The European Commission suspects it knows how BYD, the Warren Buffett-backed EV giant that’s outselling Tesla, can sell its cars so cheaply: An unfair level of subsidies from Beijing. BYD and its peers are currently facing an European anti-subsidy probe that will determine whether countermeasures are needed to ensure a level playing field with European carmakers.

But BYD’s Europe president Michael Shu is hitting back. BYD’s vehicles are cheaper because the company has higher “management efficiency” and unique technology, Shu said to the Financial Times.

“We invested in this technology much earlier, and much more, than competitors. It’s not because of the subsidy,” Shu said, adding that the manufacturing subsidies the automaker receives from Beijing are “very limited”.

BYD’s advantage over its EV peers could be due to the company’s history as a battery maker. EV batteries usually account for about 30% of a vehicle’s cost; BYD can make its own batteries in-house. The company has also vertically integrated its operations to include a network of factories and even a fleet of ships to transport cars overseas.

Beijing prioritized EVs as a way to grab a share of the global auto market, and has supported the industry by offering incentives to both manufacturers and consumers to shift to EVs. China became the world’s largest auto exporter last year, overtaking Japan, in part due to EV exports.

Several western carmakers, including those from Europe, warn that a wave of cheaper Chinese cars could undercut the market. Tesla’s Elon Musk said in January that protectionism is the only thing stopping cheap Chinese EVs from demolishing the competition.

Shu had a different take on the matter. “They are afraid they cannot offer a competitive price,” he said.

The EU’s anti-subsidy probe could possibly result in some form of tariff on BYD’s exports to Europe. Shu suggests that could mean more cars will be produced in BYD’s still-under-construction plant in Hungary. BYD expects the facility to be operational within three years, and plans to produce at least 150,000 cars a year.

And BYD may be looking to other European countries to host factories. Italy has contacted BYD about setting up operations in the country, Bloomberg reports.

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