regarding the nature of the grant programmes, the Geely Group explained the nature and description of the grant programs could almost always be identified in the bank slips related to the individual grant payments. Furthermore, the Geely Group explained that additional information related to the grant programs including the legal basis is not in its possession and should be requested from the GOC.

(380)

The Commission noted that from the limited information, when available on the bank slip, it was unable to determine the underlying subsidy schemes for the grant programmes in relation to the product under investigation. At the same time, as mentioned in recital (300), the Commission noted that the GOC did not provide any information regarding the ad hoc grants provided to the sampled groups. The claim of the group was therefore dismissed.

(381)

Fourthly, on the absence of reporting regarding some projects linked to the production of BEVs, Geely Group was of the view that on-going and future projects such as potential new car launches are not related to the investigation period and not within the scope of this investigation. Geely Group also stressed the highly confidential and market sensitive feature of this information.

(382)

The Commission noted that ongoing and future projects linked to the production of BEVs were requested in the initial questionnaire, as well as during on-spot verifications, since a number of subsidy schemes are linked to the future BEV production, while a foreseen increase in BEV production capacity are relevant for establishing a threat of injury. Without this complete information the Commission was unable to determine all the underlying subsidy schemes in relation to the product under investigation. The claim of the group was therefore dismissed.

(383)

Fifthly, regarding the fact that the actual BEV producers in the Geely Group did not provide a full questionnaire reply, the Geely Group did not consider these companies to be BEV producers, since the vehicles that they produce still need to pass a series of inspections and tests. Geely Group also indicated that it provided additional information related to these companies, as requested by the Commission services.

(384)

The Commission noted that, whereas the companies provided the information requested, the very late submission of this information prevented it from verifying its completeness and accuracy. In particular, it was unable to adequately validate the supplies of certain inputs relative to the production volume and costs of BEVs, since the cost information provided by these companies did not provide sufficient details, as normally requested from the producing entities in the Commission’s questionnaire. The claim of the group was therefore dismissed.

(385)

Regarding the provision of Annex IV – Bank authorization, Geely Group argued that it submitted a consolidated version of the bank authorizations, at the time of submission of the initial questionnaire responses. The Commission reverted to the document submitted and confirmed its usability.

(386)

Last, on the provision of the information on the land use rights relevant to one exporting producer in the group, Geely Group indicated that the land use rights related to the headquarters were not related to the production and sales of BEVs, and were irrelevant and immaterial to the investigation.

(387)

The Commission noted that the headquarters are for part used for the activities related to BEV. Subsidies related to these headquarters should therefore be allocated in proportion to the activities related to BEV that are taking place there, while it materiality cannot be established without having the basic information on the land use rights owned. The claim of the group was therefore dismissed.

(388)

On 8 December 2023, the Commission notified the BYD Group of its intention to apply Article 28 of the Basic Regulation with regard to the information that BYD Group failed to provide and invited the company to submit comments on it. The BYD Group submitted the missing information on 15 December 2023.

(389)

In the course of the investigation, the Commission found that the BYD Group had not disclosed its relationship with (at least) two suppliers of raw materials used in the production of batteries, and that these companies had thus not submitted a questionnaire reply. In addition, both suppliers were found to be supplying significant quantities of lithium, representing more than 1 % of the total input purchases from the companies that submitted a questionnaire reply. Furthermore, no information about unrelated suppliers was submitted to the GOC, despite the fact that the anti-subsidy questionnaire contained provisions on the disclosure of unrelated suppliers, nor Annex IV – Bank authorization was provided. The Commission found that the absence of such necessary information impeded the investigation and access to information to relevant schemes. As a result, on 24 April 2024, the Commission notified the BYD Group of its intention to apply Article 28 of the Basic Regulation with regard to the information not submitted and invited the company to submit comments.

(390)

On 30 April 2024, the BYD Group submitted comments concerning the Commission’s intention to apply facts available on the information covered in recital (389).

(391)

First, the BYD Group argued that no information about the related suppliers of raw materials was submitted, because the questionnaire indicated that only related companies involved in “production of fixed assets or inputs used in the production process of the exporting producer, such as the inputs listed in Section E-3-3 below” , should submit a questionnaire reply. Based on this, the BYD Group argued that some inputs were not used in the production process of the exporting producer, but instead in the production process of the upstream battery producer.

(392)

In addition, the BYD Group declared that it had submitted a list of suppliers to the GOC based on the same rationale (i.e. related companies involved in the production of inputs used in the production process of the exporting producer), and that, hence, some of the inputs in section E-3-3 were used in the production process of battery producers, not in the production process of the exporting producer.

(393)

The Commission recalled that on 17 November 2023 it issued a Note to file with clarifications on the related companies asked to submit a questionnaire reply, adding that related companies, “whether related to producers selling domestically or for export”, involved in the production of fixed assets or inputs, including raw materials, parts or components covered in Section E-3-3 of the questionnaire, and “used in the production process of the manufacturing entities” were required to submit a questionnaire reply. Considering the clarification issued by the Commission, the Commission considered that the company should have submitted clear and complete instructions on the company structure and its suppliers, triggering a questionnaire reply especially from the suppliers of raw materials used in the production of batteries. Furthermore, considering the level of vertical integration of the BYD group, the Commission considered that it was not possible to consider the production process of batteries as separated from and unrelated to the production process of the exporting producer. Therefore, the claim was rejected.

(394)

The Commission also highlighted that Section E-3-3b of the questionnaire clearly explained that a full list with the names and contact details of suppliers of pieces and raw materials during the investigation period should have been provided both to the Commission and the GOC. The questionnaire also specified that if the supplier is not a related company, “the original independent supplier of the material in question” had to be indicated. In addition to the aforementioned instructions, the Commission noted that in the list of suppliers sent to the GOC, the company had already included some names of related suppliers of raw materials used in the production of batteries. While the Commission acknowledged that the BYD Group had filed a list of suppliers to the GOC, this list was incomplete, since it did not include any unrelated supplier, as specified in Section E-3-3b of the questionnaire, nor the related suppliers identified by the Commission. The lack of such information impeded the investigation, as it did not give the opportunity to the GOC to contact those upstream suppliers to provide a reply to the questionnaire. Therefore, the Commission rejected the claim.

(395)

The BYD Group claimed that it did not submit Annex IV – Bank authorization forms, because the group considered that the Commission was able to obtain the requested information by examining the information provided by the respective companies and especially through the Credit Reference Center of the People’s Bank of China.

(396)

As stated in the Commission’s letter of 24 April 2024, the bank authorization forms were considered crucial for the collection of information form the GOC regarding the respective subsidy schemes. The bank authorization forms were needed to receive company confidential data from the various banks that provided loans to the BYD Group, which was information requested to the GOC. Without these forms, banks were not in the position to provide this information via the GOC to the Commission, resulting in impeding the investigation. Therefore, the claim of the BYD Group had to be rejected.

(397)

The BYD Group disputed the fact that one of their related raw material suppliers should have provided a questionnaire reply. The group argued that the Commission used the wrong denominator to calculate the percentage of the purchase value, and that the company actually supplied less than 1 % of all purchases by the producing companies that submitted a reply to the questionnaire. The BYD Group also referred to the fact that the Commission granted an exemption for the suppliers of inputs representing less than 1 % of the purchases of the BEV producers. In addition, the Group disputed the usefulness of a questionnaire reply, since the supplier in question only provided a raw material indirectly used in the production of batteries.

(398)

The Commission observed that the percentage of purchase value reported by the Commission in its Annex to the Article 28 letter had been calculated by the company itself and discussed with the case team during the verification at the company’s premises. This piece of information was also included in the mission report sent to the company. In addition, the Commission acknowledged that it had granted an exemption for those input suppliers supplying less than 1 % of the purchase value of the BEV producers of the BYD Group. However, this decision was taken based on the information submitted by the group to substantiate its exemption requests. The Commission noted that no information on related suppliers of raw materials was submitted at initiation stage, and that the Commission thus lacked the necessary underlying information to make an assessment on whether the related raw material suppliers needed to submit a reply. At initiation stage, despite the clear instructions provided in Section E-3-3 of the questionnaire, the BYD Group limited its disclosure of information on the company structure only to the parts and components listed in the first part of Section E-3-3. Lastly, the Commission stressed that the lack of a questionnaire reply from the related raw material suppliers impeded the Commission services from assessing whether upstream suppliers were benefitting from subsidies.

