Chinese cars pose an existential threat to Europe
Electric vehicles are taking over from German diesel
The European automotive sector — above all the German car industry — is a bulwark of the EU’s economic might. But for how much longer? It’s becoming increasingly clear that Chinese exports pose an existential threat.
This week, Brad Setser, a senior fellow at the Council on Foreign Relations, tweeted out two charts that illustrate the astonishing speed and scale of recent developments.
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The first chart shows that during the 2010s China became a massive importer of vehicles, but that, since 2020, Chinese exports have surged. As in so many other sectors, the People’s Republic is now a net exporter. To put it another way, a trade deficit of tens of billions of dollars per annum has been more than wiped out in the space of just three years.
The Chinese haven’t stopped importing vehicles — the market is still worth billions to European exporters. However, China is now exporting back to the EU at record levels. It should be said that this surge is coming from Western companies with factories in China, not just homegrown Chinese firms, but that won’t be of much comfort to EU workers or to anyone concerned with the long-term security of the West’s supply chains. Automotive is one major manufacturing sector that Europe has managed to avoid offshoring. Allowing this position of strength to crumble seems extraordinarily careless.
But why is it crumbling? After decades in which the big European car companies were able to hold their own, why are the Chinese now gaining ground? A quick look at the second chart posted by Setser (originally published in the FT) provides a massive clue: almost all of the Chinese export surge is made up of electric vehicles.
The Germans are the undisputed masters of the diesel engine, but that’s just the problem: having built an industrial strategy around this core technology, they couldn’t let it go. Most notoriously, there was the Dieselgate scandal, in which German manufacturers were caught fiddling emissions tests. Arguably more damaging, though, was the general European failure to lead on developing and commercialising electric cars — thereby allowing others, like Tesla and the Chinese, to seize the moment.
The Europeans have no excuses for being caught unawares. After all they were the ones who forced the pace on Net Zero — which requires the complete decarbonisation of road transport.
It’s time for the rest of the EU to question Germany’s economic leadership. After all, this isn’t the only example of Berlin crashing the car. More than anyone else, the Germans were responsible for Europe’s reckless dependency on Russian energy supplies. They also impoverished the Greeks and pushed the British into Brexit.
But as far as the car industry is concerned, there is time to regain the initiative. Though the electric engine is a game-changing technology, there may be an even bigger transformation on the way. Given the rapid progress currently being made on artificial intelligence (AI), we might finally get the breakthroughs required to make driverless vehicles an everyday reality.
If we get full automation in the next decade, then the game will change all over again. Without the need for human drivers, the vehicles themselves will be transformed — and so will the way that they are owned, serviced, insured and financed.
It will be a whole new world — and one last chance for old Europe to keep up.
I’m pleased to see this article. I’ve commented on a number of sites recently that our rush to ban ICE car sales from 2030 is just giving our car industry to the Chinese. It’s not so much that Europe can’t make EVs, it’s that Europe can’t make them in a way that is price competitive with Chinese EVs.
China controls much of the world’s sources of the minerals needed for EVs and 90% of the relevant mineral processing capacity. There isn’t enough to go around in the first place, so batteries, wiring looms and electric motors are going to become cripplingly expensive for manufacturers without the access that Chinese manufacturers have. Even if I’m wrong about that, the CCP has the capability and motivation to subsidise their manufacturers in order to ensure that European (and US) manufacturers are heavily undercut. The cost of living crisis won’t be over by 2030, so Western consumers will buy Chinese EVs in their droves and put them in their drives (sorry).
Only by delaying the 2030 deadline – scrapping it entirely and relying on free market forces, ideally – can save the European car industry (in which, for the avoidance of doubt, I include the UK industry). Will our politicians realise this in time? I’m not optimistic.
The EU is broken. They have been one of the biggest proponents of EVs, yet they do nothing to manufacture the cars. No doubt they will spend countless billions on subsidies, bringing in all sorts of businesses associated with EVs, and no doubt these businesses will ultimately fail. Here’s a thought, maybe invest in building a competitive tax structure, energy infrastructure and workforce capable of attracting real business.
