Were European manufacturers too blinded by their thirst to conquer a giant country to not see the “threat” it could represent a few decades later? While Europe has always been in favor of free trade, China quickly realized that it had to protect its industry. So for foreign manufacturers to be allowed to make cars in China they had to partner with a Chinese brand and create a joint venture with a local player, in which they could not own more than 50% of the shares. And even if that commitment is over, decades of commitment have paid off.
Problem: joint venture means… technology exchange and transfer. Therefore, for years, Chinese brands have had varying degrees of access to engineering from the American or European auto industry. And we know how masterful the Chinese have become in terms of reverse engineering! Of course, the big historic car groups aren’t completely ignorant, they quickly realized that they would have to find ways to not give the Chinese too much to grind. China had industrial tooling and cheap labor, it lacked the expertise and “design office” part. In 2022, they have everything: factories, workers and engineers, as well as raw materials and the government on their side!
Also read: How China dominates the world of electric cars
Will Europe become China’s “customer” in 2025?
PWC study: Europe will be an importer of (electric) cars from 2025. The European Union is losing one battle after another: digitization lost, now our leading industry: the car https://t.co/5ynLida5Kf
—Alexander Prym (@AlexanderPrym) November 4, 2022
In 2005, China’s motorization rate was 28 cars per 1,000 people, compared to 593 in Europe. Major brands from the Old Continent therefore quickly realized the potential of China, which accounts for 30 million annual registrations. In 2021, China’s ratio rose to 200 and continues to rise, announcing a missile strike. The Chinese are no longer country neo-urbanites hoping to buy their first car, they have become real car customers like every European. And many opportunities for the Chinese auto industry to meet the growing demand of individuals.
The Xi Jinping administration has set production quotas for new energy vehicles (NEVs, which are electric and plug-in hybrids): a minimum of 16% in 2022 and 18% in 2023. And government incentives don’t just apply to national brands. A policy recently voted by the United States. Meanwhile, Europe is watching and waiting.
European manufacturers must respond to them as well as other hyper-protectionist laws. This now has Stellantis (who recently bankrupted Jeep China and is considering starting up in the Middle Kingdom) and the Germans themselves questioning the relevance of China. Across the Rhine, Chancellor Olaf Scholz even visited China to try to loosen increasingly strict regulations for foreign companies. This is to say whether the period was critical for the Old Continent.
Constantly increasing volumes
Europe can change quickly: from 35,000 electric cars sent to us in 2021, China should increase to 66,000 in 2022. A study by the PwC firm talks about the volume of 800,000 cars manufactured in China and sold in Europe in 2025. 330,000… produced by European brands! Smart, Volvo/Polestar, Dacia, DS, Mini… examples of expatriation are not lacking recently. In 2025, with 800,000 Chinese imports, Europe will turn from an exporter to an importer with an import surplus of 221,000 cars. That’s it.
It is clear that this phenomenon can also be explained by the deindustrialization of our continent, which has been deliberately carried out by our historical builders during the last 20 years. In 2017, 14.9 million cars were produced there, and we did not even reach 10 million in 2021. Admittedly, the health and industrial crises of the past two years have been severe, but they do not explain everything…
The only hope for Europe? The “battery passport”, which is still expected to enter into force, provides state aid for the construction of factories only to European companies (in the coming years, a large part of sites that will produce batteries in Europe will be controlled by Chinese giants). and, why not, bonuses are given only to cars manufactured within our own borders.