(399)

The BYD Group contested the fact that another upstream supplier should have submitted a reply to the questionnaire, based on the fact that BYD’s shareholding was below 5 % for part of the investigation period and thus the supplier did not qualify as a related party, and that the limited shareholding also meant that the information requested was not held by, or in control of the BYD Group, and therefore could not be provided by the BYD Group.

(400)

The Commission recalled that for part of the investigation period the BYD Group still held more than 5 % in the upstream supplier in question and recalled that this relationship was not disclosed at the beginning of the investigation, but only during the deficiency process. Besides, considering the existing business relationship between the two companies, the two parties clearly appeared related within the meaning of Article 127 of Commission Implementing Regulation (EU) 2015/2447. Therefore, the claim was dismissed. The Commission restated the fact that considering the importance of the raw material supplied in the production process of the BYD Group, the purchase volume and value bought by BYD from the upstream supplier, and notwithstanding the fact that the raw material in question had also been included in Section E-3-3 of the questionnaire, which explicitly provides for related raw material suppliers to submit a questionnaire reply, the Commission considered that the BYD Group cooperated only partially by withholding relevant information on the group structure and its suppliers at the beginning of the investigation. This is also confirmed by the fact that the list of purchases from suppliers was only submitted as a result of the first Article 28 letter referenced in recital (388). Article 28(1) of the basic Regulation provides that in cases where any interested party “does not provide necessary information […] provisional or final findings, affirmative or negative, may be made on the basis of the facts available” . The lack of a questionnaire reply from the related raw material suppliers impeded the Commission services from assessing whether upstream suppliers were benefitting from subsidies, and whether the purchase price of one of the main inputs used in the production of batteries could be deemed at arms’ length.

(401)

On 30 April 2024, the GOC submitted comments contesting the intended application of Article 28 of the basic Regulation by the Commission and to make its findings based on facts available for specific aspects pertaining to three sampled exporting producers.

(402)

The GOC claimed that the Commission not only “failed to rectify its illegal approach on several procedural and substantive issues in this case, but also overlooked the complexity of the industries involved, the large number of companies forming part of the sampled exporting producers that provided a questionnaire reply in the case, the complexity of the alleged programs and the extremely tight timeframes provided by the Commission to provide the unjustifiably vast amount of information sought from the companies.” In doing so, the GOC claimed that the Commission was in breach of the rules of the World Trade Organization (‘WTO’) and the EU basic Regulation on a number of points.

(403)

Similarly to the claims made by the SAIC Group (see above recitals (323) to (328)) the GOC claimed that the Commission's application of Article 28 of the basic Regulation lacked sufficient legal basis and was inconsistent with the relevant WTO rules. The GOC referred to requests for information which were not considered as “necessary” for the identification of the alleged subsidies and the calculation of benefit in particular. These claims, already addressed in (323) to (328) were therefore rejected.

(404)

The GOC claimed that the Commission unreasonably increased the burden on Chinese exporting producers in the investigation by: a) expanding the scope of related companies that were required to provide a questionnaire reply, b) expanding the scope of the alleged subsidies being investigated and the information requested, and continuously amended or supplemented the information requested and c) imposing very short deadlines while requesting an un unreasonable amount of information. Whilst the GOC acknowledged that in several instances the sampled exporting producers were unable to provide the requested information, but claimed it was because the Commission put an unreasonable burden on them. Finally, the GOC stated that the “Commission’s determination that the sampled enterprises did not cooperate with the investigation was obviously contrary to the principle of fair and objective investigation provided for in the WTO rules and the EU Basic Anti Subsidy Regulation”.

(405)

While recognising that the three sampled exporting producers had cooperated to a different degree, the Commission noted that the GOC failed to consider a number of elements such as:

(406)

The Commission had to send numerous deficiency letters to the three sampled exporting producers inviting them to provide the information initially requested, it also sought to accommodate their request for deadline extensions as much as possible and even agreed to consider information provided after the on-spot verification visits giving a chance to the sampled exporting producers to complete the information to be supplied. Nonetheless, the Commission found that in several instances, the entities belonging to one of the sampled exporting producers deliberately denied access to the information to the Commission’s investigation team. Therefore, the claim that the sampled exporting producers were subject to an unjustified imposition of excessive burdens, which prevented them to cooperate was rejected.

(407)

On the basis of the information contained in the Memorandum on sufficiency of evidence, the Notice of Initiation and the replies to the Commission’s questionnaires, the following subsidies by the GOC were investigated:

(408)

According to the information provided by the three sampled groups of exporting producers, at least 37 financial institutions located within the PRC had provided financing to them in accordance with the Chinese Bank Law. As mentioned in recital (256), the GOC did not forward the questionnaires to financial institutions and did not provide information on the ownership of the financial institutions which provided loans to the sampled companies. Only one State-owned bank filled in the specific questionnaire, despite a request to the GOC that covered all financial institutions which had provided loans to the sampled companies. On this basis, the Commission therefore was not able to determine whether they were State-owned or privately owned.

(409)

The Commission ascertained whether the State-owned banks were acting as public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation. According to the relevant WTO case-law (108), a public body is an entity that ‘possesses, exercises or is vested with governmental authority’. A public body inquiry must be conducted on a case-by-case basis, having due regard to ‘the core characteristics and functions of the relevant entity’, that entity's ‘relationship with the government’, and ‘the legal and economic environment prevailing in the country in which the investigated entity operates’. Depending on the specific circumstances of each case, relevant evidence may include: (i) evidence that ‘an entity is, in fact, exercising governmental functions’, especially where such evidence ‘points to a sustained and systematic practice’; (ii) evidence regarding ‘the scope and content of government policies relating to the sector in which the investigated entity operates’; and (iii) evidence that a government exercises ‘meaningful control over an entity and its conduct’. When conducting a public body inquiry, an investigating authority must ‘evaluate and give due consideration to all relevant characteristics of the entity’ and examine all types of evidence that may be pertinent to that evaluation; in doing so, it should avoid ‘focusing exclusively or unduly on any single characteristic without affording due consideration to others that may be relevant’.

(410)

In particular, WTO case law specified that (109): ‘What matters is whether an entity is vested with authority to exercise governmental functions, rather than how that is achieved. There are many different ways in which government in the narrow sense could provide entities with authority. Accordingly, different types of evidence may be relevant to showing that such authority has been bestowed on a particular entity. Evidence that an entity is, in fact, exercising governmental functions may serve as evidence that it possesses or has been vested with governmental authority, particularly where such evidence points to a sustained and systematic practice. It follows, in our view, that evidence that a government exercises meaningful control over an entity and its conduct may serve, in certain circumstances, as evidence that the relevant entity possesses governmental authority and exercises such authority in the performance of governmental functions. We stress, however, that, apart from an express delegation of authority in a legal instrument, the existence of mere formal links between an entity and government in the narrow sense is unlikely to suffice to establish the necessary possession of governmental authority. Thus, for example, the mere fact that a government is the majority shareholder of an entity does not demonstrate that the government exercises meaningful control over the conduct of that entity, much less that the government has bestowed it with governmental authority. In some instances, however, where the evidence shows that the formal indicia of government control are manifold, and there is also evidence that such control has been exercised in a meaningful way, then such evidence may permit an inference that the entity concerned is exercising governmental authority.’

(411)

In order to properly characterize an entity as a public body in a particular case, it may be relevant to consider ‘whether the functions or conduct [of the entity] are of a kind that are ordinarily classified as governmental in the legal order of the relevant Member’  (110), and the classification and functions of entities within WTO Members generally. Thus, whether the functions or conduct are of a kind that are ordinarily classified as governmental in the legal order of the relevant Member may be a relevant consideration for determining whether or not a specific entity is a public body.

(412)

There are many different ways in which government in the narrow sense could provide entities with authority. Accordingly, different types of evidence may be relevant to showing that such authority has been bestowed on a particular entity. Evidence that an entity is, in fact, exercising governmental functions may serve as evidence that it possesses or has been vested with governmental authority, particularly where such evidence points to a sustained and systematic practice.

