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Europe Confronts China's EV Dominance as Carbon-Zero Targets Approach

China's President Xi Jinping's visit to Europe highlights the continent's concerns about Chinese EV dominance. Europe is both alarmed by growing Chinese EV imports and eager to attract Chinese investment into its own EV industry. Chinese EVs are cheaper than European brands, contributing to their growing market share in Europe.

With China producing approximately 60% of the world's EVs in 2022, European countries are both alarmed by the influx of Chinese imports and eager to attract Chinese investment into their own EV industries.


During his visit to France, President Xi was accompanied by a business delegation that included major players in the electric vehicle industry such as Envision Group, SAIC Motor, and Xpeng Motors. This visit served as an opportunity for China to explore potential partnerships and for European auto companies to seek ways to counter the Chinese EV threat.


Europe's concern stems from the fact that China has a significant lead in affordable EVs, with plans to ramp up exports and overseas production. As European consumers increasingly transition to EVs, European carmakers are worried about losing market share to Chinese brands. While Chinese EVs accounted for only 7.9% of battery-electric vehicle (BEV) sales in the EU in 2023, this figure is projected to grow to 20% by 2027, according to the Europe-based policy group Transport & Environment.


One of the key advantages of Chinese EVs is their lower price compared to European brands. On average, Chinese brand EVs in Europe are 24% cheaper than their European counterparts, making them more appealing to price-conscious consumers. This pricing advantage has contributed to the growing market share of Chinese EVs in Europe.


The European Union's ambitious climate targets present a dilemma for European countries. Given China's head start in the EV industry, it is challenging for Europe to meet its combustion engine ban target without relying on substantial imports of Chinese EVs. Analysts suggest that Europe may not have the necessary capital or technological advancements to achieve its goals without Chinese involvement.


However, Europe remains cautious about a potential influx of Chinese EVs and has launched an investigation into hidden subsidies in the Chinese EV sector. The European Commission aims to address unfair competition and protect its domestic industry. German Chancellor Olaf Scholz recently visited Beijing to foster business and trade relations, emphasising the need for fair competition.


The European automotive industry is sharply divided on the issue. Some companies, such as Volkswagen and BMW, welcome Chinese investment and imports, while others express concerns about losing market share and potential job losses. The automotive industry in the EU accounts for 13 million jobs, highlighting the potential societal impact of unfair competition in the EV sector.


To counter the Chinese EV dominance, European carmakers are increasingly forming partnerships with each other or with Chinese companies. These partnerships aim to reduce costs, particularly in battery production and supply chains, where Europe lags behind China. France has inaugurated its first battery "gigafactory" in collaboration with TotalEnergies, Stellantis, and Mercedes-Benz. Renault is also securing its EV battery supply chain through partnerships with French startups and China's Envision Group.


Looking ahead, Chinese EV makers are expected to make significant inroads in Europe once they establish local manufacturing plants and partnerships. Chinese carmakers understand the importance of producing locally to cater to European consumers' preferences. Europe remains a key destination for Chinese EV-related foreign direct investment, with significant investments already made in Hungary and Spain.

 
  • China's President Xi Jinping's visit to Europe highlights the continent's concerns about Chinese EV dominance.

  • Europe is both alarmed by growing Chinese EV imports and eager to attract Chinese investment into its own EV industry.

  • Chinese EVs are cheaper than European brands, contributing to their growing market share in Europe.


Source: NIKKEI ASIA


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