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On Wednesday, Ursula von der Leyen, president of the European Commission, announced an investigation into possible 'illegal' aid from the Chinese government to make its electric cars cheaper. And it was throwing a stone into a lake: its consequences can spread like the waves that form in the water and end up touching those who are not expected.
What sanction could Brussels impose?
The EU is giving itself 13 months for an investigation that seems very complicated. If illegal subsidies are discovered, the easiest thing would be to raise import tariffs on Chinese cars to Europe. Today, they are 10%, compared to 25% if the road is the other way around. France, one of the countries that has pushed the most in Brussels with this issue, proposed in the summer to exclude Chinese electricity from public aid. As the US has done, but also with Europeans or Japanese.
Are those cars so cheap?
Community sources say 20% on average. That can be, in a VW ID.3 or a Renault Mégane E-Tech, a disadvantage of 6,000 to 8,000 euros, since the MG4 or the BYD Dolphin comparable cost 29,000 euros. Although the cheapest electric is the Dacia Spring, which comes out for 20,500 euros with much lower performance and size. By the way, it is produced in China...
And comparable to ours?
There is everything, of course, but the quality of materials and finishes are more than acceptable in most cases, always talking about normal prices. In addition, they have overcome the handicap of safety and many achieve five stars in the EuroNCAP crash tests. They are worse tuned in electronics or driving assistants.
How do they do it?
The control of electrical technology – batteries included – gives them a great cost advantage, which they add to the labor ones. In addition, being born as an electrical manufacturer is much easier: the motor, so far the most complex part, does not differ much from that of a washing machine. And this means that there are hundreds of brands forced to compete fiercely for a lower clientele than expected, even when China concentrates 60% of the electrified cars sold in the world in 2022.
That development has been greased with $57 billion in subsidies between 000 and 2016 alone, according to consulting firm AlixPartners. But this would be something similar to the aid of the two Spanish PERTE VEC. The fear is that public funds have also served to "artificially cheapen" prices.
Why has Europe responded this way?
China needs to sell cars abroad and this year it will also be the world leader in exports, with some three million units beating Japan. Right now, that presence in Europe is small, with a share of only 8% in electric models (86,000 cars), just over half that of the VW Group.
But their brands must not address the enormous cost of the transition to decarbonization to which Europeans are obliged and find themselves arriving with the all-inclusive:public help to buy, customers who can pay for one of these cars and a charging infrastructure in continuous development. That is, factors that are lacking in other regions such as Latin America.
Everything, without forgetting that the pressure to reduce prices is twofold. Tesla has not removed the sales poster for months, despite reducing margins, is second among the electric and first in the total with the Model Y.
Danger of 'boomerang' effect
One of the big questions is to whom the possible sanctions or tariffs would apply. Only cars of Chinese brands or all those that are produced there, including European brands, and then sold abroad? This is the case of the Dacia Spring already mentioned, the Tesla Model 3, some BMWs and Volvos or, from next year, the Cupra Tavascan, the jewel in the crown of the sports brand of Seat. Besides, what nationality would Volvo have? Swedish because of its origin and headquarters, or Chinese because it is owned by Geely?
It would also have to be decided whether publicly owned Chinese manufacturers, which are the vast majority, and others such as BYD should receive the same treatment. Already the first manufacturer of electrified cars (100% battery and plug-in hybrid) in the world, it is one of the few privately owned, with Warren Buffet among its shareholders.
- Motor industry