Compile |Yang Yuke.
Edit | jane
Produced by |Bangning Studio (GBNGZS).
When the European Union launched an investigation into China's EV subsidies, European automakers were ready for a painful comeback from the superpowers. However, the terrible riposte is yet to come. Since the start of the countervailing investigation, China has appeared to have been low-key, with the exception of some initial tough rhetoric. This may indicate that China's electric vehicle market is under pressure from oversupply, and Tesla's war last year made the situation worse. After years of brutal development in the domestic market, local Chinese automakers have gradually increased the number of electric vehicles exported to Europe. While its market share in Europe is still low, Chinese automakers will challenge Japan's global leadership in automotive exports by virtue of its dominance in the plug-in hybrid market. Matthias Schmidt, an independent automotive analyst in Hamburg, Germany, said: "If China retaliates and worsens its relations with Europe, it will also shoot itself in the foot, because China has reached the point where it needs to sell more cars abroad." "On October 4, 2023, the European Union launched a countervailing investigation into the import of pure electric vehicles from China to determine whether it has caused economic harm to EU electric vehicle producers and may impose punitive tariffs on them. The EU has 13 months to make a decision. Tariff adjustments could be introduced as early as July next year, and either decision would need to be approved by all member states. In a recent survey of other industries such as e-bikes and fibre optic cables, the EU found that subsidies ranged from 4% to 17%. Any punitive tariffs on electric vehicles would be imposed on top of the current 10% import tariff. 
The anti-subsidy investigation into China's electric vehicles marks a low point in China's deteriorating relations with Western countries led by the United States. Previously, Sino-European relations gradually became tense due to Europe's attempts to reduce the risk of its ** chain, and the EU's ** deficit with China continued to widen last year - more than 400 billion US dollars. At this month's China-EU face-to-face summit, China** took a relatively unhurried approach. China hopes that China and the EU will become important partners who can build trust on the chain. China's Ministry of Commerce also said that the European Union should stop protectionism through this electric vehicle subsidy investigation. To be sure, Western automakers, including Tesla, Renault Group and BMW Group, will also be hit with higher tariffs when they ship their cars produced in China to Europe. If tariffs are imposed, China's position could change, which will have painful consequences for the global auto industry. BMW Group, Mercedes-Benz and Volkswagen Group sell 33 to 40 percent of their vehicles in the Chinese market, and none of the automakers can leave the country for electric vehicle batteries and other components. In October, China restricted the export of graphite, which is used to make batteries. This could be a warning. "The most obvious retaliatory option is to raise China's import tariffs from 15 percent back to 25 percent. Brad Setser, a senior fellow at the Council on Foreign Relations, said, "China has every right to do that." ”
Internal worries and external confusion
The average price of Chinese-made electric vehicles in Europe, such as the BYD Dolphin and SAIC's MG MG4, is about twice as high as in Europe, customs data shows. The reasons for this discrepancy include China's low labor costs and generous subsidies, as well as the additional costs that companies must incur when exporting cars overseas, including tariffs and freight. The Dolphin, which was exhibited at the Munich Motor Show in September this year, retails for $11 in China10,000 yuan ($15,500). In Germany, consumers have to pay 35,990 euros ($38,780), although this is still much lower than the Volkswagen ID3 Getting Started**. In Thailand, where electric vehicles are just getting started, consumers need about $19,560 to buy a Dolphin. The same goes for MG Motors. The Chinese brand, which has British prestige, has been establishing a presence in Europe for more than a decade. MG4 is produced in Ningde, Fujian Province, and is priced at 3770,000 euros, 20,000 euros higher than its selling price in China. Tesla's Model 3 produced in Shanghai is 1.1 more expensive in the EU than in ChinaAround 30,000 euros. Now, more than ever, it's important for Chinese automakers to open the door to lucrative Europe. Because the U.S. is essentially off-limits, with a 25% import tariff on the one hand, and generous U.S. purchase incentives on the other hand, only for cars made in North America. At stake is the future of hundreds of now unprofitable electric car manufacturers that have sprung up after massive subsidies and unrestricted driving in urban areas. 