Watching Net Zero destroy Western Europe in real time is fascinatingly macabre. Germany, in particular, appears to have taken masochism to the next level. Of course Europe cannot hope to compete with China. Not only too late to play, but lower access to raws and burgeoning energy input costs, whilst China benefits from cheap Russian oil. It is hard not to be a conspiracy theorist when one watches the lack of strategic thought/secondary effects.
Why oh why is BMW building the latest electric Mini in China? It beggars belief, profit before morals !!
Because they are a business. Why should they have morals ? What is wrong with businesses making profits ? The alternative is that they don’t.
And perhaps there’s a large local marketfor electric minis in China.
I think the two should not be always separate.
If you give away your technology to China, you would make profits for a while but then you will not because Chinese subsidised copies will eat your market.
China should never had been allowed into WTO.
Europe slow death is speeding up. It will be interesting how long the civilised behaviour continues before things get rough. Another big question will be where the skilled workers move on to after this? India, China, the US?
Europe needs to take a few steps back, put up with the difficult times and start going a few steps forward.
The vast majority of people, not least in Europe do not like, nor wish to buy electric cars.
If the German or European car industry isn’t competitive then it’s not going to survive long term anyway and doesn’t deserve to. Likewise if it cannot master the technological change in time.
Like everything else, cars are becoming global products. Teslas are pretty much the same here as in the US. When we were growing up, US and European cars were pretty much mutually exclusive – very few sold in the other market. The age of national champions is over whether in airlines or cars.
This claim that the Germans are masters of the diesel engine seems dubious.They have also produced the best petrol engines. Why just pick on diesel ? And the French have produced some very good diesel engines for decades.
What the article fails to mention is that the Germans are caught in the classic “Innovator’s Dilemma” (Clayton Christensen’s famous book) where being #1 in an existing market makes quick adaptation very difficult when major technological disruption occurs.
The “Germans pushed us into Brexit” ? You what ? It can’t possibly have been British people knowing and expressing their own views, can it ?
Yes, it happened with Japan TV industry.
They tried to keep selling their overpriced CRT boxes or plasmas in case of Panasonic and Koreans won that war.
Hopefully our new trade arrangements will promote sales of cars made by our Korean and South Asian partners at the expense of both China and Germany. British consumers need to start using our spending power in politically aware ways.
If someone had wanted to destroy the West and enthrone China as global dictator in a relatively peaceful, so sly you’re not really aware that it is happening, kind of manner, could they have come up with a better plot than the lockdowns and Net Zero combo?
Low emission hybrids with low emission internal combustion engines will win out in the end, plus hydrogen power.
Well, you would need governments which would reverse current mad policies.
I don’t see any, do you?
Full automation will be the playground for protesters. The potential will be limitless.
The Chinese through the numerous Western politicians and organisations they have bought up are essentially doing what the West did to Eastern Europe mid 20th century by allowing communism to spread all over it. The economy of all Eastern European states was crippled whilst the West has enjoyed lack of competition and unencumbered development.
Western Europe will now try the taste of their own medicine with the climate change swindle spread by scientists, organisations and politicians bribed by the Chinese for the purpose of crippling its economy and blocking its development
Few in the West truly understand China, They think In entirely different ways from us
Much of their thought process is very deep rooted in Ancient Wisdom most of which is now totally lost to Neo Liberal Western Capitalism
And that means the end of Western geo political, economic and military hegemony for ever
We in the West have no choice but to work peacefully in a cooperative ,sustainable and eco friendly manner with China
If not so Western thinking withers,dies merely tossed into the history bucket and the one labbeled Detritus
Understand what the 4th small
Yellow star upon the Chinese
National Flag represents as it
Explains the heights China has reached globally
While I salute the decline of the German car industry, you would have to be mad to buy a Chinese car. They can’t even build escalators that don’t devour hundreds.
The idea that you don’t need to worry about Chinese exports because they can only make cheap junk is a lazy trope that needs to die.
The Chinese have been making high quality export good for literally centuries an currently have a space station in orbit and robots on the planet Mars and the far side of the moon.
Things get made for a price, always have been always will be and there are many times when the best use of your budget is more units of lower quality rather than a few expensive ones.
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