2023-10-02 23:47:03
Europe falls into the trap of Chinese cars… Attempts to reduce imports may hit Tesla and others
The investigation conducted by the European Union into China’s support for its electric cars has become a hammer that may not only destroy the Chinese vehicles that are invading the EU countries, but also famous American and European cars, whose companies China has succeeded in attracting over the past years.
It is not BYD, MG, and Nio cars, which are the most famous in the world of Chinese electric vehicles, whose companies are subject to European investigation, but rather well-known American and European companies whose vehicles are manufactured in China, led by Tesla and German BMW, French Renault, and Swedish Volvo.
The volume of sales of Chinese electric cars shows the extent of concern that dominates the European Union about the widespread encroachment of Chinese models into its markets. About 450,000 Chinese electric cars were exported to Europe in the first seven months of this year, according to the latest estimates, while the latest data issued by the European Automobile Manufacturers Association at the end of last September indicated that about one million fully electric cars had been sold. In the EU countries during the first eight months of 2023.
Chinese automakers have benefited from the global shift to electric cars, a trend that has strong support in the European Union, as it seeks to phase out sales of cars that emit carbon dioxide by 2035. In 2022, China produced about 7 million electric cars. With more new energy, including electric vehicles, than any other country.
Brussels fears that Chinese state support distorts the market at the expense of European automakers, putting jobs at risk, but Beijing denied that the facilities it provides to companies affect vehicle prices.
The European investigation, which takes a time frame of approximately nine months, will likely lead to the imposition of significant tariffs on Chinese electric cars of up to 27%, approaching those that the United States has already imposed on the same Chinese products, according to Bloomberg. But the European hammer may shake when it becomes certain that it will not only fall on Chinese cars, but that its strikes may also hit European and American allies.
The name Tesla appeared more than its counterparts during the investigation into the flow of electric cars to Europe from China. During the evidence-gathering phase that ended with the sudden announcement at the end of last September of a European Union investigation to combat subsidies for Chinese electric vehicles, the American automaker was among the companies that were revealed to have potentially benefited from this subsidy.
Tesla and European companies are included in the investigation
European Union Trade Commissioner Valdis Dombrovskis confirmed, in an interview with the British newspaper the Financial Times, that Tesla and European car manufacturers that export from China to the European Union are scheduled to be subject to scrutiny. “This is not only limited to Chinese brand electric vehicles, but could also include vehicles of other producers if they receive subsidies in production,” Dombrovskis said.
He added that the European Union is “open to competition” in the electric car sector, but “competition must be fair,” noting that other major economies have already imposed tariffs on battery-powered electric cars from China.
The dispute over electric vehicles was at the top of the agenda of the European Union Trade Commissioner during his trip to China at the end of last month, where he sought to stabilize relations and mitigate the repercussions of the investigation, which Beijing described as a “blatant protectionist measure.” But at the end of his five-day trip, he spoke of being under constant pressure from his Chinese counterparts regarding the investigation.
The European Union, as well as companies on the Old Continent, are concerned that China may retaliate in response to the investigation. Senior European Union officials warned against China targeting specific sectors in certain countries in the bloc. In addition to Chinese pressure, pressure from companies such as Tesla or European entities operating in China will also be present at the table.
Tesla began exporting Model 3 vehicles produced at its factory in Shanghai in late 2020, less than a year after production began at its first car factory abroad. By July 2021, the company referred to the facility as its main vehicle export hub.
During the first seven months of this year, Tesla sold about 93,700 vehicles made in China in Western European countries, representing approximately 47% of its total sales, according to Schmidt Automotive Research.
In China, Tesla gained advantages that other international companies struggle to obtain, the most prominent of which was the state’s agreement for the American company to fully own the local unit, instead of having to enter into a joint venture with a local partner. Tax cuts, low-interest loans, and other forms of support helped Transforming China into the most important market for Tesla cars outside the United States.
Some European companies, such as German BMW and French Renault, which operate joint ventures with Chinese manufacturers, will also be included in the investigation of all car manufacturers that produce their vehicles in China and export them to the European Union.
European companies are lagging behind
In addition to the European Union’s concern about price competition that harms its companies, there are also fears that European companies are lagging behind Tesla and Chinese companies in terms of electric vehicle and battery technology, which threatens the ability of the automobile industry in the EU countries to continue, and the sector provides about 14 million. Direct and indirect function.
About a fifth of electric cars sold in Europe are manufactured in China. In the first half of this year, Chinese-made cars accounted for about 11.2% of electric cars sold in Germany, for example, according to a summary issued by the Center for Strategic and International Studies (CSIS) in the United States last month.
According to the centre’s data, about 91% of those cars were from European brands owned by China, such as the British “MG”, owned by the Chinese “SAIC” company, or “Polestar”, a subsidiary of the Swedish company Volvo, or from joint projects between European and Chinese companies such as “ Dacia Spring” or “Smart”.
The China Association of Automobile Manufacturers said it expects the EU to be wise in combating subsidies for Chinese electric vehicles to avoid undermining the momentum of mutually beneficial development in the two sides’ industrial chains. The association added, according to what Xinhua reported last week, that the investigation will cast a dark shadow on the electric vehicle sector in the world and will bring negative impacts on the global vision of carbon neutrality.
Worried about the trade war
Perhaps what is striking is German Transport Minister Volker Vissing’s criticism of the protective fees that the European Union plans to impose on Chinese electric cars. Volker Vissing told the German newspaper “Augsburger Allgemeine”: “In principle, I do not think much about establishing market barriers,” adding: Today, it is closing on cars, tomorrow on chemical products, and each individual step in itself makes the world poorer.”
Vissing warned that a trade war in this electric car sector could quickly spread to other sectors and cause enormous economic damage.
According to the Car Center for Automotive Research in Duisburg, more than one in three cars produced by Volkswagen, Germany’s largest automaker, delivered last August, went to customers in China. With a value of 6.3 billion euros ($6.68 billion), German cars and spare parts were the best-selling products by value in China in the first quarter of this year, according to official figures. Other car companies, such as the German “Daimler”, cooperate closely with Chinese companies.
According to a spokesman for the Chinese Ministry of Commerce, China and the European Union have a wide scope for cooperation and common interests in the automobile industry, adding that the two sides, after years of development, have formed a pattern of mutual support.
Chinese statements show that Beijing may be quicker to take steps than the European Union, as it is expected to circumvent its efforts to undermine the presence of its cars crossing the border on its roads, by moving its factories to European territory.
This situation brings to mind similar problems that occurred throughout the history of the automobile industry, especially between the United States and Japan in recent years, when Japanese companies faced American restrictions by expanding local production in the United States and creating broad job opportunities there by pumping remarkable investments.
So Chinese car companies are moving quickly before their electric cars get hit by hammers. An executive at the state-owned SAIC Motor Company recently said that the company had begun the process of selecting a location for a European assembly plant. Executives at other companies also announced similar steps.
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