(413)

Evidence that a government exercises meaningful control over an entity and its conduct may serve, in certain circumstances, as evidence that the relevant entity possesses governmental authority and exercises such authority in the performance of governmental functions. Indeed, government ownership of an entity, while not a decisive criterion, may serve, in conjunction with other elements, as evidence. However, the existence of mere formal links between an entity and government in the narrow sense is unlikely to suffice to establish governmental authority. Thus, for example, the mere fact that a government is the majority shareholder of an entity in itself does not demonstrate that the government exercises meaningful control over the conduct of that entity, much less that the government has bestowed it with governmental authority. In some instances, however, where the evidence shows that the formal indicia of government control are manifold, and there is also evidence that such control has been exercised in a meaningful way, then such evidence may permit an inference that the entity concerned is exercising governmental authority.

(414)

The central focus of a public body inquiry is not whether the conduct that is alleged to give rise to a financial contribution is logically connected to an identified ‘government function’. In this respect, the legal standard for public body determinations under Article 1.1(a)(1) of the SCM Agreement does not prescribe a connection of a particular degree or nature that must necessarily be established between an identified government function and the particular financial contribution at issue. Rather, the relevant inquiry hinges on the entity engaging in that conduct, its core characteristics, and its relationship with government. This focus on the entity, as opposed to the conduct alleged to give rise to a financial contribution, comports with the fact that a ‘government’ (in the narrow sense) and a ‘public body’ share a ‘degree of commonality or overlap in their essential characteristics’ – i.e. they are both ‘governmental’ in nature.

(415)

The nature of an entity's conduct or practice may certainly constitute evidence relevant to a public body inquiry. Indeed, the conduct of an entity – particularly when it points to a ‘sustained and systematic practice’ – is one of the various types of evidence that, depending on the circumstances of each investigation, may shed light on the core characteristics of an entity and its relationship with government in the narrow sense. However, the assessment of such evidence is aimed at answering the central question of whether the entity itself possesses the core characteristics and functions that would qualify it as a public body. For instance, relevant for the assessment as to whether an entity is a public body in the context of Chinese State-owned commercial banks (‘SOCBs’) in DS379 included information showing that: (i) ‘[t]he chief executives of the head offices of the SOCBs are government appointed and the [CCP] retains significant influence in their choice’; and (ii) SOCBs ‘still lack adequate risk management and analytical skills’. This evidence was not limited to SOCBs' lending activity per se, but rather spoke to their organizational features, chains of decision-making authority, and overall relationship with the GOC. Thus, the WTO Appellate body (‘AB’) in DS379 noted that, while the United States Department of Commerce (‘USDOC’) did take into account evidence relating to the conduct of SOCBs [‘making loans’], it did so within the framework of its inquiry into the core characteristics of those entities and their relationship with the GOC. These SOCBs exercised governmental functions on behalf of the Chinese Government.

(416)

Moreover, the AB has also given importance to the fact that the government in question failed to cooperate during the investigation. Indeed, in DS379, the AB confirmed the USDOC's determination that the SOCBs in the CFS Paper investigation constituted ‘public bodies’ on the following considerations: (i) near complete state-ownership of the banking sector in China; (ii) Article 34 of the Commercial Banking Law, which states that banks are required to ‘carry out their loan business upon the needs of [the] national economy and the social development and under the guidance of State industrial policies’ ; (iii) record evidence indicating that SOCBs still lack adequate risk management and analytical skills; and (iv) the fact that ‘during [that] investigation the [USDOC] did not receive the evidence necessary to document in a comprehensive manner the process by which loans were requested, granted and evaluated to the paper industry’  (111).

(417)

In order to determine whether State-owned banks possess, exercise or are vested with governmental authority, the Commission paid due regard to the core characteristics and functions of the banks, their relationship with the government, and the legal and economic environment prevailing in the country in which the investigated entity operates. In this respect, the Commission sought information about State ownership as well as formal indicia of government control in the State-owned banks. It also analysed whether control had been exercised in a meaningful way in view of the normative framework in place. For this purpose, the Commission had to partially rely on facts available due to, among others, the refusal of the GOC and the State-owned banks to provide evidence on the decision-making process that had led to the preferential lending, as set out in recitals (255) to (265).

(418)

In order to carry out this analysis, the Commission first examined information from the State-owned bank that had filled in the specific questionnaire.

(419)

Only one State-owned bank, namely EXIM bank, provided a questionnaire reply. In previous AS investigations, (112) the Commission already concluded that EXIM bank was a public body. The Commission concluded that such a characterisation appears to still be valid as shown by the analysis below.

(420)

The Chinese banking sector is dominated by State-owned Banks, based on their specific primary functions typically referred to as SOCBs or State policy banks (see recital (407)).

(421)

Since the State maintains control over the State-owned banks through multiple channels – beside shareholding (analysed in Section 3.5.1.4), it also ensures presence of Party structures and their influence in the financial institutions and it mandates certain types of the banks’ commercial conduct by means of regulatory measures (see Section 3.5.1.5) –, it is in position to make use of the financial sector’s resources in pursuit of its policy objectives (see also recitals (203) – (205)), including the overarching goal to “promote the development of the socialist market economy”, as stipulated by Article 1 of the Bank Law (see Section 3.5.1.5 for a more detailed analysis of the Bank Law).

(422)

Accordingly, the core functions of banking institutions, in particular their lending policies are shaped to serve policy purposes, the banks’ economic performance is subordinated to the requirements of the GOC’s industrial policies. The applicable legal framework and the institutional setup ensures in this respect that whenever the GOC identifies economic priorities, for example development of the BEV sector, requisite funds are channelled as a priority to corresponding projects via the financial sector. Consequently, State-owned banks effectively perform government functions, insofar as their key management personnel is required to be CCP-affiliated – and, therefore, loyal primarily to the Party – and their core business activities have to be carried out with due regard to policy objectives set by the government authorities.

(423)

Concerning State policy banks, in the absence of appropriate reply concerning the major shareholder of EXIM bank (see recital (261)), the Commission had to rely on facts available. It appeared that the Wutongshu Investment Platform Co., Ltd. is a wholly owned subsidiary of China’s State administration of Foreign Exchange, which itself is 100% state-owned through the People’s Bank of China. On this basis, and on the basis of the information received in the questionnaire reply, the Commission established that the GOC held, either directly or indirectly, 100% of the shares in this financial institution.

(424)

Concerning the formal indicia of government control of the cooperating State-owned bank, the Commission qualified it as a ‘key State-owned financial institution’. In particular, the notice ‘Interim Regulations on the Board of Supervisors in Key State-owned Financial Institutions’ (113) states that: ‘The key State-owned financial institutions mentioned in these Regulations refer to State-owned policy banks, commercial banks, financial assets management companies, securities companies, insurance companies, etc. (hereinafter referred to as State-owned financial institutions), to which the State Council dispatches boards of supervisors’.

(425)

The Board of Supervisors of the key State-owned financial institutions is appointed according to the ‘Interim Regulations of Board of Supervisors of Key State-owned Financial Institutions’. Based on Articles 3 and 5 of these Interim Regulations, the Commission established that Members of the Board of Supervisors are dispatched by and accountable to the State Council, thus illustrating the institutional control of the State on the cooperating State-owned bank’s business activities.

(426)

In addition to these generally applicable indicia, the Commission found the following with respect to EXIM bank. EXIM bank was formed and operates in accordance with ‘The Notice of Establishing Export-Import Bank of China’ issued by the State Council, as well as the Articles of Association of EXIM bank. According to its Articles of Association, the State directly nominates the management of EXIM bank. The Board of Supervisors is appointed by the State Council in accordance with the ‘Interim Regulations on the Boards of Supervisors in Key State-owned Financial Institutions’ and other laws and regulations, and it is responsible to the State Council.

(427)

The Articles of Association also mention that the Party Committee of EXIM bank plays a leading and political core role to ensure that policies and major deployment of the Party and the State are implemented by EXIM bank. The Party’s leadership is integrated into all aspects of corporate governance.

(428)

The Articles of Association also state that EXIM bank is dedicated to supporting the development of foreign trade and economic cooperation, cross-border investment, the One Belt One Road Initiative, cooperation in international capacity and equipment manufacturing. Its scope of business includes short-term, medium-term and long-term loans as approved and in line with the State’s foreign trade and ‘going out’ policies, such as export credit, import credit, foreign contracted engineering loans, overseas investment loans, Chinese government foreign aid loans and export buyer loans.

(429)

Furthermore, in its annual report of 2022, EXIM Bank stated that it “firmly implemented the country’s full range of policies and follow up measures” and that its responsibilities included “conscientiously implement[ing] the decisions of the CPC Central Committee and the State Council”. The annual report also stated that “Multiple measures were adopted to ensure that mid- and long-term loans were provided to the manufacturing industry to support national projects”.

