China poses big threat to Europe’s carmakers

London — Chinese-made electric vehicles (EVs) pose the greatest risk to Europe’s carmakers and could cost them €7bn (R141.2bn) a year in lost profits by 2030 unless policymakers take action, according to an Allianz Trade report.

The report released on Tuesday by German insurer Allianz says policymakers need to meet the challenge with reciprocal tariffs on imported cars from China, do more to develop EV battery materials and technologies, and also allow Chinese carmakers to build cars in Europe.

Europe’s carmakers face a dual threat from the prospect of falling sales of their own vehicles in China, where local EV makers have been growing market share, and from rising sales of imported Chinese EVs — made by Chinese or Western carmakers.

Global carmakers have pledged to make a comeback in China with a large number of EVs in a fast-moving market where the pressure to cut prices is getting more intense. A crowded market for all-electric SUVs in China is putting pressure on local carmakers to export more vehicles to Europe.

Chinese EV imports could cost the EU over €24bn (R484bn) in economic output in 2030, or 0.15% of the bloc’s GDP, Allianz Trade said. But the “automotive-dependent economies of Germany, Slovakia and Czech Republic could face an even bigger hit” of between 0.3% to 0.4% of GDP, said the report, titled “The Chinese challenge to the European automotive industry”.

“The stakes are high for Europe’s automotive industry: four out of five cars sold in Europe are assembled locally,” it added. “Europe is also the world’s export powerhouse in the sector, with car trade generating between €70bn (R1.4-trillion) and €110bn (R2.2-trillion) in trade surplus for the European economy every year over the past decade.”

The report said the US Inflation Reduction Act had made Europe a target for Chinese exports.

While Europe remains comparatively open to imported EVs — Tesla, for instance, accounts for 20% of fully-electric car sales in Europe — the US was “set to be a much tougher market to crack for Chinese vehicles” because of the Inflation Reduction Act, the report said.

Reuters