Written by Kjeld van Wieringen.
Europe is lagging behind the US and China in electric vehicle (EV) innovation and has become China’s largest EV export market. The double pressure of Western companies moving production facilities to China and Chinese companies that are looking to Europe to sell EVs risks disrupting the European automotive supply chain. As the automobile sector generates 7 % of the EU’s gross domestic product (GDP) and close to 14 million direct and indirect jobs, any threat against the sector should be taken seriously. This paper explores the future of European EVs and whether the EU car industry will manage to survive competition with China.
China has become the world’s leading EV-producing country in recent years, making over half of the world’s electric vehicles. The European Commission has stressed that China’s rapidly rising exports of cheap EVs and growing overcapacity constitute a threat to Europe’s automotive industry. China achieved its leadership position through subsidies and various competitive advantages such as its access to natural resources, its large internal market, cheap labour and cheap technologies.
The European Commission announced the initiation of EU anti-subsidy investigations into Chinese electric vehicle supply chains on 4 October 2023. This anti-subsidy probe is the largest EU trade case against China in history. The Commission concluded in June 2024 that Chinese-made EVs have benefited from unfair subsidies and implemented various provisional tariffs in response, ranging from 17.4 % to 38.1 %. In October, the Commission received the necessary support from Member States to impose definitive duties on Chinese EVs.
Stakeholders and experts have warned that tariffs will not be enough to protect EU competitiveness in the EV industry, stressing the need for investment and other measures, and that the EU needs a stronger industrial policy to this end. However, they do suggest that tariffs will help EU producers buy time in their transition towards EV production, and that tariffs may also serve to attract Chinese EV investment into the EU.
Ten policy experts in the field were surveyed for the development of four scenarios for the European EV industry by 2030. These scenarios are the following:
- Cutting-edge Europe: The EU and its EV manufacturers develop cutting-edge technologies and take a leading role in the global EV market.
- Slow electrification: Chinese carmakers have captured large shares of the European EV market through exports and local production as Europe lags behind.
- Overdependence: Europe is reliant on Chinese technology as almost all domestic European EV industry and brands vanish.
- Sanctions spiral: Chinese counter-sanctions following aggression against Taiwan cause massive disruption to EV supply chains.
If Europe is to steer its future to a positive outcome, it will have to use its existing policy instruments and build new ones to promote and protect its EV industry and foster meaningful partnerships to that end. All of this could involve a new EU industrial plan designed to stimulate electric vehicle manufacturing in Europe.
Read the complete ‘in-depth analysis’ on ‘The future of European electric vehicles‘ in the Think Tank pages of the European Parliament.
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