The European Commission is probing whether BYD's (HKG:1211, SHE:002594) electric car factory in Hungary received unfair subsidies from the Chinese government, the Financial Times reported Thursday, citing two people familiar with the matter.
The probe, which is in its preliminary stages, could escalate trade tensions with Brussels and Beijing, the report said.
Should the commission conclude BYD took advantage of unfair government subsidies, the EU could force the BYD plant in Hungary to liquidate some of its assets, shrink capacity, repay the subsidy, and even pay a fine for non-compliance, according to the report.
The probe on BYD's Hungary plant comes as Prime Minister Viktor Orbán is attracting Chinese capital into his country, according to the Financial Times.
Shares slid 7% in Hong Kong and Shenzhen during Friday's afternoon trading.
(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)
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