(430)

Concerning SOCBs, the Commission observed that the six largest banks accounted for more than 40% of the Chinese financial sector terms of total assets by the end of 2022 (114). At least two of these six SOCBs, namely ICBC and ABC, are among the financial institutions which provided loans to the sampled groups of exporting producers in the present investigation (see recital (468)). The State holds a majority share both in ICBC (115) and in ABC (116). In addition to controlling the six largest SOCBs, the State maintains significant shares in a number of other SOCBs, in which its involvement is more often indirect, e.g. through SOEs. Accounting for approximately 20% of the total assets of the Chinese banking sector in 2021, several of these SOCBs, such as Shanghai Pudong Development Bank, China Everbright Bank, Ping An Bank, China Minsheng Bank, are among the financial institutions which provided loans to the sampled groups of exporting producers in the present investigation (see recital (468) for a full list), with a varying degree of State shareholding, ranging from some 3% in the case of China Minsheng Bank (117) to more than 80% for China Everbright Bank (118).

(431)

The Commission also found that State-owned financial institutions have changed their Articles of Associations in 2017 to increase the role of the CCP at the highest decision-making level of the banks (119).

(432)

These new Articles of Association stipulate that:

(433)

Recital (204) above provides specific examples of these changes to the Articles of Associations with respect to ICBC and ABC.

(434)

The Commission further sought information about whether the GOC exercised meaningful control over the conduct of EXIM bank with respect to its lending policies and assessment of risk, where they provided loans to the BEV industry. The following regulatory documents have been taken into account in this respect:

(435)

Reviewing these regulatory documents, the Commission found that financial institutions in the PRC are operating in a general legal environment that directs them to align themselves with the GOC’s industrial policy objectives, in particular, the Energy-saving and New Energy Vehicle Industry Development Plan (2012-2020) which provides for “policy incentives through financial service support with credit management and loan evaluation systems to encourage the development of energy-saving and new energy vehicle industries" , when taking financial decisions, as developed below.

(436)

With respect to EXIM Bank, its public policy mandate is established in the notice of establishing EXIM Bank setting out that “The main task of the Export-Import Bank of China is to implement national industrial policies and foreign trade policies, and to provide policy financial support for expanding the export of capital goods such as mechanical and electrical products and complete sets of equipment.” (124) as well as in its Articles of Association stipulating that “The Export-Import Bank of China is a state-owned policy bank funded by the state, directly under the leadership of the State Council”  (125).

(437)

At the general level, Article 34 of the Bank law, which applies to all financial institutions operating in China, provides that ‘commercial banks shall conduct their business of lending in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State’. Although Article 4 of the Bank Law states that, ‘commercial banks shall, pursuant to law, conduct business operations without interference from any unit or individual. Commercial banks shall independently assume civil liability with their entire legal person property’ , the investigation showed that Article 4 of the Bank law is applied subject to Article 34 of the Bank law, i.e. where the State establishes a public policy the banks implement it and follow State instructions.

(438)

In addition, Article 15 of the General Rules on Loans provides that ‘In accordance with the State’s policy, relevant departments may subsidize interests on loans, with a view to promoting the growth of certain industries and economic development in some areas’.

(439)

Similarly, Decision No 40 instructs all financial institutions to provide credit support specifically to ‘encouraged’ projects. As already explained in Section 3.1 and more specifically in recitals (210) - (211), projects of the BEV industry belong to the ‘encouraged’ category. Decision No 40 hence confirms the previous finding with respect to the Bank law that banks exercise governmental authority in the form of preferential credit operations. The Commission also found that the NFRA has far-reaching approval authority over all aspects of the management of all financial institutions established in the PRC (including privately owned and foreign owned financial institutions), such as (126):

(440)

The Bank law is legally binding. The mandatory nature of the Five-Year Plans and of Decision No 40 has been established above in Section 3.5.1.5. The mandatory nature of the NFRA regulatory documents derives from its powers as the banking regulatory authority. The mandatory nature of other documents is demonstrated by the supervision and evaluation clauses, which they contain.

(441)

Decision No 40 of the State Council instructs all financial institutions to provide credit support only to investment projects pertaining to the encouraged category and promises the implementation of ‘other preferential policies for projects pertaining to the encouraged industries category’ On this basis, banks are required to provide credit support to the BEV industry as an encouraged industry.

(442)

Furthermore, even private commercial banking decisions must be overseen by the CCP and remain in line with national policies. In fact, one of the State’s three overarching goals in relation to banking governance is now to strengthen the Party’s leadership in the banking and insurance sector, including in relation to operational and management issues in companies. In this respect, the Three Year Action Plan of the CBIRC for the years 2020 to 2022 instructs to ‘further implement the spirit embodied in General Secretary Xi Jinping’s keynote speech on advancing the reform of corporate governance of the financial sector’. Moreover, the Plan’s section II aims at promoting the organic integration of the Party’s leadership into corporate governance: ‘we shall make the integration of the Party’s leadership into corporate governance more systematic, standardised and procedure-based […] Major operational and management issues must have been discussed by the Party Committee before being decided upon by the Board of Directors or the senior management.’

(443)

Also, the GOC has recently stipulated that even shareholders of financial institutions need to facilitate the exercise of the GOCs control via the institution’s corporate governance framework, as follows: ‘Large shareholders of bank and insurance institutions shall support bank and insurance institutions in establishing an independent and sound corporate governance structure with effective checks and balances, and encourage and support banks and insurance institutions to ensure the organic integration of Party leadership with corporate governance’  (127).

(444)

Finally, the performance evaluation criteria of the NFRA for commercial banks now, notably, take into account how financial institutions ‘serve the national development objectives and the real economy’, and in particular how they ‘serve strategic and emerging industries’ (128).

(445)

Therefore, the Commission concluded that the GOC has created a normative framework that had to be adhered to by the managers and supervisors of the cooperating State-owned bank, who are appointed by the GOC and accountable to the GOC. Therefore, the GOC relied on this normative framework in order to exercise control in a meaningful way over the conduct of the cooperating State-owned bank whenever it was providing loans to the BEV industry. The core functions of the State-owned bank relate to the specific tasks assigned by the GOC through this normative framework, leading to becoming the GOC’s tool to perform governmental functions.

(446)

The Commission also sought concrete proof of the exercise of control in a meaningful way based on concrete loans provided to the sampled exporting producers. In its questionnaire reply, the partially cooperating State-owned bank explained that it uses an internal rating model to assess the creditworthiness of borrowers based on historical default data, including qualitative and quantitative indicators whereby borrowers are ranked according to the magnitude of their default probability. EXIM bank further explained that there is no policy difference regarding the industry in which the borrower operates or its ownership and that its risk assessment model is market-based.

(447)

As already indicated in recital (261), the partially cooperating State-owned bank refused to provide concrete examples of its credit risk assessment relating to the sampled companies on the ground that the information requested is internal of the bank and contains business confidential information that is not permitted to be disclosed even though the Commission had a written consent from some of the sampled companies waiving their confidentiality rights. Also, EXIM bank failed to answer questions regarding the qualitative and quantitative indicators used to rank borrowers according to their default probability.

(448)

In the course of the investigation, the GOC referred to the NPC’s interpretation of the Bank law and Articles 4, 5 and 41 of the Bank law claiming that commercial banks in China were operating as independent legal entities that “make their own decisions”, “without interference from any unit or individual” and that “no entity or individual may coerce a commercial bank into granting loans or providing a guarantee”. Furthermore, the GOC claimed that Article 15 of the General Rules on loans are not mandatory but only of a guidance nature.

(449)

As explained in recital (440), the Commission considered that the Chinese Bank law and Decision No. 40 are of a mandatory nature. Furthermore, the findings of this investigation as well as the Commission's findings in previous investigations concerning the same subsidy programme (129) did not support the claim that banks do not take government policy and plans into account when making lending decisions. For example, the Commission found that the three groups of sampled exporting producers benefited from preferential lending at below-market interest rates.

