There have been many voices in the European automotive industry that have warned, for some time, of the risk posed by an uncontrolled landing of cheap Chinese cars, especially electric ones. Carlos Tavares, CEO of Stellantis, is the one who has most clearly positioned himself in that sense and already a year ago lamented that the EU was putting a red carpet to those cars. Days ago, Oliver Zipse, head of the BMW Group, insisted on that danger; Not so much for luxury brands like yours, but for the so-called generalist builders. The high volume.
First, because it is admitted by all that the Asian giant has at least a decade of advantage in the development of this technology, apart from the fact that they control up to 75% of the world's battery production capacity and also own many components and the chemistry necessary to treat them. A doubly strategic issue: apart from its impact on the supply chain, the battery accounts for between 30% and 40% of the cost of a 100% electric vehicle.
Second, because despite that, in its race to be the first decarbonized region in the world, the EU has entrusted everything precisely to these cars and will ban the sale of models with combustion engines from 2035. Only those who can use synthetic fuels would be admitted, whose route remains to be seen.
And thirdly, because there has always been a suspicion that Chinese cars arriving in Europe can be sold cheaper thanks to the public money injected into them, since most of the builders are owned by the government, the cantons or some municipalities. Sigrid de Vries, secretary general of Acea, the employers' association of European car manufacturers, said it in black and white in a recent letter.
That is precisely the argument on which the investigation announced on Wednesday by Ursula von der Leyen, president of the European Commission, rests. An investigation that comes at the request, among others, of France. Thus, protectionist measures – such as an increase in current tariffs – against which some manufacturers have positioned themselves are excluded. They argue that the Japanese arrived before and then the Koreans and European industry continues to be a benchmark in this sector. Although the landing of those Asian builders, who took decades to reach their current position, occurred in a very different context. For example, when everything revolved around the combustion engine, a technology that in China they ended up accepting that they were not going to control and that's why, at the beginning of this century, they decided to turn to the electric one.
In the US, free trade mattered little to them when, in August of last year, they passed the controversial Inflation Reduction Act (IRA). A measure that, in the field of the automobile, translates into aid of $ 7,500 for the acquisition of an electric vehicle. Although this requires it to be manufactured in the country and, from 2024, it will also require that 40% of the battery materials or half of the components must be locally produced, a percentage that will rise to 100% in 2029.
This slamming of the door in the nose has made Chinese brands run out of options to compete in the US so, as Luca de Meo, CEO of Renault, recalled at the recent Munich Motor Show: "they have launched to sell in Europe, which they consider a market of conquest". And also the most profitable, in the words of Thomas Schäfer, CEO of the Volkswagen brand
And that, conquering market, they are doing, with the MG brand as the best exponent of an aggressive commercial strategy. The company of British origin today owned by SAIC sells in our market a 100% electric car, the MG 4, with prices that can be up to 6,000 or 7,000 euros cheaper than comparable Western models.
Their numbers aren't big yet, but what's worrying is how quickly they're improving them. In just six years, China has already gone from being the eighth country in volume of vehicle imports to the EU, to become the leader: almost 522,000 cars last year. This would be equivalent to a 5% quota, but it would have to be halved considering that many of these cars are from Western brands that also have plants in the Asian giant.
In the case of 100% electric vehicles, the results are more remarkable and in the first seven months of 2023 they already accumulate a share of 8%, with 86,000 units registered according to the consultancy Schidmt Automotive Research. In 2019, they barely reached 0.1% of registrations in this category. To situate ourselves, between January and June of this year, sales of battery-powered cars reached 2.2 million units in China.
In fact, many Western builders also drink from this clientele. For example, the Volkswagen brand reached registrations of 2.29 million units in China, more than half of all those shipped worldwide. And at Audi, the percentage was 36%. We cite these two examples because they both belong to the same German consortium, usually against action against Chinese trademarks. At least those of a protectionist nature.