In contrast to the lucrative European market, in the Chinese market, the battle for survival is underway. After cutting 10% of its workforce in the first round, NIO is considering further layoffs. It used to be a leader in China's new electric vehicle power, and it exports to Europe for 5The 990,000-euro ET5 sedan, etc., the company has just received another capital injection from the Middle East. WM Motor has been pushed to the edge in the fierce competition and has filed for bankruptcy. In China, the oversupply of electric vehicles is unlikely to be alleviated in the short term. As of November, BYD's sales of electric vehicles and plug-in hybrids increased by 65 percent, and total sales are expected to reach 3 million this year. At the same time, China's prolonged lockdowns and the property sector crisis have triggered rising personal debt and slower income growth, limiting consumer spending. Xu Haidong, deputy chief engineer of the China Association of People's Republic of China, said: "China gave some support in the early stages of the electric vehicle industry, but now it is gradually withdrawing. Overseas manufacturers started late, and their products and technologies are relatively backward. In October, the European Union's investigation into BYD, SAIC and Geely Holdings opened, bringing the EU more in line with the United States in seeking to protect the auto industry, which is home to millions of workers. At the same time that the EU is seeking additional tariffs, the United States is rolling out a series of subsidies to attract investment, while imposing strict rules on local **chains and electric vehicle manufacturing to limit subsidy eligibility. "The U.S. and the European Union are on the same page on this point, and they don't want the transition to electric vehicles to become a transition to Chinese electric vehicles," the Council on Foreign Relations said. The revised U.S. Inflation Reduction Act will allow European automakers to receive the same access, which will help shape a coherent, joint response. ”
Unstoppable
Chinese EV manufacturers are expected to nearly double their market share in Europe by 2025. Currently, it accounts for only 3% of the total automotive market in Western Europe, but 84%, up from 62%, a significant increase from almost zero in 2019. Earlier this year, China overtook Japan to become the world's largest exporter of cars. In the first nine months of this year, China exported about 3.4 million vehicles overseas, of which about a quarter were electric. Chinese manufacturing brands, including NIO, Tesla, BYD, Geely, MG, Great Wall Motor and Zeekr, are expanding their networks in Europe. Europe is preparing to ban the sale of petrol and diesel cars by 2035, and each brand is trying different strategies to enter Europe. This year, NIO launched the ET5 Touring and EL6 models in Germany, the Netherlands, Denmark, Norway and Sweden, with a starting price of around $590,000 euros ($62,235). Since entering Europe in 2021, the Chinese brand has also been building infrastructure throughout Europe to provide charging, battery swap stations, as well as a network of authorized service centers. NIO has already built 13 battery swapping stations in the EU, and the company aims to have a total of 120 battery swapping stations by the end of 2023. It also offers a rental model. NIO has deployed a direct-to-consumer model in Europe through NIO House stores in major European cities, while Tesla's biggest competitor, BYD, relies on a dealer partnership model. BYD said that the reason why it chose the dealer network is because the dealers have the necessary experience, expertise and location to launch products. Currently, BYD operates in 14 European markets, including the United Kingdom and Germany, and plans to establish more than a dozen dealerships in France by the end of this year. BYD recently launched the electric sedan Seal in Europe, with a starting price of 44,900 euros ($47,362). 