(450)

The investigation showed that Article 15 of the General Rules on Loans was actually applied in practice, and that Articles 4, 5 and 41 of the Bank law were applicable subject to Article 34 of the Bank Law, i.e. where the State establishes a public policy the banks implement it and follow State instructions. In fact, while Articles 4 and 5 of the Bank Law are part of Chapter I, which sets the general provisions, Article 34 is part of Chapter IV, which establishes the basic rules governing loans. The wording of Article 34: “commercial banks carry out their loan business upon the needs of national economy and the social development and under the guidance of the State industrial policies”, demonstrates that this provision is not of a guiding nature but has rather a mandatory character and provides a clear instruction to banks to take into account the State industrial policies when carrying out their loan business. In this particular case, as mentioned in recital (221), the Energy-saving and New Energy Vehicle Industry Development Plan (2012-2020) clearly points to “credit management and loan evaluation systems to encourage the development of energy-saving and new energy vehicle industries". The Commission also noted that the Decision No. 40 of the State Council instructs all financial institutions to provide credit support only to encouraged projects and promises the implementation of “‘other preferential policies for projects pertaining to the encouraged industries category’s” . While Article 17 of the same Decision requires banks to respect credit principles, the Commission could not establish during the investigation that this was done in practice. To the contrary, loans were provided to the exporting producers irrespective of their financial situation and creditworthiness. This finding is not new and was already made in previous investigations (130).

(451)

Finally, as noted in recitals (442) to (444) above, the fact that all the bank’s major operational and management issues are reviewed by the Party, which is thoroughly embedded in the corporate governance structure of the banks, and the fact that the performance of the banks is evaluated in line with their efforts to serve strategic and emerging enterprises such as the BEV industry, also shows the tight and binding nature of the regulatory framework over the operations of the financial institutions.

(452)

In the absence of concrete evidence of creditworthiness assessments, the Commission therefore examined the overall legal environment as set out above in recitals (434) to (444), in combination with the behaviour of the cooperating State-owned bank regarding loans provided to the sampled companies. This behaviour contrasted with its official stance as in practice EXIM bank was not acting based on thorough market-based risk assessments.

(453)

In the course of the investigation, the Commission found that loans were provided to the three sampled groups of exporting producers at interest rates below or close to the Loan Prime Rate (‘LPR’), as announced by the National Interbank Funding Center (NIFC). The LPR was introduced on 20 August 2019, and replaces the previous PBOC’s central bank benchmark rate (131). The provision of financing at rates below or close to the country’s risk-free interest rate on the interbank market clearly shows that risk was not adequately taken into consideration. In the absence of cooperation by financial institutions or refusal to provide information pertaining to the sampled groups by the EXIM bank despite the existence of a bank authorization, the Commission had to use facts available and thus concluded that the loans were granted regardless of the companies’ real financial and credit risk situation, as established in section 3.5.2.3 below. Hence, the loans were provided below market rates when compared to the rate corresponding to the risk profile of the sampled exporting producers.

(454)

Moreover, as concerns specifically EXIM Bank, it is undisputable that this is a policy bank directly pursuing government policies by its own admission. As explained on its website (132), EXIM bank is a State-funded and State-owned policy bank directly under the leadership of the State Council and dedicated to supporting inter alia China’s foreign trade and implementing the ‘going global’ strategy.

(455)

On that basis, the Commission concluded that the GOC has created a normative framework with respect to lending to encouraged industries that had to be adhered to by the managers and supervisors of the bank, which are appointed by the GOC and accountable to the GOC. This normative framework did not leave any margin of manoeuvre to the managers and supervisors of the bank as to whether to follow this framework or not with respect to the sampled exporting producers, thus putting the management of that bank in a position of dependence.

(456)

Therefore, the GOC relied on the normative framework in order to exercise control in a meaningful way over the conduct of the cooperating State-owned bank whenever it was providing loans to the BEV industry.

(457)

As explained in recital (434), the Commission sought proof of the exercise of control in a meaningful way based on concrete loans. However, the cooperating State-owned bank did not provide certain necessary information, including its specific credit risk assessment related to the sampled companies. In the absence of concrete evidence of such credit risk assessments, the Commission examined the overall legal environment applicable to lending to encouraged industries such as the BEV industry in combination with the behaviour of the cooperating State-owned bank and established that the bank was not acting based on thorough market-based credit risk assessments.

(458)

Furthermore, as explained in recital (453), loans were provided to the three sampled groups of exporting producers at interest rates below or close to the Loan Prime Rate regardless of their financial and credit risk situation. Therefore, considering the risk profile of the sampled exporting producers described in Section 3.5.1.10 below and that, according to the risk analysis performed by the Commission, the exporting producers should have received a B credit rating and should thus have paid interest rates significantly above the risk-free rate, the Commission concluded that the loans at issue were provided below market rates.

(459)

The Commission therefore concluded that the GOC has exercised meaningful control over the conduct of the cooperating State-owned bank with respect to its lending policies and assessment of risk concerning the BEV industry.

(460)

The Commission established that the partially cooperating State-owned bank implemented the legal framework set out above in the exercise of governmental functions with respect to the BEV sector. Therefore, it was acting as public body in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

(461)

The General Rules on Loans (133) promulgated in 1996 aimed to regulate the activities connected with loans in particular, with the promotion of specific socio-economic development (134). According to Decision No. 40 (135), the GOC also intervenes into the lending operations of financial entities by designating industrial sectors which should benefit from privileged access to credit and mandating financial institutions to take into account industrial state policies when providing loans.

(462)

The prominent role of State policy considerations (instead of purely commercial ones) which the State imposes upon the commercial banks, particularly State-owned financial institutions, in shaping their lending strategies is also clearly visible in the MOF’s Notice on the Commercial banks performance evaluation method issued on 15 December 2020. According to the notice’s provisions, the performance evaluation criteria of commercial banks have to take into account how entities “serve the national development objectives and the real economy”, and in particular how they “serve strategic and emerging industries”. Article 4 of the notice stipulates that “the performance evaluation of commercial banks shall provide a strong and effective guarantee that national macro-policies will be implemented” (136).

(463)

As set out in Section 3.3.1.1 above, none of the State-owned financial institutions except for EXIM bank, which provided loans to the sampled companies, replied to the specific questionnaire. The list of the banks includes: Agricultural Bank of China, Bank of Beijing (137), Bank of China, Bank of Communications Co. Ltd, Bank of Kunlun (138), Bank of Nanjing (139), Bank of Ningbo (140), Bank of Shanghai (141), Bank of Tianjin (142), China CITIC Bank (143), China Construction Bank Corporation, China Everbright Bank (144), China Industrial Bank Co. Ltd (145), China Merchants Bank (146), China Minsheng Bank (147), Export-Import Bank of China – EXIM bank, ICBC, Ping An Bank (148), Shanghai Automotive Group Finance Co., Ltd (149), Shanghai Pudong Development Bank Co. Ltd (150)., Chong Hing Bank Limited (151)Huishang Bank Co., Ltd. (152),Sun Life Everbright Asset Management Co. Ltd. (153),and the Zhongyuan Bank Co., Ltd (154). The GOC did not provide information neither on the ownership of the banks, or on their governance structure, risk assessment or examples relating to specific loans to the BEV industry.

(464)

Therefore, in line with the conclusions reached in Section 3.3.1.1, the Commission decided to use facts available to determine whether those State-owned financial institutions qualify as public bodies.

(465)

In a previous anti-subsidy investigation (155) the Commission established that the banks which had provided loans to the sampled groups of exporting producers in the investigation were partially or fully owned by the State itself or by State-held legal persons. Since the banks did not reply to the specific questionnaire, the Commission used publicly available information, such as the bank's website, annual reports, information available in bank directories or on the internet, In line with the findings of this past investigations the Commission Staff Working Document (156) confirmed that the State dominates the banking sector (157) by maintaining controlling stakes in all state-owned commercial banks, as well as by being the majority shareholder in a number of joint-stock commercial banks, either through direct investment by Central Huijin or indirectly through other state-owned legal entities. Recital (468) below list those banking entities reported by the exporting producers in which the State holds a majority shareholding .and in the absence of changes since recent similar investigations (158), it was considered that all State-owned financial institutions that provided financing to the sampled exporting producers as partially or fully owned by the State itself or by State-held legal persons.

(466)

In light of the above considerations, the Commission established that all State-owned Chinese financial institutions that provided financing to the three sampled groups of cooperating exporting producers are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation.

(467)

In addition, even if the State-owned financial institutions were not to be considered as public bodies, the Commission established on the basis of the same information that they would be considered entrusted or directed by the GOC to carry out functions normally vested in the government within the meaning of Article 3(1)(a)(iv) of the basic Regulation for the same reasons, as set out in Section 3.5.1.9 below. Thus, their conduct would be attributed to the GOC in any event.

