China’s imminent dominance as a vehicle exporter will be accelerated by electric vehicles

China is poised to become a major export hub for automobiles. China possesses the required prerequisites to export vehicles on a massive scale, fueled by technical progress, large production capacity, and government assistance. The Chinese government encourages and pushes Chinese and foreign carmakers based in China to export.

The administration has prioritized absorbing international value chains over promoting homegrown champions. The government is also establishing goals and disseminating information about foreign rules in order to assist Chinese electric vehicle manufacturers in their international expansion.

China’s car exports are booming, as per François Chimits and Gregor Sebastian of the Mercator Institute for China Studies(opens a new window), with the majority of them going to Europe. China shipped half a million EVs (electric vehicles) in the year 2021, up from approximately nothing only a few years before, and it had the second-largest market share in Europe, just second solely to Germany. As the automotive industry moves to electric vehicles, Europe may eventually discover itself in a trade deficit with China.

That would be a huge change in the market structure. Europe and Japan are already buying consumer items from China while sending luxury vehicles — or their most critical components — the other way. The insignia on Chinese vehicles that arrive in Europe may or may not betray their true origins. Teslas from Shanghai account for about half of them, with Dacia, Polestar, and BMW rounding out the rest of the lineup. Although Tesla just constructed a plant in Germany, other manufacturers’ production selections show that China has a significant cost advantage.

The ramifications will be enormous if batteries gets to replace combustion engines as well as China controls car manufacturing. Europe’s and Japan’s prosperity is based on automobile manufacturing. Toyota and Volkswagen, as well as their supply chains, employ millions of people in dependable, skilled manufacturing jobs. National current account surpluses are supported by them. A transfer in vehicle manufacturing location would have a far higher impact than initial migrations of electronics, steel, and shipbuilding.

Sebastian and Chimits suggest that Europe should be fighting back against Chinese industrial regulations that supply cheap funding to carmakers and tether electric vehicle incentives for Chinese customers to domestic production. Meanwhile, European consumers can benefit from EU subsidies for Chinese-made electric vehicles, which have a 10% tax compared to the US’s 27.5 percent.

Fair and reciprocal treatment should be a top priority for Europe. Competitiveness, on the other hand, cannot be replaced by protection. Even if the United States and Europe impose hefty tariffs on their automobile markets, the reward in global car trade is to manufacture for the numerous richer nations — from Norway to the Middle East to Australia that lack the capacity to support their car industries.

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