Berlin is against the duties and says Chinese retaliation would harm Germany’s auto industry. Is it right?
Depends who you ask. Germany fears that its car industry, which is heavily exposed to China in terms of both sales and production, will suffer trade retaliation similar to what France’s cognac sector — the first collateral damage in the trade fight — has already faced.
On top of that, Chinese brands like BYD are expanding with new factories into Turkey and Hungary. As soon as these become operational, the company can produce locally and be impervious to the measures.
Also, demand for electric vehicles is slumping across most markets. European makers of both cars and batteries are also feeling the crunch, with Volkswagen threatening to close three plants in Germany. Swedish battery producer Northvolt, which counts VW among its main investors, announced layoffs last month.
Can the duties buy EU carmakers time to catch up?
On paper, that’s exactly what they’re supposed to do — create a time and investment window allowing them to catch up under the conditions of fair global competition. In reality, however, it’s more complicated. European automakers are struggling in the Chinese market — their most lucrative — and that is eating away at their bottom lines.
China is also at least one full generation ahead of Europe’s auto champions on EV technology, and that is causing handwringing across the bloc and a rethink of whether to ditch internal combustion engines. The European People’s Party campaigned on reversing the EU’s de facto ban on selling new ICEs from 2035, and the automotive industry has made similar calls.
The debate, however, threatens to squander any window that the investigation and the subsequent duties might offer automakers. As Chris Heron, secretary general of e-mobility lobbyist AVERE said: “Looking beyond duties, Europe’s fundamental competitiveness challenge remains. We still urgently need to reduce business costs across the EU electric vehicle value chain, to give our companies the platform for competing with China in the long term.”