Geely Holdings' premium electric vehicle brand Zeekr entered Europe this year, launching two electric vehicles in the Netherlands and Sweden — the Zeekr 001 and X — starting at 59,490 euros ($62,752) and 44,990 euros ($47,457), respectively. ZEEKR 001 is positioned to compete with premium cars such as the Mercedes-Benz EQE, a segment that is a sizable and growing segment in Europe. "How we position the brand in Europe is very important, because the European premium car market is probably the oldest and most mature market in the world," said Spiros Fotinos, CEO of Zeekr Europe. The brand plans to expand to Germany, France, Denmark and Norway by next year, and cover all Western European markets by 2026. Europe is attracted to Chinese EV makers because of its low import tariffs of 10 percent, compared to 25 percent in the United States. As Chinese automakers develop their European expansion strategies, what are they using to outperform local automakers with loyal followings?A study published by McKinsey in December showed that more than half of European consumers surveyed were interested in buying an entirely new brand, including a so-called disruptive brand, when switching to electric vehicles. 
How China fought back
Despite Chinese automakers' eagerness to expand into Europe, could potential punitive taxes create a barrier?From a consumer perspective, punitive taxes only make products more expensive and do not protect local EV producers from competition. Bruegel, Europe's leading think tank in the field of international economics, believes that China's current low profile and silence in response to the EU's countervailing investigation of electric vehicles may be deceptive. There are 3 main factors that should be taken into account when it comes to a possible Chinese counterattack. One, China may submit countervailing investigations to the World Organization (WTO) against key sectors in Europe. This is not difficult, as Europe has significantly increased subsidies since the pandemic and has recently tried to gain more strategic autonomy in industries such as semiconductors. There is little the EU can do about such potential retaliation, and the cost of such a measure would be high for the automotive industry, as well as for the EU's image as a defender of freedom** and the WTO. SecondChina could try to persuade EU countries to withdraw the European Commission-led investigation. A similar investigation occurred in early 2014, when the European Union launched a countervailing investigation into solar panels produced in China. Subsequently, the issue was quickly resolved, and the European Commission withdrew the case from the WTO. Based on past experience, China may prefer to negotiate bilaterally with Germany rather than with the European Commission. But the main difference is the relative importance of the automotive industry in the EU compared to previous solar panels. The automotive industry supports 14 million jobs in Europe and is an important part of the EU's exports. Exports of automobiles and components are mainly concentrated in a few EU countries, especially Germany. European exports to China have fallen sharply in 2023, by nearly 30%, and China's competition in third-party markets and even in the EU market has become more intense. ThirdUnlike the solar panel investigation, this time it was initiated by the European Commission, not by the injured industry. It will be more difficult for the European Commission to withdraw the investigation because it will lose credibility. The new investigation aims to protect the automotive industry. Large European automakers that produce electric vehicles in China may be affected, but the current jobs in Europe are more important than the future of these companies in China. In any case, the future is bleak for European manufacturers, who seem to have lost out to their Chinese rivals in the EV race. China will also find it much more difficult to persuade the EU to abandon its decision to launch a countervailing investigation, unlike in 2014. 
What happened to Apple in China in September this year may teach Europe a lesson. A few days before Apple launched the iPhone 15, Huawei introduced the upgraded Mate 60, which requires high-end semiconductors. In addition to questioning the effectiveness of U.S.-led export controls on advanced semiconductors, the statement poses a direct challenge to Apple's sales in China. Before Apple's release, there were rumors of poor quality of the iPhone 15 on local social media. Investors around the world dumped Apple**, with the company's share price around 6% in a matter of days. China's response to the European Commission's countervailing investigation, which may be less direct and transparent, is still harmful and could reduce the EU's room for response. Europe is now more strategically dependent on China than it was in 2014, and the survey is likely to have a greater impact on the EU. China has strengthened its position as a global power, and anti-competitive behavior could hit Europe's core industries harder because it has a greater ability to fight back. On the other hand, the EU is at greater risk given the importance of the automotive industry in terms of jobs and exports. As a result, China may not be as easily blocked as it has been in the past, and at the same time, it has prompted China to retaliate on a larger scale. (Part of the content of this article is a synthesis of automotive news, Bloomberg, Jing Daily, and Bruegel reports, and part of ** from the Internet).