[RahulNagaraj]

According to a media report, the European Commission has launched an investigation on whether to impose tariffs against cheaper Chinese electric vehicles being imported into the EU.

The Commission will have 13 months to assess whether the extra tariffs above the standard 10% will help protect European Union producers against cheaper Chinese EVs, which are said to be benefitting from state subsidies. The anti-subsidy investigation is said to cover imports of electric cars from non-Chinese brands, including Tesla, Renault & BMW.



However, the Chinese Chamber of Commerce to the EU urged the Commission to look at Chinese EVs objectively. They also opposed the investigation, stating that their competitive advantage isn't due to subsidies.

Amidst the growing tensions between China and the EU due to the former's close ties with Russia, Europe is looking to reduce its reliance on China for its green transition. European carmakers are looking to produce lower-cost EVs and erase China's lead in developing cheaper models.

The Commission mentioned that China's share of EVs in Europe has already risen to 8% and could reach 15% by 2025. The reason for the growth is attributed to the prices, which are, on average, 20% below EU-made models.

Germany's VDA auto association, though, has raised concerns about a possible backlash from China. They insisted that the EU must focus on creating conditions for European EV makers to succeed by way of lowering electricity prices and reducing bureaucratic hurdles. This reportedly comes due to the fact that Germany's car industry relies on China for a large proportion of its sales revenue.

The investigation by the European Commission is said to be looking at a range of possible unfair subsidies and preferential lending or cheap provision of land.

China is currently the world's biggest EV producer. The country also surpassed Japan to become the world's largest auto exporter in the first quarter of this year.

Source: Reuters

Link to Team-BHP news

[save_ioniq5]

This is interesting. As much EU wants to clamp down on Chinese EVs the pace of Chinese manufacturers establishing bases in EU is surprising to see.

I work in Hoofddorp in the Netherlands which is located close by to Schiphol airport. In no more than 3 months I see BYD has taken the entire neighboring building of my office and has brought a full Chinese staff there. The parking lots of my office is now entirely filled with BYD models either stocked up together with camouflaged new BYD models. The pace with which this has happened is just striking.

[gauravdgr8]

Yes, this is exactly what I pointed a week ago. During my recent trip to Scandinavia, BYD had a full range of EV sedan, SUV, Coupé on the roads. What's even stark is they are actually competing with, or say giving Teslas/VWs tough competition with showrooms bang opposite them.

The fact is, people are actually buying them. More than anyone, I feel it's VW which is impacted by the BYD onslaught

[GutsyGibbon]

The Chinese weaponized modern economics, and a blowback is to be expected. It is clear that they have EV supremacy now. Not sure how much the west can walk back their talk about EVs.

I think, a good example for Chinese tactics is Aluminum hoarding. They did lots of hoarding as it was widely reported.
https://www.mic.com/articles/153805/...gwang-holdings
Then they lifted their exports.
https://www.reuters.com/markets/comm...es-2022-04-01/
An aluminum engine from China can be bought for less than the cost of the net weight of raw aluminum that goes into an engine. No wonder BMW GS850 engines are now from China. It is impossible for BMW to make this engine in Germany.

[anjan_c2007]

As usual chaos, indecision and mismanagement within the EU have been its hallmark. It has now become more glaring, post their countries' markets getting flooded with Chinese EV's since the last few years. They are waking up too late after thd damage is nearly done. The individual buyer is too keen to get a brand with a price advantage in the range under his consideration. European brand loyalty is miniscule if the competition offers a better VFM product.

And the German population plus many other residents of EU member countries have faced a severe energy crises during the past winter, due to the Russia-Ukraine war, where China is a sympathiser of Ukraine's enemy no.1. Plus life in EU countries has never been the same, post the commencement of this war since February 2022.

No doubt, many of the EU carmakers earn well through their sales proceeds from China. Its a tricky riddle.

[SmartCat]

EU is very protective about its automotive industry simply because its massive contribution to both GDP and employment. They will not take it lightly if the Chinese (or anybody else) is trying to subsidize car production and dump it in EU.

EU already has a 10% import tariff on cars. Now this is applicable to imports from ALL countries. But if their investigation finds out that the Chinese are playing games, they will slap anti-dumping duties on car imports from China. And I don't think there are WTO limits on how much anti-dumping duty you can put on a certain country.

