The European Union recently opened an anti-subsidy probe into Chinese EVs sold in Europe, with European Commission President Ursula von der Leyen arguing that Chinese EVs with "artificially low" prices enabled by "huge state subsidies" are distorting the EU market.

In response, the Chinese Ministry of Commerce described the investigation as "protectionist," adding that the competitive advantage of Chinese EVs is not due to subsidies. The ministry pledged to "firmly safeguard the legitimate rights and interests of Chinese companies," with some analysts interpreting that as a retaliation threat.

As it turns out, Chinese automakers are not the only ones on the EU's radar – other international manufacturers that build EVs in China using Chinese state subsidies are reportedly also in its crosshairs.

Bloomberg reports that Tesla is included in the investigation on EVs flooding the EU market from China, with the list also said to include BMW, Renault, and others.

Citing people familiar with the matter, the report notes that the US carmaker was among the companies found to have likely benefited from Chinese state subsidies during the evidence-gathering for the probe.

Gallery: Tesla Giga Shanghai (Tesla Gigafactory 3)

The investigation will seek to determine whether China has subsidised Tesla and domestic manufacturers including BYD, SAIC Motor, and Nio – and to which degree. The unnamed sources said the EU will then take any necessary countermeasures to level the playing field for its auto industry.

Tesla started exporting Model 3 sedans made at its Shanghai plant to Europe in late 2020, less than a year after starting production at the site, which it often refers to as its primary vehicle export hub. Before starting production at Giga Berlin, Tesla also imported Model Y EVs from China.

In the first seven months of 2023, Tesla sold approximately 93,700 made-in-China vehicles across Western Europe, making up roughly 47 percent of its total deliveries in the region, according to Schmidt Automotive Research. SAIC Motor's MG brand was the next biggest exporter of EVs from China to Europe with approximately 57,500 registrations.

Needless to say, if Tesla is found to have benefited from Chinese state subsidies and the EU ends up imposing tariffs on its vehicles, it would be a significant blow for the US company, which was the top-selling EV brand in Europe in the first half of 2023 with 185,238 registrations according to JATO Dynamics. 

Tesla has enjoyed preferential treatment in China compared to other foreign automakers, with the most notable being the state's permission to wholly own its domestic operations, rather than having to set up a joint venture with a local partner. Tesla has also benefited from tax breaks, cheap loans and other forms of assistance.