Electric cars: the numbers, contradictions and risks of the Chinese invasion of Europe

For some time, there have been electric cars produced in China and ready for invade the European market. However, the invasion is already underway, and this is demonstrated by the elaborations of the German think tank Merics, which warn against a paradoxical contradiction: It is not the Chinese producers who are burning exports to the old continent, but the European and American companies themselves.

The numbers. In their cold, the figures speak for themselves. Last year, Europe became the main destination for electric “made in China”: Dragon’s battery-powered cars were exported to the world 555,041 and 40% (over 222,000) were absorbed by European markets, where 10% of total electric sales are now represented by Chinese products. “Exports of electric vehicles to the Union have not grown because cars are better, but because European and American manufacturers are converting to electric vehicle production in China, also to the European market,” warns Merics experts, recalling how Western builders rose up. investment in Beijing later the relaxation of the rules on joint venturesand emphasizes the decision of Renaults, BMWs or Mercedes to develop and produce models in China for global markets, such as Dacia Springthat Mini electric or Smart.

The Chinese “distortions”. But what is the reason for the strong “increase” in Chinese electricity production? The think tank explicitly speaks of “very distorting” industrial policy initiatives on the part of Beijing. “To spur the development of a domestic electric car industry, the government has combined the allocation of subsidies with restricting market access for foreign-made cars and batteries. This means that global exports of ‘made in China’ electric vehicles – which are likely to increase in the next few years – poses a challenge to market-based competition “and therefore to the principles of Western capitalism. Specifically, there are three main” distortive “measures. First, China linked subsidies to local production, which in turn vehicles to Chinese competitors “. In addition, Beijing has” excluded foreign battery companies from its domestic market to help domestic companies “conquer the value chain. Finally, Chinese central and local authorities provide” low-cost capital “through investment funds or the provision of special concessions in the form of energy tariffs, land, licenses, etc. g approval procedures.

The implications. That said, the think tank believes that the “strong export growth” is destined to continue over time, as more and more companies will focus on exports to offset the slowdown in domestic demand associated with the gradual abolition of the purchase incentives guaranteed of Beijing. “In this context – warns Merics – Europe is a particularly interesting target due to currently low trade barriers, a well-developed charging network and high subsidies for the purchase of electric cars”, including imported. All this has serious consequences for the economy and the car sector on the old continent, starting with trade exchanges that are destined to be completely disrupted in favor of China. The European Union, where the car represents 10% of exports, a third of the trade surplus, 7% of GDP and 10% of employment in the manufacturing sector (data from 2019), risks not only becoming a “fast” net importer of electric cars of the kite, but also to face lower production of cars, especially if European manufacturers use China as a hub for exports to other countries. Therefore, “Made in China puts Europe’s jobs, investments and innovative capacity at stake”. Not only. The strong integration between the different countries is also in jeopardy (a third of each production is linked to the activities of others), as well as the possibility of creating retraining and relocation opportunities for workers, perhaps in batteries.

We need an answer. Merics therefore recommends that European institutions respond to the Chinese threat, taking into account the use of trade defense instruments such as the increase in tariffs (currently at 10% compared to the 27.5% imposed by the US), even if it is in this cases “significant turbulence in the already strained relations between the EU and China” would be triggered. However, experts conclude that what happened in the European solar panel industry, “now dominated by Chinese manufacturers thanks to a long history of distorting practices”: the cost of passivity, which essentially does nothing to avert or limit the threat, may be very high.

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