Project Syndicate
The Electric Vehicle Revolution Comes for German Industry

How will the European car industry survive the Chinese electric vehicle?

Dalia Marin, research at the european think tanks @CEPS_thinktank and @Bruegel_org, released and article about the electric vehicle competition between China and Europe. According to the article, China leads the global market for electric vehicles and batteries as chinese manufacturers have benefited from heavy government subsidies (price advantage), and early embrace of new technology. These advantages will be difficult to cut with tariffs or anti-competition investigations. The article proposes, in order to remain competitive on a global scale, that German manufacturers will have to adopt the strategy that China has pursued over the past 30 years with European manufacturers, that had to reach joint ventures with local players to be able to operate in the market, although now it will be the other way around, with Chinese manufacturers being the financial and technological partners.

Key points of the article: 

  • Europe's automotive sector is key to the economy: The automotive industry provides almost 13 million direct and indirect jobs, accounts for about 7% of the EU economy and about a third of its total research and development spending.

  • China leads the EV and battery market thanks to a price and technology advantage: European automakers have been slow to embrace the EV revolution, while Chinese companies have more than a decade's head start in investing in the technology and benefiting from government subsidies and know-how received from European manufacturers. In 2022, Europe imported more vehicles from China than it exported to China than ever before. Chinese electric vehicles are cheaper and compete on quality and other aspects.

  • Europe needs a strategy to allow its car companies to remain globally competitive: It will need more than tariffs (10% in Europe or 27.5% in the US under Trump) and anti-competition investigations. According to the article, German manufacturers could carry out, albeit in reverse, the strategy followed by China over the last 30 years and enter into joint ventures with foreign companies to be able to operate in the market, although now it would be the other way around, with the Chinese manufacturers being the financial and technological partners. This would be a way to reach the technical know-how that Chinese manufacturers now possess and that European industry lacks.

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