EU will lose an EV conflict with China

Europe is attempting to mount a robust defense against the influx of inexpensive Chinese electric vehicles, indicating it has the desire to engage in an "economic cold war" with China. The consequence of this is that a number of industries in the most developed European countries is at risk. China has a range of strategies at its disposal that could have a significant impact on the European market.
So what is the current situation and what is likely to happen?
Europe is attempting to mount a robust defense against the influx of inexpensive Chinese electric vehicles, indicating it has the desire to engage in an "economic cold war" with China
EU countries supported the European Commission's initiative to impose high duties on Chinese electric cars for as long as five years. Ten member states voted for the duties, five voted against, and 12 abstained. To block the EC initiative, 15 member states had to vote against. But this did not happen.

The EC now has the green light to proceed. In the next 30 days, it can publish a legal decision on the adoption of duties, or propose a new version of duties or agreements. In other words, the Chinese and EU governments have a month to resolve the issue amicably. However, discussions on this matter have been ongoing for some time without reaching a resolution. It is therefore unlikely that the situation will change.
The trade conflict has the potential to be the most significant between the world's leading economic powers in a decade. Hungarian Prime Minister Viktor Orbán has described it as the EU's entry into an "economic cold war".

Now before I continue I would like to make an appeal,if you like and enjoy my videos you can help me fund the channel and my websited sco brics insight .com and to further develop it. You can do this by making a small donation which you can do by clicking on the thanks button at the bottom of the video screen. Everybody who donates does get a personal thank you from me.

All attempts by China to negotiate a peaceful resolution to the issue with the EU have thus far been unsuccessful. Beijing has already initiated the process of implementing retaliatory measures against Brussels. In particular, it threatens to impose tariffs on EU brands, as well as restrictions on European pork and dairy products. China has initiated a special investigation into these products in order to establish legal grounds for imposing high import duties on EU imports.

What are the European Union's concerns regarding Chinese electric vehicles? After all their production is in alignment with the EU  overarching  "green agenda" in Europe and its plans to phase out the use of fossil fuels.
The European Union has required its members  to phase out the production of internal combustion engine vehicles and transition to electric vehicles by 2035. No local auto manufacturers  must phase out traditional engine vehicles in their European line-ups and focus production on electric models for the domestic market. Logicalt it  would appear that China's assistance in the transition to electric vehicles and in the reduction of emissions into the atmosphere should be welcomed.

However, Chinese manufacturers are rapidly gaining ground in the European car market. In light of these developments, the EC initiated an investigation into electric cars from China in October 2023, suspecting the presence of state subsidies. Indeed, there is a legal means of removing competitors from the market.

Over the past three years, the proportion of electric cars from China sold in the EU has grown from 3% to over 20%. Meanwhile, Chinese brands (BYD, Geely, SAIC) have only captured 8% of the market, with the remainder accounted for by international companies exporting their electric vehicles from China, including Tesla.
It is in China's interest to maintain a strong presence in the European market. There is a significant market demand for environmentally-friendly vehicles in China, and this is set to grow in line with the country's green agenda. Furthermore, China has established a comprehensive electric car manufacturing industry, primarily for export. The situation is now under threat. In response to the recent trade dispute, the European Union introduced temporary additional duties on Chinese electric cars in August. This has resulted in a 48% decline in sales, reaching an 18-month low.

"First and foremost, EU countries are seeking to safeguard their domestic market from Chinese electric vehicles, which are gaining ground on European manufacturers in terms of price competitiveness and market share.

The EU believes that China is gaining an advantage in the competition due to government financial incentives for this industry. However, this is not the only issue. The EU has seen a sharp increase in energy and electricity costs, which has led to increased production costs and higher car production costs.

The EU has already implemented a 10% tariff on Chinese electric vehicles. However, the EC is seeking to increase this to a higher level. The specific rate for each future duty will be determined on a brand-by-brand basis. China's BYD will be subject to a 17.4% duty, Geely to 19.9%, and SAIC to 35.3%. Companies that cooperated with the investigation but were not included in the sample will be subject to a weighted average duty of 20.8%.
The European Union, in its blind pursuit of it green clean energy agenda, has itself rushed into abandoning all the  cheap traditional energy resources, including Russian pipeline gas, plus its has let  down badly its own industrialists. A large number of companies are even moving their factories to the United States or to China. Instead of subsidies, electric vehicle manufacturers in the EU have given increased costs..

"If the EU introduces price competition or raises the cost of Chinese electric cars via import tarrifs , local electric car manufacturers and Chinese models produced in the EU will be the first to benefit," says Chernov.

However, some European countries will be particularly affected, with Germany, which voted against the tariff increase for valid reasons, being among the worst hit. China's retaliatory measure (a similar tariff increase) will impact European alcoholic beverages, as well as pork and dairy products. In this context, Russia, which is prepared to supply even more pork and dairy products to China, may emerge as the winner.

It seems unlikely that Beijing will limit itself to jus targeting and affecting European farmers. "It is possible that China will take retaliatory measures in the future that are similar to those already announced." "In this scenario, sales of European cars in China will decline, and European manufacturers such as Volkswagen, Mercedes, BMW, and Audi will be adversely affected," Chernov stated.
It is also important to note that electric cars produced in the EU rely on Chinese batteries. Furthermore, there is no guarantee that China will not take retaliatory measures, such as significantly increasing prices. The EU relies on the import of materials from China for the production of the majpority of its so called green technologies. China is the dominant player in this market. "This is one of the reasons for the current trade disagreements between the countries," states Oksana Kholodenko of BCS World of Investments.

German automakers VW, Mercedes-Benz and BMW lobbied Berlin to vote against the tariff hikes and called on the EU to negotiate with Beijing. The loss of the Chinese market could have a significant impact on German car manufacturers. In 2023, China accounted for approximately one-third of their sales.

"The outcome of this vote represents a significant setback for the European automobile industry," stated BMW CEO Oliver Zipse. "It is imperative that the European Commission and China swiftly engage in negotiations to avert a trade conflict that would only result in losses for all parties involved," he emphasised.

From an industry perspective, the German economy could be the most adversely affected in Europe. China is shifting its position as Germany's primary trading partner. Kholodenko states. Germany has traditionally been the industrial backbone of the entire European economy, but has experienced a decline over the past two years. The German Institute for Economic Research forecasts a 0.1% contraction in the German economy this year. The reasons for this include the missteps made in the transition to green energy, the rejection of nuclear energy and the lack of the previously available inexpensive Russian pipeline gas. The transition to electric vehicles will also result in a decline in the production of gasoline engines.

Consequently, the entire EU economy may be adversely affected. The announced set of measures is relatively limited in scope. Nevertheless, the Eurozone economy is facing significant pressure and is approaching a state of stagnation. The countries that may be most adversely affected in the region are those that rely heavily on exports. Mr. Kholodenko concludes that Germany, the Netherlands, and Italy will be the countries most affected.