Trade commissioner Maroš Šefčovič’s informal auto export quota with China for hybrids and plug-ins closed a loophole after EU anti-subsidy duties on EVs in 2024, but tariffs have failed as Chinese exports shifted to hybrids. European companies must radically improve to compete, as legacy carmakers struggle despite tariffs tilting the field in their favour. Overall EV imports from China continue to rise, with Chinese-origin firms gaining market share at Tesla’s expense.
Volkswagen sees higher EU EV sales but is hammered in China, with its CEO calling for more EU help. BMW’s advanced Neue Klasse platform still lags behind Chinese competitors. Transport & Environment finds Chinese EVs price-competitive in all EU categories despite tariffs.
BYD benefited from past state support but refined operations in China’s fiercely competitive domestic EV market, while European firms focused on incremental ICE advances. As Hosuk Lee-Makiyama of ECIPE noted, Stuttgart optimised diesel engines while Anhui dreamed of self-driving electric cars. China’s R&D as a share of GDP now far exceeds the EU’s, with German R&D growing slowly.
European firms prioritised dividends over tech investment, unlike US, Chinese, and Japanese peers. Early 2020s focus on US tax credits blinded Europe to China’s imminent challenge. Germany’s lobbying to weaken the 2035 ICE phaseout persists, as shown in the Merz-Macron meeting.
Plug-in hybrids in Šefčovič’s deal appeal to European makers due to existing ICE supply chains and high margins, but may be transitional as battery EVs dominate. Quotas risk becoming long-term managed trade, raising consumer prices and entrenching underperforming incumbents. China is unlikely to extend such quotas to robotics, chemicals, renewables, or drones, where it holds technological leads.
Source: Financial Times Companies · Summarized by HeadlinesBriefing