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Chinese electric cars are taking over the world. Not everyone likes it

Last year, China overtook Germany to become the world’s second-largest car exporter. And this year it overtook the leader, Japan. China’s domination of the global automobile market is becoming a reality according to forecasts, and the West is urgently looking for ways to return to the times when the whole world drove cars made in Germany, Japan, France and in the USA.

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So far, the main exporting brand of electric cars with the “Made in China” label is Tesla. But gradually, not only batteries, but also machines designed by China are conquering domestic consumers and rushing to the global market.

In just a decade, China has created the automotive industry of the future and become an export leader. How did he do it?

Thanks to the party, Putin and the crisis

Support from Chinese authorities and control of the resources needed to produce batteries helped launch the industry. The Communist Party got the auto industry back on its feet, and it didn’t go any further, but it ran away.

This success is all the more surprising given the problems of the Chinese economy. She has had a fever for several years.

The prolonged crisis has undermined public confidence in the ability of Xi Jinping’s Communist Party to guarantee the same rate of growth in prosperity. People are in no hurry to part with their money, which delays the stated objective of economic policy: to revive consumption.

But it turned out to be an ideal solution for the automotive industry. Falling domestic demand worsened the overproduction crisis, and automakers rushed with redoubled energy to find buyers abroad.

And here, on the one hand, “green” reforms in Europe helped, where everyone will switch to electric cars in the next 10-15 years.

On the other hand, Vladimir Putin’s order to conquer Ukraine, as a result of which the Western automobile industry left Russia, and China received a large and narrow sales market for gasoline and diesel cars , which can no longer be sold to developed countries.

Chinese automobile exports to Russia have increased sevenfold. If a year ago, one in five cars sold on the Russian market was Chinese, today, a second is.

The Russians are happy, but the Europeans do not like such rapid foreign expansion by China.

It is to the EU that merchant ships loaded with electric cars assembled in China are mainly sent, since the 27 countries of the bloc with a population of 450 million inhabitants constitute a gigantic rich market, comparable only to that of the United States. United. However, China has very tense relations with the United States and the EU benefits from a favorable trade regime.

But things could soon change.

Europe is on the warpath

“China has flooded the global market with cheap electric cars. Their prices are artificially low due to huge government subsidies,” European Commission President Ursula von der Leyen said this week in her annual speech on main priorities of European policy.

This year, car imports from China have doubled and electric cars assembled in China now represent 8% of the European market. This share will double in a few years, predicts the European Commission.

The prices of Chinese models are on average 20% lower than those of their European counterparts.

The European Commission has therefore decided to open an investigation for unfair competition, which will most likely result in additional taxes on cars assembled in China with electric batteries.

This category includes not only Chinese brands like BYD or XPeng, and not only formerly European brands now belonging to Chinese companies like Volvo and MG, but also cars from the Chinese factories of German BMW, French Renault or the American Tesla.

The authorities of the EU’s two main industrial powers – Germany and France – were delighted and unanimously supported the European Commission’s investigation.

China was offended and made a complaint.

“Open protectionism by the EU will lead to destabilization and distortions in the global automobile market, including in the European Union,” China’s Ministry of Commerce said. “Protecting your own automobile industry under the pretext of “fair competition” will harm economic and trade relations between the EU and China.

Europeans say Chinese carmakers have outperformed their European rivals thanks to large-scale government support, banned in the EU. The Chinese claim they are winning only – not through anti-doping subsidies, but through business talent and technological superiority.

Who is right?

How China became the leader of the automotive industry of the future

Over the past decades, Chinese authorities have consistently supported the emerging automobile industry in their country and provided the industry with access to lithium and other resources outside its borders.

The Communist Party pursued three main goals: clean air in cities, import substitution, and an emphasis on leadership in future technologies in order to win the competition with the West for economic domination of the planet.

From 2016 to 2022, China has allocated $57 billion to support demand and production of cars equipped with electric and hybrid engines, estimates Reuters from consultancy AlixPartners. And in 2023, a new four-year, $72 billion tax relief package was announced.

And these are just centralized subsidies. In addition to them, there are also regional ones.

Support is not limited to money. To popularize electric vehicles, China quickly created the largest charging network in the world – more than 6 million points – and forced manufacturers to unify charger standards.

The result of two decades of state support has exceeded all expectations.

China has become the world leader in batteries for electric vehicles. CATL now controls 37% and BYD almost 15%, according to statistics from the FT business newspaper.

Tesla, BMW and Volkswagen use CATL batteries in their cars, and Ford has purchased the technology and know-how to build a factory in Michigan.

Behind the batteries (spare part, but the most important in an electric car), finished products have also taken precedence, Chinese-designed cars.

They first conquered the domestic market. This year, for the first time in a decade, the best-selling brand in China was not Volkswagen, but BYD. It is now the turn of the global market.

The Western automobile industry has long understood that it was beginning to lose its competition to the Chinese industry. Total defeat is still far away, but without large-scale investments, government policy adjustments or technological breakthroughs, the gap will become more visible every year.

The available capacity of the Chinese automobile industry is already estimated at around 10 million cars per year. This is comparable to passenger car production in the 27 EU countries for the whole of last year. If all car factories in Europe close immediately, China will not even need to increase production: it will easily flood the market with its cars, as happened in Russia.

The market leader, Tesla, has therefore reduced its prices for the umpteenth time. The American authorities have therefore allocated 270 billion dollars to support the “green restructuring” of the economy, including subsidies for the purchase of American electric cars.

So Europe finally listened to the auto industry and paid attention to the Chinese threat.

Source: delfi

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