Calculate the EU's automotive bill and clarify five myths

The European Commission's decision to impose temporary anti-subsidy tariffs on electric vehicles imported from China from July 4 has sparked strong dissatisfaction among Chinese and European automotive industry professionals. On June 22, China and the EU agreed to launch consultations on the EU's anti-subsidy investigation into Chinese electric vehicles.

As the consultations are being held, reporters are here to help the EU do the math on the automobile front. We hope the EU will listen carefully to objective and rational voices from all walks of life, clarify various myths, and stop politicizing economic and trade issues, so that both sides can move toward each other and achieve mutual benefit and win-win results.

Myth 1: Have Europeans suffered losses from 40 years of Sino-EU automotive industry cooperation?

China-Europe automotive industry cooperation began 40 years ago, when German Volkswagen took the lead in establishing a joint venture with Chinese companies, marking the beginning of cooperation. Subsequently, French Peugeot Citroen, German BMW, Daimler and other automakers came to China.

Over the past 40 years, European automakers have produced and sold a large number of cars in China. By the end of 2022, Volkswagen had delivered about 40 million vehicles in the Chinese market. In early May this year, the Sino-German joint venture BMW Brilliance rolled off the assembly line for its 6 millionth vehicle. Volkswagen and BMW's sales in China account for more than 30% of their global sales.

Over the past 40 years, European car brands have stood out in the competition in the Chinese market. European car companies have brought advanced technology, management experience and production processes to China, and have also made a lot of money in the Chinese market.

Even in the field of new energy vehicles, China and Europe are not playing a "zero-sum game". Volkswagen, BMW and others have set up R&D centers in China or directly cooperated with Chinese companies to promote technological innovation, which also helps Europe better understand and adapt to the needs of the Chinese market and helps it take the lead in the fields of electric and intelligent connected vehicles.

In recent years, Chinese electric vehicles have begun to "change lanes and overtake". Although they have just entered the European market and their market share is not high, they have caused "inexplicable surprise" to some people, and some politicians have tried to hype it up and profit from it.

European automakers know best whether Europe has suffered losses in the past 40 years. When the EU announced the launch of an anti-subsidy investigation, major automakers such as Volkswagen, BMW, Mercedes-Benz, and Stellantis quickly voiced their opposition. They understand that it is unreasonable for the EU to wield the stick of protectionism against China in the automotive field.

Myth 2: Is it China's "overcapacity" or the EU's undercapacity?

As the Swiss newspaper Neue Zürcher Zeitung said, if a country only produces for the domestic market, how can it talk about international trade? The automobile industry is a globalized production and globalized sales. In 2023, about 80% and 50% of the cars produced in Germany and Japan were sold to the international market respectively, while only about 12.7% of China's new energy vehicles were sold abroad. It is unreasonable to accuse China of "overcapacity".

According to research by the International Energy Agency, in order to achieve the carbon neutrality goal, global sales of new energy vehicles need to reach about 45 million units in 2030, more than three times that of 2023, far exceeding the current global electric vehicle supply capacity.

Take the EU as an example. Currently, greenhouse gas emissions from the transportation sector account for nearly a quarter of the total. To achieve the net zero emission target by 2050, the EU needs at least 30 million zero-emission vehicles on the road by 2030. From the perspective of supply and demand, the electric vehicle sector is not oversupplied, but rather under-capacity.

Ultimately, the EU's claims of China's "overcapacity" in electric vehicles or "supply chain security" are essentially a denial of China's right to engage in normal international trade. The EU's calculations to suppress the development of China's electric vehicles are clearly visible to the world.

Myth 3: Are Chinese electric cars impacting Europe?

Currently, the majority of electric vehicles exported from China to Europe are Western brands manufactured in China, but some Western media have hyped up the "dumping" of Chinese electric vehicles in Europe, and the market share of Chinese electric vehicles in Europe has been "selectively" exaggerated.

According to the European Federation of Transport and Environment, 19.5% of the electric vehicles sold in Europe in 2023 were produced in China, and Chinese brands accounted for only 7.9% of the market share. Obviously, Western brands made in China have a larger market share. Tesla's Shanghai factory will export about 340,000 vehicles in 2023, nearly half of which will be sold to Europe.

Chinese-branded electric vehicles do not account for a high proportion of sales in the European market, let alone play a leading role. As Felipe Muñoz, an analyst at British Juntech Business Consulting, said, despite the noise surrounding the entry of Chinese electric vehicles into Europe, which tries to give people the impression that Chinese electric vehicles are rapidly taking over Europe, "the data and reality tell a more modest story."

Myth 4: Are China’s cheap and good electric cars “made up”?

The EU's claim that "China relies on massive subsidies to produce cheap electric vehicles for export, disrupting the European market" is completely untenable. China's electric vehicle development is based on continuous technological innovation, a sound production and supply chain system, and full market competition. China's success in electric vehicles is "skilled" rather than "made up".

The report from the Center for Strategic and International Studies in the United States pointed out that we must face up to the great progress made by Chinese electric vehicle manufacturers and battery manufacturers. In recent years, the energy intensity, driving range and reliability of Chinese electric vehicle batteries have been significantly improved, and the overall design of the models, infotainment systems and autonomous driving capabilities have also been improved.

What really "disrupts the market" is Europe's increasingly serious trade protectionism, not the so-called Chinese "subsidies". Subsidy policies originated in Europe and the United States and are widely adopted by countries around the world. China does not have any prohibited subsidies stipulated by the WTO. On the other hand, Europe and the United States have significantly increased subsidies for electric vehicles in recent years, with a large number of exclusive and discriminatory practices, setting up many obstacles for Chinese products to enter relevant markets, violating WTO rules.

Myth 5: Is it reasonable for the EU to abuse investigations into Chinese automakers?

The EU has always touted itself as a staunch defender of free trade. It conducted an investigation to determine whether subsidies for Chinese electric vehicles were excessive and determined the extent of taxation based on the investigation conclusions. In fact, the investigation was initiated by the EU without any application from member states or the industry. The sampling standards were not in compliance and the process was not transparent, which seriously violated WTO rules.

For example, the EU excluded companies from member states with high production and sales volumes during the sampling process, which was clearly a discriminatory choice against Chinese electric vehicle companies.

At the same time, the scope of the investigation and the urgency of the time limit are also staggering. The international legal team defending the Chinese companies told reporters that they had never seen the parties being asked to provide so much material in such a short time, which was almost an "impossible task."

Industry insiders believe that the EU wants to deter Chinese electric vehicle investment and layout in Europe, weaken the competitiveness of China's emerging industries, and protect the advantages of local traditional industries. This investigation is not only a protectionist move for personal gain, but also a calculated political speculation before the EU election, and it also has a distinct international geopolitical color.

People of insight in Europe's political, business and academic circles have called for Europe to not keep Chinese electric vehicles out, but to actively cooperate with China, leverage China's technological and supply chain advantages, improve Europe's industrial layout, serve consumers, fulfill its emission reduction commitments, and achieve mutual benefit and win-win results.