While Brussels seeks to control the import of electric cars, conducts an anti-subsidy investigation and threatens the Chinese auto industry with punitive measures, some EU member states want Chinese cars to be assembled directly in them.
Authorities in a number of European countries, including Hungary, Poland, Italy and Spain, are seeking to attract Chinese electric vehicle (EV) manufacturers to set up factories in their country.
Despite the fact that the European Commission is afraid of the influx of cheaper Chinese electric cars on the European car market, some states still offer a number of grants and subsidies for Chinese businesses.
On the ground, some believe that it is possible to improve the situation on the local labor market and thereby ensure economic growth.
Chinese electric car makers such as Chery Automobile, BYD and SAIC Motor are reportedly looking to gain a foothold in Europe. Those wishing to set up plants will receive benefits such as tax breaks, job creation subsidies, reduced regulation in designated areas and support for battery production to further simplify the electric vehicle supply chain. The cost of shipping from China to Europe will also become cheaper.
Given how actively Chinese EV manufacturers are investing in the EU car market and planning to expand, European factories could be an important launch pad for tapping into new regional markets.
Gianluca Di Loreto of Bain and Company said: “Chinese automakers know that their cars need to be perceived as European if they want to attract interest from European buyers. This means the transfer of production to Europe“.
Why are Chinese electric cars so popular in Europe?
Chinese EVs are becoming increasingly popular in Europe because they are cheaper than their European counterparts. These machines have a good set of additional options that are included in the standard equipment. This includes free charging for one or two years, video surveillance cameras, an additional set of winter tires, and other offers.
Despite the lower price, Chinese electric cars are still focused on design and functionality, and safety parameters have been improved recently.
The growing appeal of Chinese cars has led the EU to consider the possibility raising tariffs and even imposing sanctions in relation to products from the PRC to control imports. Current car import tariffs in Europe are around 10 percent. In the US, they reach 27.5%.
If this happens, how effective such a move will be is unclear, as Chinese electric car manufacturers already have enough margins in European markets to absorb the shock of the EU’s restrictive measures.
Here are the conclusions reached by the experts of the independent research center Rhodium Groupn which specializes in China: “Some Chinese manufacturers will still be able to make a comfortable margin by exporting cars to Europe, thanks to a significant cost advantage.“.
“Tariffs in the 40-50% range – possibly even higher for vertically integrated manufacturers like BYD – are likely to be needed to make the European market unattractive for Chinese EV exporters“.
Moreover, while the tariff hikes are seen to ultimately help European automakers, some countries such as Germany have already warned against such protectionism, warning of a high likelihood of retaliatory measures from China, as well as an overall negative impact, which one step can have on the domestic car market.
German Chancellor Olaf Scholz recently stated at the Stellantis event, as reported by Automotive News Europe: “Isolation and illegal customs barriers only end up making everything more expensive and us all poorer. We don’t close our markets to foreign companies because we don’t want to“.