The US has been in the lead with higher tariff barriers and controls on high-tech exports, initiated under the Trump presidency and markedly intensified by Biden.
It is now being joined by the European Union, which this week imposed an additional tariff of 35 percent on Chinese electric vehicles on top of a 10 percent tariff already in force.
The new measures, which will come into force next week, are to last five years. They were introduced on the basis that Chinese EV makers were benefiting unfairly from state subsidies.
The Chinese government rejected the claim of undue state support, saying it would “continue to take all necessary measures to resolutely safeguard the legitimate rights and interests of all Chinese companies.”
The decision to impose the tariffs came after eight rounds of talks aimed at trying to devise a mechanism through which a minimum price could be set along with the volume of Chinese exports. But the talks broke down with both sides saying the differences remained significant.
Further talks are to be held, with the EU accepting an invitation by China to send envoys to Beijing to see if some agreement can be reached on these mechanisms.
The divisions within the EU, which must rank as some of the most significant on trade issues in the history of the Union, were underscored by comments from Germany. Hildegarde Müller, the head of the German auto industry association, VDA, said the decision was “a setback for free global trade and so for prosperity and Europe’s growth.”
The chief executive of BMW Oliver Zipse said protectionism would only make cars more expensive for consumers and accelerate plant closures in Europe.
The interconnectedness of the global car industry was indicated by Roberto Vavassori, who told the Financial Times (FT) that “for many suppliers in the automotive industry, [the Chinese] are both the biggest threat and the biggest customer.”
He asked: “What did the Chinese do, what did the Japanese do and what did the Koreans do when they were behind on technology? They collaborated. The European industry needs to get the Chinese to localise in Europe and it needs to collaborate with them, particularly around battery technology in order to catch up.”
For workers in the auto industry, in Europe and internationally, neither path is the way forward in a situation where they face a wave of job destruction and wage cutting.
I think comparing Chinese EVs to shitware like Temu is wrong and potentially harmful.
The PRC can pump out EVs more efficiently in the same way TSMC can pump out chips efficiently. Yes there are government subsidies, but that’s not the main reason why they’re so cheap
China has lithium: China has lithium within its borders, and has the 3rd largest reserves in the world. Unlike Tesla or European manufacturers which needs to import lithium, China can source it locally, drastically reducing the cost. In recent years, due to demand, technology involving the mining of lithium has increased significantly, further increasing output (and lowering price). Unlike Chile and Australia (other lithium rich countries), China has the capacity to mine it domestically at scale, making it extremely cheap.
China has domestic battery production: CATL is actually a world leading battery manufacturer and innovator. CATL, Samsung, LG, Panasonic and BYD account for 75% of all battery production on the planet. Even if a Chinese manufacturer is buying batteries from South Korea or Japan, the shipping costs is vastly reduced compared to shipping to Europe or the Americas.
China has pre-existing industry and economy of scale: I’m sure you may have noticed, but China has laid more railways than the rest of the world combined in the last decade and a half. Building trains, planes, space stations and cities requires steel, factories that pump out steel are located in China. You’re not starting from scratch, there are many, many, many factories that pump out quality steel for extremely low prices because the demand has been there for decades.
China has cheap labour: I’m not sure I have to explain this one
China has a domestic market: There are 1.4 billion people in China, even if 10% want to buy a car, that market is larger than entire nations.
China makes the machines that build the cars: A BMW or Volkswagen factory will have robotics that assemble the arms. Those robots are either made in China fully or partially. That exact same machine, therefore, would be cheaper to acquire within China, and would be cheaper and quicker to repair if it breaks down because the factory that makes the machines is also in China. And as demand grows, guess what? The machines that make the machines that build the cares are also in China. The machine that builds robot arms that attach car doors to the frame is already in China.
Each of these factors (and I’m sure more that I’ve forgotten) has a ripple effect is the main reason why Chinese EVs are so cheap, government subsidies are only partial.
Just to add, the idea that western countries do not subsidize their exports is laughable. I don’t doubt that in many sectors, western governments - both now and in the past - have subsidized their industries to far greater degree than China ever has with theirs.