The European Commission launched a probe on Wednesday to determine whether to impose tariffs to defend the European Union against Chinese EV imports that are subsidized by the government.

“Cheaper electric cars are currently overrunning the world’s markets. In her yearly speech to the European Union’s parliament, President of the European Commission Ursula von der Leyen claimed that substantial state subsidies keep their price unnaturally low.

European automakers are aware that they must compete to build cheaper electric cars and overtake China’s lead in creating more affordable, consumer-friendly models.

Chinese EV manufacturers are intensifying their efforts to enter new international markets as domestic competition heats up and domestic development slows. According to the China Passenger Car Association (CPCA), China’s auto exports increased 31% in August after rising 63% in July.

Of new EVs sold in Europe this year, 8% were made by Chinese brands, up from 6% last year and 4% in 2021, according to autos consultancy Inovev.

Shares of Chinese EV producers fell after the EU announcement. BYD shares were trading 4.5% higher before the news, to then close down 2.8%. Nio (9866.HK) fell 1% and Xpeng (9868.HK) dropped 2.5%.

In April, the founder of Nio said that Chinese electric vehicle makers should brace for the possibility of protectionist policies against them by foreign governments as they seize on their cost advantages to expand exports.

He estimated his company and other Chinese EV makers had a cost advantage of around 20% over rivals such as Tesla (TSLA.O) thanks to China’s grip over the supply chain and raw materials.

Von der Leyen stressed the importance of electric vehicles to the EU’s ambitious environmental objectives.

“So I can announce today that the Commission is launching an anti-subsidy investigation into electric vehicles coming from China. Europe is open to competition. Not for a race to the bottom,” she told the European Parliament.