Shares in European carmakers revved higher after Ursula von der Leyen announced an "anti-subsidy" probe into Chinese electric vehicles (EVs).
The European Commission (EC) president, in her State of the Union speech this morning, said the EV sector is "crucial" for Europe's economy but global markets are "flooded with cheaper Chinese electric cars and their price is kept artificially low by huge state subsidies".
Also alluding to how China's solar industry had ravaged European rivals through "unfair trade practices", she said the subsidy support for Chinese EVs is "distorting the market".
In a recent note, analysts at UBS warned that the European auto market seems to be moving to an oversupply situation amid the rise in production from local OEMs, Tesla's Berlin plant and Chinese imports, which is expected to see major companies like Volkswagen Group (XETRA:VOW) (VW) and Renault losing large amounts of market share and facing significant pressure on their profit margins.
Although not mentioning that Europe does provide funding for the automotive sector via support for R&D, von der Leyen said the EC "do not accept [huge state subsidies] from the inside, we do not accept this from the outside".
She said the EC is therefore launching an "anti-subsidy investigation into electric vehicles coming from China".
Shares in Renault jumped 5% on the announcement, with VW and BMW rising 3%, while Stellantis and Porsche also popped higher.
Meanwhile, Chinese EV stocks, several of which are listed in New York, fell. NIO Inc (NYSE:NIO) was down 2.6% in US pre-market trading and Xpeng Inc (NYSE:XPEV) 3.2% lower. BYD Co ADRs listed in Frankfurt screeched 4.2% lower, though the company's China-listed shares were only down 0.2%.