And if anybody thinks EU is unlikely to put anti-dumping duties on EV imports from China, just type "EU anti-dumping duties China" to read news articles about such duties slapped on various imports from China. Example:

EU extends tariffs on Chinese bicycles, fearing import flood
https://www.reuters.com/article/us-e...-idUSKCN1VJ1MI

These country specific duties not only protect local industry (if any), but also protects EU's other trade partners from unfair trade practices.

[nakul0888]

Oh No! The People have more choices and can afford more cars now. What a tragedy!

Jokes aside, even if it is a case of Chinese Government splurging massive subsidies and perks to Chinese carmakers that is making their cars undercut their Euro counterparts in price, why is that a problem for anyone in Europe? Europe should welcome it. The Chinese people are literally throwing their hard earned money at the feet of Europeans to help them spend money. Win for Europe I would say. Yes European car sales and production would go down in the short term, but if Europe has an otherwise healthy economy unlike say Pakistan, where resources could be re allocated efficiently into different sectors, there would literally be no downside to Europe overall. Workers laid off can be employed again by capital freed up from exiting some of the car production. The only real losers here are the Chinese people getting taxed by their own misguided government so that some white guys in Europe can get a sweet discount on their car purchase.

[14000rpm]

Originally Posted by gauravdgr8

Yes, this is exactly what I pointed a week ago. During my recent trip to Scandinavia, BYD had a full range of EV sedan, SUV, Coupé on the roads. What's even stark is they are actually competing with, or say giving Teslas/VWs tough competition with showrooms bang opposite them.

The fact is, people are actually buying them. More than anyone, I feel it's VW which is impacted by the BYD onslaught

Not just BYD. Maxxus, NIO and XPeng have all been marketing heavily in the Nordics.

China has been subsidizing EV car companies for a while now. But then, they have merely learnt from what S Korea did with their Auto-Industry decades earlier. No wonder we see the Hyundai's and KIA being where they are. Expect similar with China.

This is just new-age Cold War tactics that I see emerging.

[extreme_torque]

Its a tricky situation to be in for Europe - on one hand China is the biggest most important market for car makers like BMW, Mercedes, VW and the likes and they can retaliate which would be curtain downs and on the other hand the same car makers have their behind handed to them by upstart Chinese EV companies in their home market and elsewhere. The reason for their success is not just that they are cheap and more efficient than their European counterparts but also that Chinese companies are better at software game too. It would be an interesting decade this and like I have said previously, most EU car makers would either go bankrupt or would be a shadow of their former self by 2035.

[save_ioniq5]

Leave Mercedes, BMW since they somehow cater to a slight niche market in EU I see mass market brands like VW, Pevgeot (Stellantis) group struggling big time in the EU. Autoweek.nl monthly sales in the Netherlands reveals KIA as the No.1 brand on monthly sales basis for quite some time now.

In terms of models Tesla Model Y has been the best seller for many months now. And in that list the models from VW and Peugoet are the polo and 208 respectively. Unfortunately, none of the EU brands electric line up is selling that well. ID3 was doing good in 2021-2022 but is now no where when the Korean and Chinese competition has ample to offer. BYD has put up an all segment portfolio in literally months I would say which none of the EU makers can match.

So despite all the strategic games at the end of the day the value of money that a product offers will dictate the success which I feel the EU makers are struggling to get at the moment.

[aayusht]

Originally Posted by nakul0888

Oh No! The People have more choices and can afford more cars now. What a tragedy!

The Chinese people are literally throwing their hard earned money at the feet of Europeans to help them spend money. Win for Europe I would say. Yes European car sales and production would go down in the short term, but if Europe has an otherwise healthy economy unlike say Pakistan, where resources could be re allocated efficiently into different sectors, there would literally be no downside to Europe overall. Workers laid off can be employed again by capital freed up from exiting some of the car production. The only real losers here are the Chinese people getting taxed by their own misguided government so that some white guys in Europe can get a sweet discount on their car purchase.

I am no economics expert, and my views are purely based on the limited understanding through browsing, but such predatory moves are not good for the economy.

In any country, if an industry is facing on slaughter from external forces, there is a lot more indirect impacts as well. In this case, if the automobile sector in negatively impacted, there will be impact on auto ancillary, supply chain vendors, right down to the transport and F&B in the vicinity of the factories that cater to the day to day services to the labor force. Take the auto industry in Australia for example - today there aren't any auto companies manufacturing in Australia. Almost all the cars are imported from Thailand. Look at how Detroit has now turned out to be with almost all auto companies moving elsewhere. Its not easy to reallocate resources from one industry to another. For example, today I am working in the banking sector, but if I were to be told that I need to start working in the telecom sector or mining, I would not be able to adapt that change. Now imagine that for everyone in the actual working population.

