Last Updated on Thursday, 8 August, 2024 at 9:16 am by Andre Camilleri
Lina Klesper is an International Legal Assistant at PKF Malta
In recent years, China’s emergence as a global powerhouse in various industries has been nothing short of remarkable. From technology to consumer goods, Chinese firms have rapidly expanded their influence worldwide. A particularly notable area of this expansion is the electric vehicle (EV) sector, where Chinese manufacturers have quickly positioned themselves as serious competitors to established players, especially in Europe. This year, it is estimated that one in four EVs sold in Europe is from China. This trend has sparked a new commercial contest, raising questions about how Europe should respond: through protectionist measures like tariffs, or by innovating to enhance their own offerings.
In 2023, China was the largest producer and consumer of EVs, accounting for more than half of the global EV sales. China’s rise in the global EV market can be attributed to several factors. The country has heavily invested in the development of EV technology, supported by robust government policies, subsidies, and a burgeoning domestic market. Leading Chinese companies such as BYD, SAIC and NIOhave leveraged these favourable conditions to not only dominate their home market but also expand internationally.
Chinese EV seem to be particularly appealing for European customers because they are sold cheaper than European builds and they typically offer more features. However, awareness of consumers in the EU about Chinese brands is still limited. BYD, which overtook Tesla as the world’s largest producer of EVs, has picked up on that and is advertising itself as an electric car brand “you’ve never heard of”. Additionally, BYD was an official partner of the UEFA EURO 2024 making the brand more visible for the European market.
Electric mobility in Malta has gotten very popular as customers are increasingly aware of the environmental impact of traditional engines. As Malta with its small size and short distances is predestined for EVs, the government is incentivising the growth of the EV market and has invested in the necessary infrastructure. The EV market in Malta is expected to grow annually by 14.8% with an estimated revenue of US$19.7m by 2024. Internationally, most revenue will be generated in China, with a projected revenue of US$319,000m by 2024.
Europe, home to some of the world’s most renowned automotive brands, now finds itself at a crossroad in response to China’s growing presence in the EV market. Traditionally, European countries have been at the forefront of automotive innovation, particularly in Germany, where brands like Volkswagen, BMW, and Mercedes-Benz have set global standards for quality and engineering. However, the rapid influx of Chinese EVs, which are often more affordable, presents a significant challenge.
One response from Europe has been the consideration of higher tariffs on Chinese imports to shield local industries from cheaper foreign competition. In context of an EU investigation of unfair subsidisation in the Chinese value chain of battery EVs threatening EU producers with economic injury, protective measures have been entered in force. In July, the EU has decided on provisional tariffs on Chinese EV imports ranging from 17.4% for BYD to 37.6% for state-owned SAIC to level the playing field to regional car manufacturers. While those tariffs have been criticised as being too harsh and risking a ´trade war´, they have to be considered in contrast to US rates which are at 100%.
However, such measures may only offer short-term relief. While tariffs can temporarily make foreign products less competitive, they do not address the underlying issue: the need for European manufacturers to innovate and improve their offerings. This is also what seems to be the stance of European brands, which are rather critical towards the tariffs and prefer to take the route of fighting to stay competitive.
European automotive companies have a long history of technological excellence, and leveraging this expertise to advance in the EV sector could be a more sustainable strategy in the long run. Particularly investment in R&D seems to be the key. European manufacturers could significantly benefit from increased investment particularly in battery technology, autonomous driving, and other cutting-edge automotive innovations. The future EV market will be shaped by pushing the boundaries of what is possible and offering unique value propositions that distinguish products from competitors. With Europe’s broader policy goals around sustainability and carbon reduction and a growing segment of environmentally conscious consumers, European brands should especially leverage their strong reputation for quality and environmental consciousness.
It is to hope that the rise of Chinese EVs presents not only a challenge but also an opportunity for Europe. The increased competition can serve as a catalyst for European firms to innovate and improve. After all, in a globalized economy, the success of one region’s industry can spur advancements and benefits worldwide. For instance, the development of better battery technology can have far-reaching effects even beyond the automotive sector.