(468)

As in previous investigations (159), the Commission established in the case at hand that the following banks and private financial institutions operating in China had provided loans to the sampled groups of exporting producers in the investigation at hand: China Postal Savings Bank Co. Ltd., Citibank (China) Co., Ltd., DBS Bank (China) Limited, East West Bank (China) Co., Ltd., Hana Bank (China) Co., Ltd., HSBC Bank (China) Limited, Mitsubishi UFJ Bank (China) Co., Ltd., Mizuho Bank (China) Co., Ltd., OCBC Wing Hang Bank (China) Limited, Standard Chartered Bank (China) Limited, Sumitomo Mitsui Banking Corporation (China) Co., Ltd., United Overseas Bank (China) Limited, and the Yushan Bank (China) Co. In line with the corresponding analysis provided in Section 3.5.1.8, it was considered that these banks and private financial institutions have been operating under the supervision of the CBRC have been entrusted or directed by the GOC, Since no information was provided indicating otherwise, the Commission maintained the same conclusion in the present investigation.

(469)

The Commission analysed whether all these financial institutions had been entrusted or directed by the GOC to grant subsidies to the BEV sector within the meaning of Article 3(1)(a)(iv) of the basic Regulation.

(470)

According to the WTO Appellate Body, ‘entrustment’ occurs where a government gives responsibility to a private body and ‘direction’ refers to situations where the government exercises its authority over a private body (160). In both cases, the government uses a private body as a proxy to make the financial contribution, and ‘in most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement’ (161). At the same time, Article 3(1)(a)(iv) does not allow Members to impose countervailing measures to products ‘whenever the government is merely exercising its general regulatory powers’ (162) or where government intervention ‘may or may not have a particular result simply based on the given factual circumstances and the exercise of free choice by the actors in that market’  (163). Rather, entrustment or direction implies ‘a more active role of the government than mere acts of encouragement’  (164).

(471)

The Commission noted that the normative framework concerning the industry mentioned above in recitals (434) to (442) applies to all financial institutions in the PRC, including privately owned financial institutions. To illustrate this, the Bank Law and the various orders of the CBIRC cover all Chinese-funded and foreign-invested banks under the management of the CBIRC.

(472)

Furthermore, the majority of loan contracts with private financial institutions had similar conditions as the contracts with State-owned banks, and the lending rates provided by the private financial institutions were similar to the rates provided by the State-owned financial institutions. This shows that de facto preferential lending conditions are granted by those banks in accordance with the GOC’s control over the banking sector.

(473)

In the absence of any divergent information received from the private financial institutions, the Commission concluded that, in so far as the BEV industry is concerned, all financial institutions (including private financial institutions) operating in China under the supervision of the NFRA have been entrusted or directed by the State in the sense of Article 3(1)(a)(iv), first indent of the basic Regulation to pursue governmental policies and provide loans at preferential rates to the BEV industry (165).

(474)

In previous anti-subsidy investigations, the Commission already determined that domestic credit ratings awarded to Chinese companies were not reliable, based on a study published by the International Monetary Fund (166), showing a discrepancy between international and Chinese credit ratings. Indeed, according to the IMF, over 90 % of Chinese bonds are rated from AA to AAA by local rating agencies. This is not comparable to other markets, such as the EU or the United States of America (‘US’). For example, less than 2 % of firms enjoy such top-notch ratings in the US market. Chinese credit rating agencies are thus heavily skewed towards the highest end of the rating scale. They have very broad rating scales and tend to pool bonds with significantly different default risks into one broad rating category (167). According to the China bond market insight 2021 by Bloomberg (168), five Chinese local rating agencies dominate the bond market: China Chengxin, Dagong, Lianhe, Shanghai Brilliance, and Golden credit rating, and around 90 % of the bonds are rated AAA by local rating agencies. However, many of the issuers have received a lower S&P global issuer rating of A and BBB (169).

(475)

In addition, foreign rating agencies, such as Standard and Poor’s and Moody’s, typically apply an uplift over the issuer’s baseline credit rating based on an estimate of the firm’s strategic importance to the Chinese Government and the strength of any implicit guarantee when they rate Chinese bonds issued overseas (170).

(476)

To complement this analysis, previous cases showed that the GOC can also exercise its influence over the credit rating market.

(477)

According to the information provided by the GOC in previous cases, there were 14 credit rating agencies active on China’s bond market, including 12 domestic rating agencies. Second, there is no free entrance on the Chinese credit rating market. It is essentially a closed market, since rating agencies need to be approved by the China Securities Regulatory Commission (‘CSRC’) or the PBOC before they can start operations (171). The PBOC announced mid-2017 that overseas credit rating agencies would be allowed to carry out credit ratings on part of the domestic bond market, under certain conditions. However, these credit rating agencies follow Chinese rating scales and are thus not exactly comparable with international ratings, as explained in recital (475).

(478)

Finally, a 2021 research by Allianz Global Investors confirms the Commission’s findings, stating that ‘China’s onshore credit rating system differs from international rating conventions. For example, onshore bonds rated AA+ would typically be rated as “high yield” on an international scale’ (172).

(479)

Finally, the OECD pointed out in 2022 that “[d]eficiencies in the credit-rating market, including inflated ratings and weak warning systems hinder the healthy development of the bond market” (173).

(480)

Furthermore, the Commission has also determined (174) that the Chinese credit rating system cannot be considered to be solely driven by market forces and that it operates on a distorted basis.

(481)

In view of the situation described in recitals (474) to (478), the Commission concluded that Chinese credit ratings do not provide a reliable estimation of the credit risk of the underlying asset. Those ratings were also distorted by the policy objectives to encourage key strategic industries, such as the BEV industry.

(482)

The Commission established that companies in all three sampled groups used various short-term and long-term loans to finance their activities. These loans were mainly used for daily operations, working capital needs, for special projects, investments or to replace other loans. The sampled groups of exporting producers also used short-term and long-term export credits.

(483)

In the course of the investigation, the Commission found that one of the sampled groups contracted loans with the specific purpose to replace the capital repaid on loans at the maturity date by fresh capital from new loans. Such revolving loans are usually a sign of liquidity problems of the borrower and involve a greater risk exposure for the banks granting them. In line with the findings in previous investigations (175), the Commission established that with this practice some companies could rearrange their liabilities and obtain the funds without which they would not be able to meet their repayment obligations, evidencing therefore problems to repay debt.

(484)

In the course of the investigation, the Commission found that certain sampled companies issued bonds with the specific purpose of debt repayments, namely loans. The Commission established that by restructuring their debt via this instrument, some companies could rearrange and defer their liabilities as well as obtain the funds without which they would not be able to meet their repayment obligations, evidencing therefore problems to raise funds.

(485)

The use of bonds to that aim raises concerns on the ability of a given company to pay for its debts, therefore questioning not only its short-term liquidity, but also the solvency in the long term. The existence of bonds issued with the purpose of repayment of loans in a given company is therefore considered an indication that the company is in a worse financial situation than what the financial statements would suggest at first sight, and that there is an additional risk related to its short and long-term financing.

(486)

As demonstrated in Section 3.5.1.5, several legal documents, which specifically target companies in the BEV sector, direct the financial institutions to provide loans at preferential rates to the BEV industry. These documents demonstrate that the financial institutions only provide preferential financing to a limited number of enterprises or industries, which comply with the relevant policies of the GOC. The Commission considered that the reference to the BEV industry is sufficiently clear as this industry is identified either by its name or by a reference to the product that it manufactures or the industry group that it belongs to.

(487)

The Commission calculated the amount of the countervailable subsidy based on the benefit conferred on the recipients during the investigation period. According to Article 6(b) of the basic Regulation, the benefit conferred on the recipients is the difference between the amount of interest that the company has paid on the preferential loan and the amount that the company would have paid for a comparable commercial loan, which the company could have obtained on the market.

(488)

As explained in Sections 3.5.1 and 3.5.2 above, the loans provided by Chinese financial institutions reflect substantial government intervention and do not reflect rates that would normally be found in a functioning market.

(489)

The sampled groups of companies differed in terms of their general financial situation. Each of them benefitted from different types of loans during the investigation period with variances in respect of maturity, collateral, guarantees and other conditions. For those two reasons, each company had an average interest rate based on its own set of loans received.

