The interior of Fiat’s Lingotto factory in Turin, finished in the Twenties, literally resembled a cathedral with its soaring levels of concrete pillars and ribs. Even in the era of globalization, a powerful car industry centered in Germany and exporting to the world has been an enduring source of European prestige. So it is not entirely an exaggeration to say that the twilight of this car industry heralds a spiritual crisis for the continent. 

The reversal of fortunes has been swift and brutal, manifest in a wave of Chinese electric vehicles and hybrids now crashing over European trade barriers. As recently as 2021, just 1% of new cars sold in Europe came from Chinese brands; last month, one in every seven new cars did, despite EU tariffs of around 30% on Chinese EVs. The challenge could not have come at a worse time. Europe’s car makers have been crippled by the loss of Russian energy supplies, Trump’s tariffs, and the EU’s bungled efforts to phase out petrol engines. They are suffering an even worse mauling in the lucrative Chinese market. 

China has been the focal point of the car industry for decades; but until recently it was European marques selling their vehicles to the expanding Chinese middle class and bringing the profits back home. Volkswagen arrived there in the late Seventies as an auto-making god, teaching Chinese engineers the manufacturing standards that underpinned their own nascent industry. It would later hold the title of China’s top-selling brand for 25 years. Today, as VW undertakes a restructuring that threatens 100,000 jobs globally, it is partnering with Chinese brands to learn how to make the automobiles of the future. Some of those Chinese models may even be produced in its emptying German factories. Imagine if French wines were shouldered out of their own market by foreign upstarts; this gives some sense of the humiliation that will be entailed by VW making Chinese-designed cars in Saxony.

Embarrassed Europeans have typically blamed China’s export success on a sinister plot to deindustrialize Western countries by undercutting their manufacturers with heavily subsidized goods. As Rishi Sunak warned last month, Xi Jinping wants to “make the world dependent on China while China depends on no-one”. There is certainly some truth in this account, but it rests on a misleading image of China as a purveyor of cheap knock-offs. Sadly, the snobbery implied by the phrase “Temu Range Rover” — as the popular Jaecoo 7 has been nicknamed in Britain — has not been earned. Even if China cannot match the German mastery of the internal combustion engine, its car industry has bested the European one in innovation, entrepreneurship and industrial strategy.

The best illustration of this is BYD – an abbreviation of the pinyin name Biyadi – the Shenzhen-based firm which displaced VW as China’s largest brand in 2023, and which has since become the global leader in EVs and hybrids. Fifteen years ago, when BYD was seeking a toehold in the United States, a baby-faced Elon Musk dismissed the challenge to Tesla with a scoff: “have you seen their cars?” It has indeed been a long road for a company founded by the son of rice farmers in rural Anhui province, which started out in the Nineties making batteries for laptops and mobile phones. Yet Musk’s Silicon Valley approach to cars, focusing on a tiny range of products to serve everyone, has proved inferior to BYD’s strategy of challenging incumbents across a wide spectrum of vehicles, from city runabouts to monster pick-ups. 

As of this year, BYD has two models tailored to the European market. According to the company’s adviser for the region, these will answer peculiar conditions such as German Autobahns, Italian mountain roads, and British potholes. They look just like European cars, and deliberately so: BYD is offering something familiar for a lower price, along with an assortment of clever tech to dispel any residual uncertainty about buying a Chinese product. Who has not wished for a tiny vent to douse your smartphone with cool air while it charges wirelessly?

Like the Chinese auto industry at large, BYD rose through a combination of imitation, innovation, and shrewdly adapting itself to government programs at both national and city levels. Its earliest vehicles, not yet electric, were closely modeled on Japanese brands such as Toyota. It released the world’s first mass-market plug-in hybrid in 2008. Around the same time, the Chinese leadership began to throw its weight behind EVs in earnest, offering a range of subsidies for both producers and consumers. It had long shown an interest in developing homegrown “new energy” vehicles, which promised to provide China with a niche in the global market and to alleviate its dependence on imported oil. 

But academics Fengming Lu and Xiao Ma argue that China’s cities were the most important drivers of the industry. BYD entered partnerships with numerous municipal governments, beginning with Shenzhen and Changsha. These deals often proved hugely profitable for both parties. The company received favorable access to land, infrastructure, electricity and labor, in exchange for which it invested in local car-making plants and provided the cities with electric buses and taxis. BYD even opened a railway division to make the most of municipal transport programs. 

Private capital also played an important role. Stock markets allowed local governments to cash in on the shares they had acquired in EV makers and begin the investment cycle again. Venture capital funds, both Chinese and foreign, were crucial to the boom in EV start-ups that took place after 2015, with hundreds of entrepreneurs from the tech sector flooding into the industry. China thus ended up with an absurdly large number of carmakers. This intense competition did not just force companies to innovate, but encouraged brands like BYD to become export giants, exploiting less competitive EV markets overseas.  

