Climate Cultists and Corporatists Pushing Energy Transition That Will Yield Chinese Takeover of Their Own Auto Industry
Guest Post from the Institute for Energy Research.
The European Union will place extra duties of up to 38.1 percent on Chinese-made electric vehicle imports from July, a month after the Biden administration imposed higher tariff restrictions on Chinese-made electric vehicles. President Biden quadrupled U.S. tariffs on Chinese-made electric vehicles to 100 percent.
The additional E.U. tariffs range from 17.4 percent for BYD to 38.1 percent for SAIC, on top of the standard 10 percent car duty. The new duties may slow Chinese EV makers’ push into Europe and the United States, but it is unlikely to impede them as China has a huge cost advantage.
Prices are typically 20 percent below those of EU-made models. U.S. and European politicians believe that China unfairly subsidizes its carmakers, putting Western rivals at a major disadvantage. Neither the United States nor the E.U. have backed away from their positions regarding climate as a justification for forcing electric vehicles upon consumers.
Chinese exports to Europe have increased to $11.5 billion last year from $1.6 billion in 2020, according to the research firm Rhodium Group. And, Chinese European EV sales have grown by 23 percent, to nearly 120,000 units, in the first four months of this year. According to the Commission, China’s share of the E.U. market has risen to 8 percent from below 1 percent in 2019 and could reach 15 percent in 2025. By contrast, few Chinese-made electric vehicles are currently sold in the United States.
Chinese companies dominate global EV production and the supply chain, enabling them to build more affordable cars than their Western counterparts. Chinese carmakers have the room to absorb the tariffs and still be competitive on price. Duties in the 40-50 percent range—or even higher for vertically integrated manufacturers like BYD—would probably be necessary to make the European market unattractive for Chinese EV exporters.
China’s dominance is not going to end. As the Biden administration and the E.U. government push the green transition, Chinese companies will be able to make gains while Western companies are struggling to produce electric vehicles at lower costs. Chinese carmakers believe they can expand in the West over the long term as well as in fast-growing markets including Southeast Asia, South America and the Middle East.
Some European Countries Welcome Chinese Manufacturing Plants
While some European governments are wary of low-cost Chinese electric vehicles flooding their markets, they are also competing for a share of the manufacturing investment and jobs the new competitors will bring. National governments are dangling incentives to attract Chinese automakers looking to build European factories.
BYD, Chery Automobile and state-owned SAIC Motor want to set up in Europe to build their brands and save on shipping and potential tariffs, as they are maxing out domestic markets. Chinese automakers believe their cars must be perceived as European if they want to gain interest from European customers.
Hungary, which produced around 500,000 vehicles in 2023, secured the first European-factory investment by a Chinese automaker, announced last year by BYD, which is also considering a second European plant in 2025. Hungary is also negotiating with Great Wall Motor for its first European plant, with the country offering cash for jobs creation, tax breaks and relaxed regulation in targeted zones to attract foreign investment.
Hungary has spent more than $1 billion in recent years to support new battery plants of South Korean groups SK On and Samsung SDI and Chinese battery giant CATL’s planned factory. Hungary was never a significant maker of internal combustion engine vehicles, but its Trade Minister predicts it will become one of the top 5 EV makers in the world within a few years.
China’s Leapmotor will use existing capacity of Franco-Italian partner Stellantis, and the pair have chosen the Tychy plant in Poland as a manufacturing base. Poland has a number of programs currently supporting more than $10 billion of investments, including one favoring the transition to a net-zero economy and another offering corporate income tax relief, of as much as 50 percent in high-unemployment regions.
Spain, Europe’s second largest car-making country after Germany, has secured investment from Chery, which will start production in the fourth quarter at a former Nissan facility in Barcelona with a local partner. Chery is expected to benefit from Spain’s 3.7-billion-euro program launched in 2020 to attract electric-vehicle and battery plants.
China’s Envision Group has already received 300 million euros in incentives under the program for a 2.5 billion battery plant creating 3,000 jobs. Spain might also host Stellantis’ planned fourth gigafactory in Europe with CATL.
Chery plans a second, larger facility in Europe, and has held talks with governments including Rome, which wants to attract a second automaker to rival Fiat-maker Stellantis. Italy can tap its national automotive fund, worth 6 billion euros between 2025-2030, for incentives for both car buyers and manufacturers. China’s Dongfen is among several other automakers that have held investment discussions with Rome.
SAIC, owner of the iconic MG brand developed in the UK, plans to build two plants in Europe. The first, based at an existing facility, could be announced in July and would employ a kit-assembly technique, targeting annual production of up to 50,000 vehicles. SAIC’s second European plant would be built from scratch and produce up to 200,000 vehicles annually. Germany, Italy, Spain and Hungary are on SAIC’s location shortlist.
Chinese automakers face higher costs for labor, energy, and regulatory compliance in Europe. However, a 15,000-euro car produced in China requires shipping-and-logistics costs of between 500 and 3,000 euros. Compared to Northern Europe, Italy and Spain offer lower labor costs and relatively high manufacturing standards – particularly important for premium vehicles.
For lower-cost vehicles, attractive European locations include Eastern Europe and Turkey, which currently produces around 1.5 million cars annually, mostly for the E.U., and has held talks with BYD, Chery, SAIC and Great Wall. Turkey’s customs union with the E.U. and free trade deals with non-E.U. countries guarantee tariff-free vehicle and component exports.
Conclusion
The European Commission will impose extra duties of up to 38.1 percent on imported Chinese electric cars from July, risking retaliation from China, who said it would take measures to safeguard its interests. China passed a law in April to strengthen its ability to respond should the United States or E.U. impose tariffs on Chinese exports.
Chinese EV makers and suppliers are also starting to invest in European production, which would avoid tariffs.
Because the United States and the E.U. are pushing a transition to electric vehicles, Western automakers are having a hard time competing with Chinese automakers, who have a huge advantage in both EV production and the associated supply chain.
#EVs #China #ElectricVehicles #Tariffs #EnergyTransition
The purpose of electric vehicles is to END availability of private vehicles, NOT to go all electric. Tyranny is the goal.
Thanks - Interesting economics. Tariffs hurt everybody and make things more expensive. "U.S. and European politicians believe that China unfairly subsidizes its carmakers." The pot calling the kettle black.
"Chinese companies dominate global EV production and the supply chain, enabling them to build more affordable cars than their Western counterparts." Sounds like Chinese production might be more efficient even if they weren't subsidized.