Europe cannot rely on trade barriers to counter China's growing influence in the automotive sector. After EU trade commissioner Maroš Šefčovič visited China, Brussels and Beijing agreed to cap imports of Chinese hybrid cars for the next few years to ease simmering trade tensions. This voluntary export restraint aims to address the EU's roughly €1bn daily goods trade deficit with China.
The agreement follows a pattern seen years ago with battery-electric vehicles, when Chinese EV imports flattened due to anti-subsidy tariffs pushed by France but opposed by Germany. Now, German automakers view Chinese hybrid imports as a threat, prompting Paris and Berlin to urge stronger trade defence measures. While the hybrid car cap may relieve short-term pressure, it offers only temporary respite.
Chinese carmakers, bolstered by home subsidies and greater innovation, remain formidable competitors. The deal risks incentivizing Chinese firms to establish EU operations, which could benefit industrial policy but won't aid incumbent European companies. The editorial warns that protectionism distracts from the real challenge: improving domestic competitiveness.
European automakers have lagged by distributing dividends and resisting internal combustion engine phaseouts, while Brussels delays reforms to boost competitiveness. Rising imports, the article argues, can spur innovation through competition—a salutary effect policymakers should not overlook.
Source: Financial Times Companies · Summarized by HeadlinesBriefing