A complex relationship has developed over the years between China and Europe, particularly as Chinese automakers increasingly seek opportunities in the European market, raising tensions in Brussels. The European Commission is implementing measures to hinder these Chinese brands, launching an investigation into alleged unfair competition due to state subsidies that allow lower prices compared to traditional European manufacturers. In response, the EU has confirmed higher tariffs on Chinese electric vehicles, prompting some manufacturers, like BYD and MG, to explore production bases in Europe. China has reacted strongly, urging its automakers to cut or halt investments in Europe and requesting a halt to new agreements, signaling potential setbacks for the European automotive industry.
Over the years, a complex relationship has developed between China and Europe. Recently, numerous Chinese automakers have seized the opportunity to enter the Old Continent, as evidenced by their significant presence at the latest Paris Motor Show. However, this trend has not gone unnoticed by Brussels, which is far from pleased.
Tensions Rise
The European Commission has been implementing a series of measures aimed at hindering brands from the Middle Kingdom, even launching an investigation accusing them of unfair competition.
According to the Commission, these companies benefit from subsidies provided by the Chinese government, enabling them to offer lower prices at the expense of traditional European automakers. This situation has prompted Brussels to impose higher tariffs on electric cars produced in China.
Just yesterday, the European Union officially confirmed this tariff increase, which will inevitably raise the prices of Chinese vehicles sold in Europe. However, the manufacturers have a workaround: they can shift production outside of China. This process has already begun with factories established in Russia and Brazil, and some are also looking to Europe for manufacturing. Companies like BYD plan to set up operations in Hungary, while MG aims to produce on the continent as well. This development is seen as positive for the European economy.
However, all is not smooth sailing. Beijing has reacted strongly to Brussels’ decision regarding the import taxes and is determined not to back down. The Chinese government has already stated that it has approached the World Trade Organization (WTO) to initiate “dispute resolution action through the WTO.” Months prior, China had condemned this measure as contrary to international trade rules.
Moreover, China is aiming to escalate its response, according to a report by British news agency Reuters. The authorities have instructed their manufacturers to cut back, or even halt their investments in Europe. Additionally, China has called for the suspension of all discussions regarding new projects and seeks to prevent any new agreements with Brussels.
Immediate Reactions
Chinese manufacturers have not taken long to respond to these developments. Companies that are directly government-affiliated, like Dongfeng and Changan, have swiftly adjusted their strategies. Dongfeng has just announced it has abandoned its factory project in Italy, a move supported by the country’s stance on the tariff increase. Meanwhile, Changan has canceled an event in Milan planned to launch its new brand Deepal, created in collaboration with CATL and Huawei.
In recent months, a growing number of Chinese manufacturers have made their way to Europe, such as BYD and more recently, Xpeng, which we reviewed with its G6 model. Additionally, several European-branded cars are produced in China, including the Volvo EX30, which will be assembled in Belgium, and the Dacia Spring. According to Reuters, the European market accounted for over 40% of electric vehicles shipped from China in 2023, a figure expected to rise in 2024.
Currently, Geely, SAIC, and BYD have not commented on this situation, nor has the Chinese Ministry of Commerce. However, one thing is certain: this decision could adversely impact the European automotive industry, as Chinese companies might scale back their investments in manufacturers based on the continent. These companies are already facing challenges due to declining electric vehicle sales in Europe. Now, those from the Middle Kingdom may opt to invest in other countries, such as South Africa or Mexico.
Further Reading
How Europe Shot Itself in the Foot with Chinese Tariffs on Electric Cars
Further Reading