 |
| Electric cars from Chinese automaker XPENG are displayed at an exhibition in Stockholm, Sweden. (Source: Xinhua) |
European Commission President Ursula von der Leyen has sounded the alarm to EU lawmakers that cheap Chinese electric cars are flooding the global market. The European car industry is finding it difficult to compete because Beijing is offering “huge government subsidies” to reduce the price of electric vehicles made in Europe.
As the global electric vehicle price war heats up, the fate of Germany's solar industry could be an example of what could happen if the EU underestimates the Chinese challenge.
According to DW , solar technology is mainly developed in Europe - especially in Germany. The solar industry in the "locomotive" of Europe is subsidized by the government. However, China has adopted this model but faster and cheaper.
On September 13, the EU officially announced that it would begin an investigation into the impact of Beijing's subsidy policies on electric vehicle manufacturers in dominating the European market.
Earlier in May, French President Emmanuel Macron said the 27-member bloc should not let Beijing "have free reign in the electric vehicle market - just like the solar panel market".
Electric cars receive too many subsidies
Recently, Chinese electric car manufacturers have announced a major sales “offensive” of European electric cars.
According to Reuters , in the first 7 months of this year, Chinese electric vehicle manufacturers BYD, Nio and Xpeng sold 820,000 vehicles in Europe, up about 55% compared to the same period in 2022. The market share of Chinese electric vehicle manufacturers in Europe increased to 13% in 2023, from 6% in 2021.
The European Commission says China's share of electric vehicles in Europe could reach 15% by 2025 if the current pace is maintained.
For all-electric vehicles, Chinese manufacturers' market share in Europe will be around 4% in 2021, 6% in 2022 and 8% from the beginning of 2023, according to French automotive consultancy Inovev. The company also predicts that the figure will increase to around 12.5-20% by 2030, with annual sales expected to reach between 725,000 and 1.16 million vehicles.
“The Chinese BYD Seal is 15% cheaper than Tesla’s Shanghai-made Model 3 and about 35% cheaper than the German-made VW ID.3. Those costs are not necessarily due to Chinese state subsidies. Production efficiency and the supply of core components may contribute to the cost advantage of these cars,” said Paul Gong, an auto analyst at UBS.
But Mr. Gabriel Felbermayr, Director of the Austrian Institute for Economic Research (WIFO), disagrees with the above opinion.
He told German daily Frankfurter Allgemeine Zeitung that there was ample evidence that Beijing was subsidizing the auto industry “in a way that is inconsistent with World Trade Organization (WTO) rules.”
The world's second-largest economy not only supports auto production through direct subsidies, but also "indirect subsidies through promoting the battery industry and rare earth elements in various forms," Mr. Felbermayr said.
While there is no serious dispute that the Chinese auto industry enjoys a lot of subsidies, the overall picture is more complicated.
“International carmakers like BMW and Tesla are producing cars in China for both the domestic and global markets. These companies are getting preferential loans from Chinese banks – something they wouldn’t get anywhere else,” notes Gregor Sebastian of the Mercator Institute for China Studies (MERICS) in Berlin.
Responding to the EU’s comments, China’s Ministry of Commerce said that Chinese automakers had achieved a solid position “through hard work” and “continuous technological innovation.” It called on Brussels to work with Beijing to create “a fair, non-discriminatory and predictable environment.”
 |
| The EU has officially announced that it will launch an investigation into the impact of Beijing's subsidy policies on electric vehicle manufacturers. (Source: Reuters) |
The Origin of the Tariff War
The French government has sought to defuse the situation by suggesting that an investigation should be launched and that hasty conclusions should be avoided.
According to Beijing-based Zhong Lun Law Firm, the maximum investigation period for an EU anti-subsidy case is 13 months or less, so Chinese EV makers need to speed up their supply chain adjustments if they want to avoid facing huge pressure from anti-subsidy duties.
Currently, tariffs on Chinese electric vehicles are 10% in Europe and 27.5% in the US.
DW commented that if the EU imposes tariffs on electric cars from China, VW and BMW will have to pay more taxes when exporting to the EU, making their cars even more expensive in Europe.
Furthermore, European companies are also supporting their own carmakers. “In the first quarter of this year, 40% of French state subsidies to the auto industry were spent on cars made in China,” said MERICS analyst Sebastian.
Looking ahead, WIFO’s Gabriel Felbermayr worries that if the EU’s anti-subsidy duties do materialize, “China will certainly retaliate and accuse the EU of similar practices. This will play out similarly to the Airbus-Boeing dispute, where both sides claim they are right.”
Bloomberg Opinion journalist Chris Bryant said that European automakers should strive to improve their competitiveness instead of "challenging" retaliation from China.
On the business side, Stellantis CEO Carlos Tavares said Brussels should step up support for homegrown manufacturers. Companies that rely heavily on sales in China – mainly Volkswagen, BMW and Mercedes – stand to lose more if China-EU trade relations worsen.
Source
Comment (0)