The European Commission has said that it will launch an investigation against cheaper Chinese electric vehicle (EV) imports it says are benefiting from state subsidies.

The Commission will have up to 13 months to assess whether to impose tariffs above the standard 10% EU rate for these vehicles.

“Global markets are now flooded with cheaper Chinese electric cars, and huge state subsidies keep their prices artificially low. This is distorting our market,” said European Commission President Ursula von der Leyen. “So, I can say that the Commission is launching an anti-subsidy investigation into electric vehicles from China. Europe is open to competition. Not for a race to the bottom.”

Reacting to the threat of these tariffs, China’s Ministry of Finance said the investigative measures to be taken by the EU to protect its industry in the name of “fair competition” are naked protectionist acts, which will seriously disrupt the global automotive supply chain, including the EU, and will hurt China-EU economic and trade relations.

China urged the EU to maintain the stability of the global supply chain and the China-EU comprehensive strategic partnership. It called for a dialogue to create a fair, non-discriminatory, and predictable market environment for the joint development of the China-EU electric vehicle industry.

China said it will pay close attention to the protectionist tendencies and follow-up actions of the European side and safeguard the legitimate rights and interests of Chinese enterprises.

China accounted for 60% of global electric car sales in 2022. Europe and the United States, the second and third largest markets, saw their sales increase by 15% and 55% in 2022.

The number of EVs globally is set to exceed 100 million by 2026 and reach 700 million by 2040, according to a report by BloombergNEF. These estimates represent a significant surge from the 27 million EVs registered at the beginning of this year.