Also, other developing economies (such as Pakistan that you refer here) face a different set of challenges.

[SmartCat]

Originally Posted by aayusht

but such predatory moves are not good for the economy.

Dumping (economics terminology) is good for consumers in the short term but bad in the long term.

Because dumping results in slow elimination of competition. EU companies will not be able to invest enough in R&D if their sales take hit. After a few years, it will then allow the "dumper" (Chinese EV makers) to raise prices. So it is negative for the consumers over time. That's why all countries have anti-dumping duties on certain products from certain countries.

If you want to learn more about this, you can check this article:
https://en.wikipedia.org/wiki/Anti-c...tive_practices

Take the auto industry in Australia for example - today there aren't any auto companies manufacturing in Australia. Almost all the cars are imported from Thailand.

Australia importing cars is fine because:

- Relatively small market size (60,000 units per month sales)
- Automotive industry was never a big employer
- Low unemployment rate
- Exports in $ value is > imports in $ value.

If you try to make everything in Australia, their currency will get stronger over time. This might negatively affect export sectors like agriculture/ poultry/ dairy/ fishing/ cattle farming etc - that actually employ significant number of people.

[PreludeSH]

Why are Chinese EVs cheaper ? Is it just due to subsidies or raw material availability in China at cheaper prices ? If EU car makers start their facilities in China, will they see same benefits ? In that case its employment and investment addition in China which is also good for Chinese.

There could be multiple reasons but anyone who has cheaper raw materials and labour will ultimately trump by increasing their skill.

[SmartCat]

Originally Posted by PreludeSH

Why are Chinese EVs cheaper ? Is it just due to subsidies or raw material availability in China at cheaper prices ? If EU car makers start their facilities in China, will they see same benefits ? In that case its employment and investment addition in China which is also good for Chinese.

If EU or American companies shift to China, their production costs will go down, but not as much as Chinese companies. Because China gives extra benefits for local companies that is not given to foreign makers.

Common benefits for all companies:

- Weak labor laws
- Lower labor costs
- Lower cost of components (economies of scale)

Extra benefits for Chinese companies:

- Govt can offer to totally eliminate "risk" of starting a new automobile or component business - by either direct funding or zero interest loan without the need for collateral. That's why we have large list of automobile makers in China. Not everybody succeeds, so the the list of defunct companies is long too



- Blocking of foreign competition using non-tariff barriers so that local makers can access a ready pool of Chinese customers, without external competition. This helps in achieving economies of scale. So if you have managed to make a half-decent EV, large sales are almost guaranteed.

- For established automobile makers, Chinese Govt can eliminate business risks by offering cash grants to partly or completely fund R&D work.

- Central or state govt can offer free land/tax benefits/free electricity & water supply/interest free loans etc. But this might also be given for large investments from foreign companies.

- Chinese govt might offer cash incentives for every unit exported. Or it could be in non-cash form by subsidizing or eliminating local transport/ international shipping/ insurance costs

[Mustang Sammy]

Originally Posted by nakul0888

Oh No! The People have more choices and can afford more cars now. What a tragedy!

Jokes aside, even if it is a case of Chinese Government splurging massive subsidies and perks to Chinese carmakers that is making their cars undercut their Euro counterparts in price, why is that a problem for anyone in Europe? Europe should welcome it. The Chinese people are literally throwing their hard earned money at the feet of Europeans to help them spend money. Win for Europe I would say. Yes European car sales and production would go down in the short term, but if Europe has an otherwise healthy economy unlike say Pakistan, where resources could be re allocated efficiently into different sectors, there would literally be no downside to Europe overall. Workers laid off can be employed again by capital freed up from exiting some of the car production. The only real losers here are the Chinese people getting taxed by their own misguided government so that some white guys in Europe can get a sweet discount on their car purchase.

China plays the long game. Their strategy is to undercut local suppliers on price and destroy them, leaving Chinese companies with a wide open market. It is absolutely not healthy for the countries at the receiving end of these cheap imports.
Look what has happened in India. Everything from Combs to furniture to even (I heard) Ganpati statues are coming from China.