(490)

The Commission assessed individually the financial situation of each sampled group of exporting producers in order to reflect these particularities. In this respect, the Commission followed the calculation methodology for preferential financing through loans established in the anti-subsidy investigation on aluminium converter foil originating in the PRC, as well as the anti-subsidy investigation on hot-rolled flat steel products originating in the PRC, the anti-subsidy investigations on tyres originating in the PRC, certain woven and/or stitched glass fibre fabrics originating in the PRC and optical fibre cables originating in the PRC (176), as explained in the recitals below. As a result, the Commission calculated the benefit from the preferential financing through loans practices for each sampled group of exporting producers on an individual basis and allocated such benefit to the product under investigation.

(491)

The Commission noted that the BYD Group was awarded an AAA rating by a Chinese credit rating agency in 2020. In light of the overall distortions of Chinese credit ratings mentioned in Section 3.5.1.10, the Commission concluded that this rating is not reliable.

(492)

As mentioned in recitals (452) to (459), the lending Chinese financial institutions did not provide any creditworthiness assessment. Hence, in order to establish the benefit, the Commission had to assess whether the interest rates for the loans accorded to the BYD Group were at market level.

(493)

The BYD Group presented itself in a generally profitable financial situation with a profit margin of around 6 % according to its own financial accounts. The group used short-term and long-term debt to finance its operations. The Commission assessed the short-term liquidity and the long-term solvency situation of the company.

(494)

Regarding short-term liquidity, the Commission used the current ratio. This ratio measures the company’s ability to pay short-term obligations, including short-term debt.

(495)

The company’s current ratio was at 0,89 in 2021, decreased to 0,75 in 2022 and then decreased to 0,68 in the investigation period. Despite the AAA rating attributed to the company in 2020, the company’s current assets were thus not enough to pay the short-term obligations. This does not justify a high credit rating, for which a company should present a ratio of at least 2.

(496)

Considering this short-term liquidity indicator, the Commission concluded that the company at issue presented short-term liquidity problems which results in having a high-risk debtor profile.

(497)

The Commission based the long-term solvency risk assessment on the debt ratio. This ratio measures the company’s ability to meet its long-term debt obligations. It is used by lenders and bond investors when assessing the company’s creditworthiness.

(498)

The debt ratio measures the amount of liabilities, in particular long-term debt. The company had a high debt to equity ratio of 0,78, which points to the fact the company is financing its activity through debt. The debt-to-equity ratio also increased continuously from 0,67 in 2021 to 0,78 in the IP, which points to the fact the company is financing more and more of its activity mainly through debt. The higher the debt-to-equity ratio, the higher the financial risk of the company is, which means that the company may have a harder time servicing its existing debts.

(499)

Therefore, considering the liquidity and solvency issues described in recitals (495) to (498), the Commission considered that the company was not in a solid financial situation and a high risk profile for potential lenders and investors.

(500)

Moreover, the Commission analysed the debt-to-equity ratio of the individual companies with the highest rate of financial benefits and found that their debt-to-equity ratio in 2022 ranged from 0,71 up to 0,97.

(501)

Following the above and in view of the overall distortions of Chinese credit ratings, mentioned in Section 3.5.1.10, the Commission concluded that the AAA credit rating awarded to the BYD Group is not reliable.

(502)

The Commission considered that the overall financial situation of the group corresponds to a B rating, which does no longer qualify as ‘investment grade’.

(503)

Based on publicly available data on Bloomberg, the Commission used as a benchmark the premium expected on bonds issued by firms with a B rating, which was applied to the PBOC Loan Benchmark Rate, or after 20 August 2019 to the Loan Prime Rate as announced by the NIFC (177) in order to determine the market rate.

(504)

That mark-up was determined by calculating the relative spread between the indices of US AA rated corporate bonds to US B rated corporate bonds based on Bloomberg data for industrial segments. The relative spread thus calculated was then added to the PBOC Loan Benchmark Rate, or after 20 August 2019 to the Loan Prime Rate published by the NIFC, at the date when the loan was granted (178) and for the same duration as the loan in question. This was done individually for each loan provided to the group of companies.

(505)

As for loans denominated in foreign currencies, the same situation in respect of market distortions and the absence of valid credit ratings applies, because these loans are granted by the same Chinese financial institutions. Therefore, as found before, B rated corporate bonds in relevant denominations issued during the investigation period were used to determine an appropriate benchmark.

(506)

As mentioned in recitals (452) to (459), the Chinese lending financial institutions did not provide any creditworthiness assessment. Hence, in order to establish the benefit, the Commission had to assess whether the interest rates for the loans accorded to the Geely Group were at market level.

(507)

The Geely Group reported a profitable financial situation with a 3% profit margin according to its own financial accounts. However, profitability declined compared to 2021. Its return on equity ratio, which is the group’s ability to turn equity capital into net profit, decreased from 8 % in 2021 to 5 % at the end of the investigation period.

(508)

Geely Group used short-term and long-term debt to finance its operations. The Commission assessed the short-term liquidity and the long-term solvency situation of the group.

(509)

Regarding short-term liquidity, the group presented an average current ratio of 1,03 during the investigation period. Although the current ratio is slightly above 1, the company’s current assets are just enough to pay the short-term obligations, which is not sufficient to justify a high credit rating, for which a company should present a ratio of at least 2. The quick ratio of the company was 0,79 at the end of the IP, 0,76 in 2022, and 0,79 in 2021, while a quick ratio of at least 1 is considered as a reference. In fact, a company that has a quick ratio below 1 may not be able to pay off its current liabilities in the short-term. The cash ratio of the company was on average 0,4 in the IP; therefore, the company had insufficient cash at hand to pay its short-term debt. Considering the short-term liquidity indicators, the Commission concluded that the company at issue presented short-term liquidity problems which results in having a risk debtor profile.

(510)

Concerning long-term debt, the Geely group had a high Debt-to-Assets ratio of 0,69, which means that 69 % of the assets of the company are financed by debt. The Debt-to-Equity ratio was 2,1 in 2021, 2,11 in 2022 and 2,22 at the end of the IP, which points to the fact the company is financing its activity mainly through debt. The higher the Debt-to-Assets and the Debt-to-Equity ratios are, the higher the financial risk of the company is. In addition, during the investigation period, one of the companies of the group (Ningbo Hangzhou Bay Geely Automobile Parts Co., Ltd.) concluded a debt-to-equity swap deal with State-owned banks, in order to improve its debt structure. Under such a deal, the company could convert part of its debt to State-owned banks into shares, and thus reduce the liabilities on its balance sheet.

(511)

Furthermore, the Commission found that Geely Group contracted loans with the specific purpose of replacing loans. As explained in Section 3.5.2.1 the existence of revolving loans is considered an indication of additional risks related to liquidity problems.

(512)

Similarly, the Commission found that Geely Group issued bonds with the purpose of debt restructuring. In this case, as explained in Section (4), the Commission considered that this is a sign of being in a worse financial situation than what the financial statements would suggest at first sight, and that there is an additional risk related to its short and long-term financing.

(513)

The Commission noted that the Geely Group was awarded an AAA rating by a Chinese credit rating agency. In light of the overall distortions of Chinese credit ratings mentioned in Section 3.5.1.10, the Commission concluded that this rating is not reliable.

(514)

The Commission considered that the overall financial situation of the group corresponds to a B rating. According to Standard & Poor's credit rating definitions, a debtor rated ‘B’ is more vulnerable than a debtor rated ‘BB’, but the debtor currently still has the capacity to meet its financial commitments. Nevertheless, adverse business, financial, or economic conditions may impair the debtor's capacity or willingness to meet its financial commitments. This benchmark is therefore considered appropriate to reflect the additional risk arising from the use of revolving loans and bonds issued for debt restructuring purposes.

(515)

The premium expected on bonds issued by firms with this a B rating was then applied to the PBOC Loan Benchmark Rate, or after 20 August 2019 to the Loan Prime Rate as announced by the NIFC in order to determine the market rate.

(516)

That mark-up was determined by calculating the relative spread between the indices of US AA rated corporate bonds to US B rated corporate bonds based on Bloomberg data for industrial segments. The relative spread thus calculated was then added to the PBOC Loan Benchmark Rate, or after 20 August 2019, to the Loan Prime Rate as announced by the NIFC, at the date when the loan was granted, and for the same duration as the loan in question. This was done individually for each loan and financial leasing provided to the company.

(517)

As for loans denominated in foreign currencies in the PRC, the same situation in respect of market distortions and the absence of valid credit ratings applies, because these loans are granted by the same Chinese financial institutions. Therefore, as found before, B rated corporate bonds in relevant denominations issued during the investigation period were used to determine an appropriate benchmark.

