Are European manufacturers too blinded by the thirst for conquest of a gigantic country not to see the “threat” that it could pose a few decades later? While Europe has always been in favor of free trade, China quickly understood that it needed to protect its industry. Thus, in order for foreign manufacturers to be allowed to produce cars in China, they had the obligation to associate themselves with a Chinese brand and create a joint venture, in which they cannot hold more than 50% of the shares.
Problem : who says joint venture, says… sharing and transfer of technology. For years, therefore, Chinese brands have had varying degrees of engineering access to the American or European automotive industry. And we know how far the Chinese have become masters of reverse engineering! Of course, the big historic car groups not being totally ignorant, they quickly understood that they would have to find ways to avoid giving the Chinese too much trouble. China had the industrial tool and cheap labor in abundance, it lacked the expertise and the “design office” part. In 2022, they have it all: factories, workers and engineers, but also raw materials and the government on their side!
Also read: This is how much China dominates the electric car world
In 2025, Europe’s “client” of China?
PWC Study: From 2025, Europe will become an importer of (electric) cars. The European Union losing one battle after another: digitization lost, now our industry leader: the automobile https://t.co/5ynLida5Kf
—Alexander Prym (@AlexanderPrym) November 4, 2022
In 2005, China’s motorization rate was 28 vehicles per 1,000 inhabitants, against 593 in Europe. The big brands of the Old Continent soon understood the potential of China. 20 years later, they might as well take the famous racket hit! In 2021, the Chinese rate rose to 200 and continued to rise. The Chinese are no longer neo-urban ex-country waiting to buy their first car, they have become true car customers like any European. And this has changed the game in many ways: China’s auto industry, which has benefited from joint ventures and state support, has grown strongly to meet domestic demand. 2020 will be the decade of “China’s first”.
Xi Jinping’s administration has set production quotas for new energy vehicles (NEVs, which are electric and plug-in hybrids): a minimum of 16% in 2022 and 18% in 2023. And state incentives don’t just go to national brands. A policy recently voted on by the United States. And Europe? She watches, she waits.
European manufacturers must respond to them, in the same way as other hyperprotectionist laws. This now leads Stellantis (who recently went bankrupt Jeep China and is considering starting in the Middle Kingdom), but also Germans to wonder about China’s relevance. Olaf Scholz, the German chancellor, even made a trip to China to try to ease increasingly tough regulations for foreign companies. This means that the period is critical for Europe.
A Europe that can also change quickly: from 35,000 electric cars sent to us in 2021, China is expected to increase to 66,000 in 2022. A study by the company PwC speaks of a volume of 800,000 cars made in China and sold in Europe in 2025, including 330,000… produced by European brands! Smart, Volvo/Polestar, Dacia, DS, Mini… examples of expatriation have not been lacking lately. And with 800,000 Chinese imports in 2025, Europe would go from exporting to importing with an import surplus of 221,000 cars. Only that.
Obviously, this phenomenon can also be explained by the deindustrialization of our continent. One number is very revealing: in 2017, 14.9 million vehicles were manufactured in Europe. By 2021, there were only 9.9 million left, a third of them in Germany. Certainly, deficiencies play a role, but they do not explain everything…
Just hope for Europe? A battery passport whose entry into force is still awaited, public aid for the construction of factories granted only to European companies (most of the installations that will produce batteries in Europe in the coming years will be owned by Chinese giants), but also and above all bonuses granted only to cars produced within our borders.