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So BYD is not so much a creature of state subsidies as the product of a state-engineered process of Darwinian struggle. The central government used tools such as credit availability, tax incentives and influence over local government priorities to stimulate an explosion of private and municipal ventures, before tightening business conditions so that only the fittest could survive. Since the early part of this decade, China’s EV industry has been in this second phase of cutthroat consolidation. 

One reason that BYD has emerged as a victor is its high degree of vertical integration: rather than outsourcing the production of every last nut and bolt as most Western carmakers have done, it controls most of its supply chain. It has partnered with mining companies around the world to ensure access to crucial minerals such as lithium, which it processes in its own refineries. It develops and produces its own batteries, powertrains, semiconductors and software systems. Consequently, the company is protected against supply shocks, can respond swiftly to market demand, and is able to innovate across numerous domains. 

This all amounts to a humbling lesson for Europe, a continent which long viewed the clean energy transition as an opportunity to show that it can still shape history and determine its own destiny. Instead, the EU is scrabbling to build defenses against the tide of Chinese EVs. Decarbonization targets may be relaxed, and a “Made in Europe” drive is underway to limit state support to European suppliers. 

The situation in Britain is somewhat better or even worse, depending on your perspective. Its government has done little to protect a long-suffering domestic car industry, and its drivers have little sentimental attachment to national car marques, most of which are foreign-owned servants of the luxury market. Britain last year produced its lowest car output since 1952. The country is less threatened by China’s dominance because it has no pretense of even being in the race. Indeed, Chinese EV imports are integral to the Government’s goals of reaching Net Zero and bringing down inflation, since they are cheap and don’t produce CO2 emissions — at least, not after they leave the factory. And the policy is working: though BYD only began selling its cars here in 2023, it was Britain’s second-most-popular brand in September. Hence the irony of a Labour Party that longs to reverse Brexit insisting that the freedom to set its own EV tariffs is a “red line” in negotiations with Europe. 

Why was Europe’s mighty car industry blindsided by the challenge from China? According to historian and commentator Adam Tooze, one reason may simply be corporate greed. Tooze argues that European brands used the post-Covid supply shortages of the early 2020s as cover for a profit-maximizing strategy, making fewer cars and aiming them at the higher end of the market. The deeper causes, however, take us to the fundamentals of political economy. The Chinese state has been ruthless at building up the supply chains, energy security and industrial base needed to succeed in high-tech manufacturing, but it has been equally ruthless in using market competition to foster innovation. Europe, by contrast, has long neglected industrial strategy through a naive faith in global free trade, yet it still allowed its powerful legacy industries to squat over the political system in such a way that new players and technologies have been denied space to breathe. 

However, such bloodless explanations feel insufficient for a matter of deep significance to Europe’s history and identity. They do not pass the cathedral test. One can tell that Europe’s cars are long past their creative peak simply by looking at them: a mass of SUVs with different names but near identical appearances and dimensions, fat blobs in shades of white, silver and black. Gone is the chic elegance of the Citroën that inspired Barthes; gone is the cold, Teutonic glamour of the old Mercedes, the charisma of the red Alfa Romeo driven by Dustin Hoffman in The Graduate. The decline can be measured in the reaction of passers-by when a vintage car rolls along the street, with its elegant profile, purring engine and rich color palette: they stop, point, let out a spontaneous groan of appreciation. True, cars now accelerate faster than they once did, but the thrill is dampened by an optimization for comfort that gives the impression of being wrapped in cling film.

My neighbor, a professional mechanic, explains the problem concisely: “Old cars have character. Today they’re all made of plastic, and they all look the same.” Some of this is due to government regulation, and the sharing of designs in a heavily consolidated industry; but it also reflects artistic failure in the form of a herd-like pursuit of the average consumer. As a result, we are forced to seek distinction in utilitarian matters such as battery range, trunk space, and, of course, price. The erotics of form has been replaced by the fetish for technological trimmings that dominates YouTube’s vast catalog of car reviews: the voice assistants, the 540-degree parking cameras, the entertainment systems and cruise control settings. If cost, efficiency and gadgetry are what matter now, then it’s not obvious why European consumers should ignore the fruits of China’s booming auto industry, which does these things rather well.

Perhaps cars offer us a barometer of civilizational vitality. Even if automated production lines do not employ the millions they once did, the fact that cars have around 30,000 components and require extensive research and engineering skills makes them fundamental to any serious industrial nation. Developing countries are acutely aware of this, hence why so many of them long to have their own brands. The rise of the AfD amid the bitterness of Germany’s disintegrating automotive sector certainly carries a whiff of Untergang. As for China, the unique prestige of automobiles is undoubtedly a reason that its leaders put so much emphasis on beating the world at EVs. Its industry may be conquering the globe on the basis of efficiency and clever software, but it is still young. It may yet develop a poetry of its own.