West scrambles to respond to Chinese electric vehicle threat
BMW’s decision to invest more than £600mn to make electric Minis in Oxford has given a much-needed shot in the arm to the UK car industry in the latest example of how the west is scrambling to respond to a wave of electric vehicle competition from China.
UK car production has fallen 40 per cent since the start of the pandemic thanks to plant closures, component shortages and decisions by manufacturers to move operations abroad. Brexit has been a key issue: China’s BYD, the world’s largest seller of electric and hybrid cars, blamed it for ruling out the UK as a location for its first European factory.
The threat from China — the world’s largest market for cars — is all-encompassing. Over the past 15 years, it has built up an EV industry that is now making a concerted push into Europe with sales that could reach 1.5mn vehicles by 2030. Last week, BMW chief Oliver Zipse said the EU ban on combustion engines from 2035 was pushing European makers of cheaper cars into a price war with Chinese rivals that they were unlikely to win (although an exemption from Brussels for cars powered by e-fuels may provide a bit of a lifeline).
China’s incursion into Europe was on full display at last week’s Munich motor show, with its carmakers taking up almost two-thirds of the floor space. Its industry has capitalised on the experience of joint ventures that international auto groups were required to form, while simultaneously placing significant bets on electric batteries.
Underpinned by vast state subsidies and unchecked bank lending, China, which has already cornered the market in the wider clean tech supply chain, is building battery plants far beyond levels needed for domestic demand, while manufacturers including world leader CATL are planning to expand into the US and Europe. It is also pouring record amounts into metal and mining investments to defend its position.
The most significant response in the west has been the US Inflation Reduction Act, which has pumped money into clean tech, including electric vehicles and batteries. However, the investment has failed to quell discontent from autoworkers whose threatened strike over pay could deliver a multibillion-dollar blow to the US economy.
In the EU, member states are being allowed to “match” incentives from elsewhere, while economy commissioner Paolo Gentiloni has urged Brussels to go further.
Meanwhile, the UK and Germany are trying to postpone tariffs on EV sales between the UK and the EU after industry warned that the measure would backfire. At present, Britain’s post-Brexit trade deal means levies of 10 per cent will be imposed on EVs shipped across the Channel from January if they have batteries made outside Europe.
France has introduced its own plan to subsidise EVs based on the emissions of their producers, in effect hitting Chinese manufacturers whose factories are run on electricity powered by coal.