In her annual address to the European parliament, President Ursula von der Leyen announced that the European Union will initiate an anti-subsidy investigation into Chinese electric vehicles. She expressed concern over the flood of cheaper Chinese electric cars in global markets, which are sustained by substantial state subsidies, leading to market distortion. Von der Leyen specifically highlighted the predicament faced by European car manufacturers who are often undercut by competitors benefiting from these subsidies. Given the high stakes and the challenging outlook, particularly for German mass market automakers like Volkswagen, it seems inevitable that measures such as tariffs or restrictions on Chinese carmakers’ access to Europe will be imposed.
Although European carmakers already have successful joint ventures in China and ownership restrictions for foreign carmakers have been lifted, it remains unclear how China could further open up its market to the EU. The concerns raised by the European Commission regarding Chinese electric vehicles are justified, as China’s growing success in the European car market may be attributed to predatory practices and significant investments from Beijing into its industrial champions. However, the response from the EU, represented by the Inflation Reduction Act (IRA) and the European Green Deal (EGD), may be perceived as delayed, considering China’s rapid dominance in the global electric vehicle supply chain over the past decade.
China has already captured a fifth of Europe’s electric vehicle market, which raises concerns within Europe. Data from Adamas Intelligence reveals that in the first half of 2023, 19% of all gigawatt-hours delivered to electric vehicle buyers in Europe originated from China-made electric vehicles and battery packs. The absolute amount of battery power exported from China to Europe has grown by more than 51% this year, totaling 14 gigawatt-hours. Chinese automakers showcased their products at the recent Munich auto expo, impressing even the most fervent European car enthusiasts.
The potential response from the European Commission, which may lead to higher electric vehicle prices and reduced variety, may not be well-received by European car buyers. Notably, the best-selling Chinese electric car, the BYD Song Plus DM-i plug-in hybrid, offers advanced features and an impressive range at an affordable price. With a range of 1,000 km, including 150 km in fully electric mode, it is available in China for just $27,000. The availability of such vehicles, along with their cutting-edge technology, presents a tempting proposition for European consumers.
It is worth noting that the majority of Chinese electric vehicle exports to Europe this year consisted of non-Chinese brands, including vehicles manufactured by BMW and Dacia in China. However, the presence of a significant number of Teslas among these shipments further complicates the situation, as imposing tariffs on the American electric car pioneer may not be well-received by Washington.
In terms of battery metals, China’s dominance in the EV supply chain has led to the export of significant quantities of lithium, graphite, nickel, manganese, and cobalt to Europe. These materials are essential for battery production. The EU-China electric vehicle dispute is likely to disrupt the flow of battery materials from China to Europe. China’s position in the supply chain gives it influence over battery metal prices, acting as a monopsony in certain raw material markets. This development brings miners closer to their long-held dream of commanding a premium for their products in Western markets with stricter environmental, social, and governance regulations. Von der Leyen’s remarks about artificially low prices further highlight this reality.
