EU countries are offering Chinese electric vehicle manufacturers a whole range of incentives to attract them to their territory.
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Several European countries, including Hungary, Poland, Italy and Spain, are seeking to encourage Chinese electric vehicle manufacturers to set up factories on their territory. Even if the European Commission views with caution the influx of Chinese electric vehicles – and therefore cheaper – on the European automobile manufacturing market, certain States continue to offer a series of aid and subsidies to Chinese factories .
States are banking on the gains that can be generated on the job market thanks to the installation of these factories, which would inevitably give a boost to the local economy.
Chinese electric vehicle manufacturers, such as Chery Automobile, BYD and SAIC Motor, which would like to establish a second base in Europe, could be tempted by the proposed subsidies and schemes.
Affected companies planning to open new factories in Europe would benefit from benefits such as tax breaks, funds for job creation, less restrictive regulations in defined areas and support for setting up factories. batteries, to further simplify the supply chain. Transport costs from China to Europe would also be lower.
Given the significant investments made by Chinese automotive manufacturers in the European automotive market and their expansion plans, factories within the EU could provide a useful launching pad for exploring new regional markets.
“Chinese car manufacturers know that their cars must be perceived as European if they want to attract the interest of European customers. This means that they must produce in Europe,” says Gianluca Di Loreta, partner at Bain and Company.
Why are Chinese electric vehicles so popular in Europe?
Chinese electric vehicles are increasingly popular in Europe, because they are priced more favorably than their European counterparts. They come with a range of standard options that are considered satisfactory, such as free charging for one or two years, surveillance cameras, an extra set of winter tires, etc.
Despite their lower price, these vehicles have a design and features that have recently improved their safety capabilities.
The growing appeal of Chinese electric vehicles has led the EU to consider increasing customs duties and sanctions against them, in order to control the flow of imports. Current tariffs on automobile imports into Europe are around 10%. In the United States, they are around 27.5%.
However, the effectiveness of such a measure remains uncertain, as Chinese electric vehicle manufacturers already have a significant profit margin.
“Some producers based in China will continue to have a high profit margin, as they will still be able to generate comfortable profit margins on the cars they export to Europe, due to the substantial advantages they enjoy in terms of costs”, notes the Rhodium group.
“Customs duties in the range of 40-50% – or even more for vertically integrated manufacturers like BYD – would likely be necessary to make the European market unattractive for Chinese EV exporters.
Additionally, although raising tariffs is being considered to help European automakers, some countries like Germany have already warned against the move, warning of potential retaliation from China, as well as the overall impact it would have on domestic automobile markets.
German Chancellor Olaf Scholz recently said at an event hosted by Stellantis, as reported by Automotive News Europe: “Isolation and illegal trade barriers only make everything more expensive and everyone poorer. We are not closing down not our markets to foreign companies, because we don’t want that to be the case for our companies either.”
“Doubting progress, delaying renewal and transformation – all of this would have harsh consequences. If we do this, others will overtake us.”
