In yet another setback for China globally, the country’s electric vehicle (EV) companies are all set to face a major roadblock in Europe.
Recently, European Commission president Ursula von der Leyen had said that the organisation is rolling out an “anti-subsidy investigation into electric vehicles originating from China.”
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| MG is one of the highest EV sellers in Europe -- Photo: MSX International. |
China a major EV exporter
In recent years, China has become a major exporter of cars globally.
One of its mega players, Morris Garages (MG), once a British sports car brand that was taken over by Chinese company SAIC in 2005, has the second-highest market share in Europe.
Besides MG, another Chinese big EV player BYD has been seeing a major sales growth in the European market, especially in the last two years.
The growth has raised an alarm in Europe, where Chinese companies employ around 6 per cent of the total employees in Europe’s electric vehicle industry.
According to an expert, this could be one of the slew of measures that Europe will adopt to protect its EV industry.
There is also a political factor, added another expert. “Europe does not want to look like it’s too dependent on China,” he said.
“Also, why should the benefits of decarbonisation be flowing to only China rather than staying in the European Union?” he asked.
Curbs on Chinese EV makers like SAIC and BYD, which have shown the best performance in Europe, could shatter the dream of these brands of beating foreign firms in their home turf.
China sees higher trend of car exports
The reason behind the probe is the impact of Chinese EVs on Europe’s economy, particularly its world-leading car industry.
Traditionally, we have seen that Europe had exported many more cars to China than it imported, but this trend reversed in December 2022 when the trade surplus turned negative for the first time for Europe.
China has become a pioneer of sorts in EV and battery tech, and both the Chinese brands and Tesla have been manufacturing cars in China, which has a cheaper labour force compared to Europe. And, these cars from China have been imported to Europe.
According to an expert, Europeans are more well off compared to people in other markets and receive higher subsidies from the government to purchase EVs.
So, even after higher shipping costs, the cars from China are, thus, lapped up by European buyers.
Also, since China has had a head start on EV tech, its electric cars could be considered as highly reliable.
Allegations of unfair competition
Nothing much is known about the probe but von der Leyen’s statement last week throws some light.
Leyen had said that global markets are flooded with Chinese cars and the prices are artificially kept low because of huge subsidies in the home country (China).
Now, the burden on China will be to show that its electric cars are not unfairly priced.
European car brands’ China connection
European automakers would reap benefits if curbs are placed on Chinese EV makers.
However, targeting Chinese EV makers could hit European firms hard also as many European brands have substantial investment in China or collaborate with Chinese brands.
In fact, half the EVs exported by China are actually made by foreign companies or via collaborations.
In the first six months of 2023, almost 40 per cent of China’s EV exports were Tesla cars and joint venture companies between European and Chinese companies had a share of only 9.5 per cent.
E-Vroooom’s views
So, if Europe becomes a roadblock for Chinese EV companies, it would have serious consequences for even European car makers, especially those having China tie-ups.
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