Chinese EVs Could Hurt European and North American Auto Industries

• Electric vehicles made in China are often much cheaper than competing European or American models.

• This makes Chinese EVs the only viable option for most buyers in developing countries.

• European automakers are pushing for regulations that would make these vehicles less competitive.

China is the largest market for electric vehicles around the world, with sales accounting for more than half of all EVs sold around the world in 2022.

This popularity is partly explained by the large market share of cheap Chinese EVs that are often more affordable than comparable gasoline-powered vehicles.

This is possible because local companies are backed by the government, which allows them to ramp up the production rate of new EVs much more quickly and thus achieve a lower cost per unit in terms of manufacture.

In addition, the Chinese government makes it much cheaper to produce batteries for its local automakers. Since the battery is the costliest part of the vehicle, this allows for a lower asking price.

Since this governmental help goes towards the production of EVs rather than their sale, Chinese electric vehicles are also much more affordable than their competitors outside of the country.

For a few years now, Chinese automakers have been making inroads in other Asian markets, particularly developing countries where most buyers can’t afford EVs produced in Europe or America.

All of the same factors are at play in Europe, where Chinese automakers are planning to occupy 15% of the EV market in 2023, up from only 5% in 2022.

This has European and American automakers worried because higher labour rates, higher quality standards, and more stringent regulations mean that their manufacturing operations are more expensive than these newcomers, which makes cheaper vehicles less profitable.

According to Carlos Tavares, CEO of Stellantis, European Automakers will have to fight Chinese EVs by closing down assembly plants in Europe and relocating them to countries with lower salaries and less restrictive laws in order to stand a chance.

In order to prevent this, Tavares says Europe could be re-industrialized but for this to happen, many laws that protect workers and the environment would have to be repealed, which is unlikely to be popular with Europeans.

Another way in which this situation could be avoided is if the European Union imposed restrictions on Chinese-made EVs, but this would likely lead to a reduction in trade with China, upon which many member countries are dependent.

The growth of Chinese companies in the electric vehicle market is also concerning for American automakers, but the threat of them being overtaken by these newcomers in their own country is less likely due to the tense political relationship between Washington and Beijing.

Source: Wall Street Journal and AutoNews Europe