As the world’s car makers gathered in Munich this month for the International Motor Show Germany, it was impossible not to sense the shifting tectonic plates underneath Europe’s $650 billion industry.
Xpeng Motors, also known as Guangzhou Xiaopeng Motors Technology, said it would sell electric sedans and SUVs in Europe from next year, starting with 15 to 20 distribution partnerships this year and doubling that in 2024. that Brussels had kicked off an investigation into China’s “unfair” public subsidies to its industry.She didn’t mince words. “Global markets are now flooded with cheaper Chinese electric cars, and their price is kept artificially low by huge state subsidies. This is distorting our market,” she told the European Parliament.
“Europe must find a way to prevent this happening. The US is already doing it with the Inflation Reduction Act, and Europe must find a way too,” says Felipe Munoz, a global analyst at research firm JATO Dynamics. The European car makers have seen the writing on the wall. But they face steeply rising energy costs following Russia’s invasion of Ukraine, and a daunting task to secure the necessary inputs for their EVs. More broadly, the overhaul of their huge, complex operations – long geared towards making ICEs – has been laborious work.
A combination of tariffs and the Inflation Reduction Act have put a wall around the US market that the Chinese might find almost insurmountable. This only adds to Europe’s allure. A trade war would only hasten this blow, which would disproportionately hit the Germans over the less China-focused French. Unsurprisingly, therefore, the Germans are more cautious in their rhetoric.France’s Economy Minister Bruno Le Maire welcomed von der Leyen’s announcement, saying “Europe must be able to fight back”. Standing beside him, German Economy Minister Robert Habeck was more emollient.
BMW and Mercedes are focusing on the premium end of the market, relying on what German Chancellor Olaf Scholz calls “brand heritage” to fend off the Chinese.