Chinese alarm in Europe: How did they take over the electric vehicle market?
European, American, Japanese and South Korean auto groups are losing decades of market dominance to China. China will become the world’s largest automobile exporter this year, surpassing Japan.
Chinese manufacturers, including electric vehicle market leader BYD, now outsell foreign automakers and are targeting overseas markets for growth.
The European Commission is considering imposing punitive tariffs to protect European manufacturers from imports of cheaper Chinese electric vehicles, which China says benefit from state subsidies.
This move, which caused shares of Chinese electric vehicle manufacturers to plummet, also raised some important questions.
Some of these questions are:
WHY AND BY HOW MUCH DID EXPORTS INCREASE TO EUROPE?
One of the most important factors in Chinese EV makers’ expansion abroad was the worsening slowdown in demand and overcapacity in China.
Bill Russo, chief executive of Shanghai-based consultancy Automobility, estimates that China has excess automotive capacity of about 10 million vehicles per year by 2022, equivalent to two-thirds of all production in North America.
Europe has become a major export market for Chinese car brands, helped by the European Union’s (EU) strict rules on carbon emissions and Beijing’s relatively moderate trade ties in contrast to rising tensions with the United States. .
According to customs data, shipments of electric vehicles from China to the EU increased by 112 percent in the first seven months of 2023 compared to the previous year and 361 percent compared to 2021.
WHY ARE CHINESE-MADE ELECTRIC VEHICLES CHEAPER?
China produces electric vehicles cheaper than anywhere else.
This is mainly due to a decade-long policy of government incentives and subsidies that has allowed China to become the world’s largest EV market and control the global EV supply chain, including raw materials.
The European Commission notes that electric vehicles produced in China are typically a fifth cheaper than models produced in the EU.
This policy has also exposed industry heavyweights such as CATL, the world’s largest electric vehicle battery maker, and BYD, which replaced Volkswagen as the best-selling car brand in China this year.
China’s costs and supply chain advantages have led foreign companies to produce here.
The best known of them is the one that will produce more than 700,000 vehicles in 2022 in its gigantic factory in Shanghai. This amount corresponds to half of the total production of the American electric vehicle manufacturer Tesla. Renault and BMW also produce cars for export in China.
WHO IS THE TARGET OF THE EU INVESTIGATION?
The EU anti-subsidy investigation covers battery-powered cars from China, so it also includes non-Chinese manufacturers.
According to the US think tank Center for Strategic and International Studies, Tesla, the largest exporter of electric vehicles produced in China, accounted for 40 percent of China’s electric vehicle exports between January and April.
Popular Chinese brands exported to Europe include Geely’s Volvo and public automaker SAIC’s MG.
Other companies, such as market leader BYD, Nio and Xpeng, have also begun to expand into European countries, including the Netherlands and Denmark.
WHAT SUBSCRIPTIONS WERE IMPLEMENTED?
China’s government subsidies for electric and hybrid vehicles amounted to $57 billion between 2016 and 2022, according to estimates by consulting firm AlixPartners.
China’s best-known electric vehicle subsidy program was aimed at encouraging purchases. The subsidy paid to the automaker at the time of purchase began in 2009 and was gradually reduced until ending last year.
According to estimates by China Merchants Bank International, approximately $15 billion has been paid to encourage the purchase of electric vehicles between now and 2021.
In June, China announced a package of tax cuts worth 520 billion yuan ($72 billion) over four years aimed at boosting sales of electric vehicles and other environmentally friendly cars.
The EU announced that the investigation targeted possible unfair subsidies in a wide range of areas, from raw material and battery prices to private loans or the provision of cheap land. (REUTERS)