BYD Company's stock (HKG:1211, SHE:002594) experienced a sharp decline, plummeting 8.49% during Friday's trading session, following reports of a European Commission investigation into potential unfair subsidies for the company's electric car factory in Hungary. The probe has raised concerns among investors about possible regulatory challenges and financial implications for the Chinese automotive giant.

According to sources familiar with the matter, as reported by the Financial Times, the European Commission is in the preliminary stages of investigating whether BYD's Hungarian plant received unfair subsidies from the Chinese government. If the commission concludes that BYD benefited from such subsidies, the consequences could be severe. The company might be forced to liquidate some of its assets, reduce production capacity, repay the subsidies, and potentially face fines for non-compliance.

The investigation comes amid a backdrop of increasing Chinese investments in Hungary, supported by Prime Minister Viktor Orbán's efforts to attract Chinese capital. This probe could potentially escalate trade tensions between Brussels and Beijing, adding another layer of complexity to the already delicate economic relationship between the European Union and China. The market reacted swiftly to the news, with BYD's shares sliding 7% in both Hong Kong and Shenzhen during Friday's afternoon trading, reflecting investor concerns about the potential impact on the company's European operations and overall financial performance.