Navigating the Electric Future: Europe’s Struggle with China’s Electric Vehicle Dominance?

The recent announcement by the #EuropeanUnion to impose import tariffs of 21-38% on #Chinese #electricvehicles starting July 4 is both perplexing and concerning. This decision poses significant risks from multiple perspectives. While China is likely to respond initially in a restrained manner, they may impose tariffs on wines and luxury goods, disproportionately affecting France, the EU country considered most hawkish towards China. China will likely avoid escalating to a full trade war, which would be disastrous for both sides given their intertwined economies. Moreover, these tariffs may not effectively protect European jobs or address the critical issue: how will the European #automobile industry remain globally competitive against the growing strength of the Chinese automobile industry and in particular with electric vehicles?

China is leapfrogging over the West by embracing the electrification of transport in all its facets, a process they’ve been committed to for years. Electric scooters have been standard in Chinese cities for a decade, with consumers willingly adapting to changing and charging battery packs. This readiness extends to electric vehicles, as evidenced by one-third of all new cars sold in China in the first quarter of this year being electric. China’s front-runner status in these technologies grants them scale in producing key components like battery packs, electric motors, and charging stations. Additionally, they dominate the mining and processing of critical materials such as cobalt and lithium used in these vehicles.

Meanwhile, in Europe, incumbent manufacturers are struggling to catch up and are heavily reliant on Chinese suppliers for key components. There is no excuse for the European automobile industry’s poor competitive position, especially as many produce in China and should be aware of market trends. They have been slow to respond.

#Volkswagen, long the No.1 automobile manufacturer in China, has recently been overtaken by #BYD (Build Your Dreams), the second-largest electric vehicle manufacturer globally and a leading battery manufacturer. BYD’s cars are not only lower cost than VW’s in both China and Europe, but they are also technologically superior, particularly in terms of range, performance, and software functionality. BYD’s success stems like #Tesla from embracing electrification and new thinking as well as achieving both technological and cost leadership.

This issue affects not just VW but also other European manufacturers like #Renault, #Mercedes, #BMW, and #Fiat, all of whom have been slow to adopt electrification. Europe lacks a Tesla to drive innovation and compete with Chinese manufacturers, putting the industry in a difficult position. Chinese cars, which are cheaper and technically superior, are already entering European markets.

Imposing import duties on Chinese cars may protect some European jobs temporarily but will not help the European industry remain competitive globally. It will also harm European consumers and climate change efforts, as higher prices for electric vehicles will slow adoption rates. China can circumvent these tariffs by producing in Europe or other Asian countries, with BYD already building a factory in Hungary.

This situation mirrors past events, such as when Europe imposed tariffs on Chinese solar exports. Those tariffs failed to stimulate European solar production and only slowed solar installations across the continent. The United States, on the other hand, plans to impose 100% import taxes on Chinese autos, which, while not consumer-friendly, is coupled with industrial policy through the Inflation Reduction Act, incentivizing the reindustrialization of the US around new energy technologies.

In contrast, Europe lacks a reindustrialization or even an industrialisation policy for that matter. However, there is an excellent example in Airbus, a combination of Europe’s best aircraft businesses, demonstrating how cross-border cooperation and constant innovation can achieve global leadership. Europe needs more initiatives like Airbus rather than ineffective import duties that risk serious trade wars and economic damage.

A holistic approach is needed for Europe to remain competitive. Investment in research and development, subsidies and supports for green technologies, and partnerships between countries and companies can help build a robust electric vehicle industry. Emulating successful models like #Airbus and fostering innovation across borders can ensure Europe remains a key player in the global automobile market.

In conclusion, while protective tariffs might offer short-term relief, they do not address the root causes of the growing competitiveness gap between Europe and China. A strategic, collaborative approach focusing on innovation and industrial policy will be crucial for not only Europe’s long-term success in the electric vehicle market but for Europe in general.

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