(518)

As mentioned in recitals (452) to (459) above, the Chinese lending financial institutions did not provide any creditworthiness assessment. Hence, in order to establish the benefit, the Commission had to assess whether the interest rates for the loans accorded to the Geely Group were at market level.

(519)

SAIC Motor Corporation Limited reported at consolidated group level a profitable financial situation with a 4 % profit margin according to its own financial accounts. However, profitability declined compared to 2021. Its return on equity ratio, which is the group’s ability to turn equity capital into net profit, decreased from 13% in 2021 to 8 % at the end of the 2022.

(520)

SAIC Motor Corporation Limited used short-term and long-term debt to finance its operations. The Commission assessed the short-term liquidity and the long-term solvency situation of the group.

(521)

Regarding short-term liquidity, the group presented an average current ratio of 1,07 in 2022. Although the current ratio is slightly above 1, the group’s current assets are just enough to pay the short-term obligations, which is not sufficient to justify a high credit rating, for which a company should present a ratio of at least 2. The quick ratio of the company was 0,87 in 2022, and 0,97 in 2021, while a quick ratio of at least 1 is considered as a reference. In fact, a company that has a quick ratio below 1 may not be able to pay off its current liabilities in the short-term. The cash ratio of the group was on average 0,4 in 2022. Therefore, the group had insufficient cash at hand to pay its short-term debt. Considering the short-term liquidity indicators, the Commission concluded that the group at issue presented short-term liquidity problems which results in having a risk debtor profile.

(522)

Concerning long-term debt, the SAIC Motor Corporation Limited at consolidated level had a high Debt-to-Assets ratio of 0,66, which means that 66 % of the assets of the group are financed by debt. The Debt-to-Equity ratio was 1,79 in 2021 and 1,94 in 2022, which points to the fact the company is financing its activity mainly through debt. The higher the Debt-to-Assets and the Debt-to-Equity ratios are, the higher the financial risk of the company is. In addition, in the period between 2009 and 2015, two of the exporting producers of the group (SAIC Maxus Automotive Company Limited and Nanjing Automobile (Group) Corporation), concluded four debt-to-equity swap deals with State-owned banks, in order to improve their debt structure. Under such a deal, the companies could convert part of their debt to State-owned banks into shares, and thus reduce the liabilities on their balance sheet. In addition, in 2017, SAIC Motor Corporation Limited benefited from an equity injection involving among others State-owned financial institutions, which again had a positive impact on the debt structure of the group. Although these events took place before the investigation period, they had a lasting structural effect on the balance sheet.

(523)

Furthermore, the Commission found that the group contracted loans with the specific purpose of replacing loans. As explained in Section 3.4.2.1 the existence of revolving loans is considered an indication of additional risks related to liquidity problems.

(524)

The Commission noted that the SAIC Motor Corporation Limited was awarded an AAA rating by a Chinese credit rating agency. In light of the overall distortions of Chinese credit ratings mentioned in Section 3.4.1.9, and the group’s financial situation as described above, the Commission concluded that this rating is not reliable.

(525)

The Commission considered that the overall financial situation of the group corresponds to a B rating. According to Standard & Poor's credit rating definitions, a debtor rated ‘B’ is more vulnerable than a debtor rated ‘BB’, but the debtor currently still has the capacity to meet its financial commitments. Nevertheless, adverse business, financial, or economic conditions may impair the debtor's capacity or willingness to meet its financial commitments. This benchmark is therefore considered appropriate to reflect the additional risk arising from the use of revolving loans and bonds issued for debt restructuring purposes.

(526)

That mark-up was thus determined by calculating the relative spread between the indices of US AA rated corporate bonds to US B rated corporate bonds based on Bloomberg data for industrial segments. The relative spread thus calculated was then added to the PBOC Loan Benchmark Rate, or after 20 August 2019, to the Loan Prime Rate as announced by the NIFC, at the date when the loan was granted, and for the same duration as the loan in question. This was done individually for each loan and financial leasing provided to the company.

(527)

As for loans denominated in foreign currencies in the PRC, the same situation in respect of market distortions and the absence of valid credit ratings applies, because these loans are granted by the same Chinese financial institutions. Therefore, as found before, B rated corporate bonds in relevant denominations issued during the investigation period were used to determine an appropriate benchmark.

(528)

The Commission established that all sampled groups of exporting producers benefited from preferential financing through loans during the investigation period. In view of the existence of a financial contribution, a benefit to the exporting producers and specificity, the Commission considered preferential financing through loans a countervailable subsidy.

(529)

The subsidy rates established with regard to the preferential financing through loans during the investigation period for the sampled groups of companies amounted to:

Preferential financing: loans

(530)

The purpose of a credit line is to establish a borrowing limit that the company can use at any time to finance its current operations thus making working capital financing flexible and immediately available when needed. The credit line agreements granted to the sampled groups refer to the various forms of financing available to the companies signing such agreements, which cover all types of short-term financing, such as short-term loans, bank acceptances, letters of credit, etc. Furthermore, according to financial literature, credit lines are also prevalent in a majority of cases in market economies. For example, they account for over 80% of the bank financing provided to U.S. public firms (179). Furthermore, in Canada, where bank acceptances are a direct and unconditional liability of the accepting bank (as is the case in China), banks would normally only accept bank acceptance draws from corporate borrowers that have an established line of credit with that bank (180). Therefore, the Commission considered that in principle, all short-term financing of the sampled companies, such as short-term loans, bank acceptance drafts etc., should be covered by a credit line instrument.

(531)

The Commission established that Chinese financial institutions provided credit lines to each sampled group in connection with the provision of financing. These consisted of framework agreements, under which the bank allowed the sampled companies to use various debt instruments, such as working capital loans, bank acceptance drafts and other forms of trade financing within a certain maximum amount.

(532)

As mentioned in recital (530) above, all short-term financing should be covered by a credit line. Therefore, the Commission compared the amount of the credit lines available to the cooperating companies during the investigation period with the amount of short-term financing used by these companies during the same period to establish whether all short-term financing was covered by a credit line. Where the amount of the short-term financing exceeded the credit line limit, the Commission increased the amount of the existing credit line by the amount actually used by the exporting producers beyond that credit line limit.

(533)

Under normal market circumstances, credit lines would be subject to a so-called ‘arrangement’ or ‘commitment’ fee to compensate for the bank’s costs and risks at the opening of a credit line, as well as to a ‘renewal fee’ charged on a yearly basis for renewing the validity of the credit lines (181). These fees cover administrative costs, such as the cost of processing the application, and performing security checks, but also the cost stemming from the prudential requirements imposed on banks, since the capital committed under a credit line diminishes the capital ratios of the bank, which it needs to maintain to ensure against systemic risks. However, the Commission established that all sampled group of companies benefited from credit lines provided free of charge. Therefore, a benefit was conferred to the investigated groups of companies within the meaning of Article 6(d) of the basic Regulation.

(534)

As mentioned in recital (210), according to Decision No 40 financial institutions shall provide credit support to encouraged industries.

(535)

The Commission considered that since credit lines are intrinsically linked to all types of short-term financing provided to the sampled companies, they should be considered as a form of a preferential financial support by financial institutions to encouraged industries such as the BEV sector. As specified in Section 3.1 above, the BEV sector is among the encouraged industries and is therefore eligible for all possible financial support.

(536)

In accordance with Article 6(d)(ii) of the basic Regulation, the Commission considered the benefit conferred on the recipients to be the difference between the amount that they paid as a fee for the opening or the renewal of the credit lines by Chinese financial institutions, and the amount that they would pay for a comparable commercial credit line obtained at an undistorted market rate.

(537)

None of the sampled companies paid a fee for their credit line. Similarly, the Commission did not find any in-country credit line fees in previous investigations. To the contrary, the only instance in which a sampled exporting producer paid a credit line fee concerned a company which obtained credit lines from two banks whose headquarters were established in a financial jurisdiction other than the PRC, and which thus were subject to fees as is the usual practice on world financial markets (182). Publicly available information seems to suggest that in some cases, credit line charges are levied for companies in China (183), but the level of these fees could not be found. Therefore, the Commission had no other choice than to look for an appropriate benchmark fee outside China. The rates for the arrangement fee and for the renewal fee were thus established at 1,75 % and 1,25 % respectively by reference to publicly available data (184).

(538)