Of course this can only mean an increase in production cost and inevitably prices. The EU won't be doing itself any favors by refusing to compete with China.
The only scenario in which these tariffs make sense is if Chinese car makers are significantly ahead of EU car makers. But that would be an admission of a monumental failure of large parts of the EU economy and nothing which could be remedied by simple tariffs.
It also makes sense if Chinese car makers can only compete because of massive state subsidies, whose purpose is to bankrupt competition and gain control of the market. From the EU's perspective, it might make sense to penalize Chinese imports to prevent them from succeeding with this strategy. While the stated reason may not be the actual reason, it's not a hypothetical that China does use this strategy and has used it in the past.
My previous company was very successful in the Chinese market. But to get pass regulatory hurdles in order to be allowed to sell there, they first had to sell off a fraction of the company to CIC
Nothing about it was ever explicit but the way things work was pretty clear.
Please. The German car industry has also been flushed with billions in state subsides, especially since covid.
It's basically a polite mob shakedown. All that the likes of VW have to do is call up Scholz on speed dial and say "Look at all these thousands of workers and voters that depend on us selling more cars. You wouldn't want anything to happen to their jobs and families, would you? Think on how they'd vote if their livelihoods were to be impacted."
Pointing the fingers at a China for state subsidies is a bit hypocritical, but it's very effective argument at local companies getting more state subsidies.
>Please. The German car industry has also been flushed with billions in state subsides, especially since covid.
Can you name specific numbers? I haven't found anything except for VW paying subsidies for EVs from their own pockets.
I think you got the situation reversed. VW, BMW, Mercedes are paying massive amounts of taxes, they and other large companies subsidize Germany, not the other way around.
> It's basically a polite mob shakedown. All that the likes of VW have to do is call up Scholz on speed dial and say "Look at all these thousands of workers and voters that depend on us selling more cars. You wouldn't want anything to happen to their jobs and families, would you? Think on how they'd vote if their livelihoods were to be impacted."
This would be a lot more convincing if the companies you refer to were in favor of tariffs on Chinese EVs.
>This would be a lot more convincing if the companies you refer to were in favor of tariffs on Chinese EVs.
Who said they aren't? They also know it would be tit for that. All those German car makers who built unfathomable fortunes on sales in China would also now face increased tariffs.
The solar and battery market share numbers are also interesting. Not saying it is solely due to subsidies, but the Chinese companies utterly dominate these sectors, and I can’t help but think it will be hard to compete now that the supply chain is there.
US car companies get more from the USG and California than Chinese car companies get from the CCCP. If Europe can't compete with Chinese and US subsidies on passenger cars, they're in for some real pain in that industry.
Do you have any sources for the subsidies given to chinese car makers?
On my cynical side I think the EU car makers have a huge leverage on the local manufacturing jobs and in consequence the public opinion. That can result in them bending laws to whatever they want (see the consequences for the dieselgate in EU so far). It's easy to not want to compete when you don't need to.
Even if you assume the argument for JV being bad for business is valid, why only bring that up now that they're against the wall on their own local market?
The Chinese "companies" are all controlled by the goverment. CCP invests in different areas to advance their 25-50 year long term plans.
We have seen many examples of a small Chinese company suddenly shelling out billions to buy a much larger competitor. Where do you think that money came from??
In that case the EU strategy is still awful, as they are essentially just sabotaging their own companies, which currently are competing in China. This just makes certain that EU companies will loose to Chinese competitors, just in a different market.
The right response isn't refusing the competition, the right response would be fighting China by creating an equal footing.
I think the situation has a huge asymmetry and the EU seems dedicated on eradicating the strengths of their own companies.
they have no choice if they want to sell in China. Look at Google if you want to see what happens if they refuse.
> Than maybe the EU can start there?
I think tariffs work just as well and are less complicated. It's not like Chinese companies would accept the same conditions.
End result will be the same, decoupling. Long term this is better, more industrial infrastructure in EU serving global market. Less support for Chinese companies if they're limited to home country, less industrial base there to go to war.
>more industrial infrastructure in EU serving global market
What? No EU companies will serve any kind of global market. That is the point of Tarifs. The companies will suffocate and loose any kind of actual global presence.
Your focus on the JVs missed the point that the Chinese JV partners are not the competitive ones in EV. These are state enterprises widely ridiculed in China for clinging to the fat margins of ice cars, getting played by their Western partners with false hopes of technology transfer and now begging for mercy from their ev competitors. They are just as threatened as their Western partners and funnily enough, any measure to protect them from extinction would in turn benefit their Western partners. Look up Byd's new hybrid dm5.0 tech. These, not pure EVs, will likely be the game enders for ice cars in China.
China can afford short term to massively subsidize their auto industry if this means it will completely wreck the local industries in Europe and US. Because once an industry is wrecked, it's very expensive to unwreck it.
The only thing the EU can do is make sure it keeps the internal market and its players on equal footing.
The EU cannot make the rules in China or regulate their market and China rarely plays by any rules anyway, even the ones they ostensibly set. In other words, China has broken trust on every possible occasion so any "ground making" today is worthless tomorrow. How many times would you invest in the hopes of "this time it will work" with a partner who keeps pulling the rug from underneath you every time?
>The only thing the EU can do is make sure it keeps the internal market and its players on equal footing.
Plainly false. It can do what is doing now, ruining it's local economy or it can fight to make sure EU companies can function from a position of strength.
>How many times would you invest in the hopes of "this time it will work" with a partner who keeps pulling the rug from underneath you every time?
EU car makers are very successful in China. Every German car maker opposes the Tarifs for that reason.
> I don't think you understand how the Chinese car market works at all [...] This is about every major car maker having set up large JVs. The distinction between Chinese and EU companies is increasingly blurred
Both of these quotes are yours. In a feat of extreme cognitive dissonance you can't seem to make up your mind about how that market works. So this and the large volume of your misinformed comments sure starts to sound like trolling to me.
There's no "EU manufacturer" in China, there are EU brands and tech, and Chinese-EU JVs. As I said before China has broken trust with every opportunity and even has an internal legal framework to support that. What local EU/US car manufacturers are doing is chasing short term profit because the executives and shareholders want to get it in their lifetimes. Après moi, le déluge.
But EU/US interests are far longer term than the average company CEO's term. So "let's make a quick buck for the next decade or two and then realize we're outcompeted to an inconceivable degree" is not an option for anyone who's not looking to completely sabotage their internal economy.
I don't think you understand how the Chinese car market works at all.
This isn't about VW selling German cars in China. This is about every major car maker having set up large JVs. The distinction between Chinese and EU companies is increasingly blurred.
Fight back how? The way this works is that Chinese people consume less than what they produce. Extreme example would be that Chinese workers are slaves who only get the food necessary for survival. How do you compete with that strategy?
The correct counter-strategy is that all major economies - USA, EU, India, etc. - enact tariffs.
What are you talking about? Have you seen Xiaomi EV car factory? Most of labor is done by robots. And part of labor that needs to be done by humans can be exported to India where labor is cheaper than China.
You are missing the alternative cost, which is Europe is lacking quality manufacturing jobs and when there is no jobs, there is no reason why people should pursue education to do said jobs. In the long run it robs the countries of economic potential and future businesses won't even start due to lack of people capable of doing the needed jobs.
Chinese lax approach to human and employment rights is a form of subsidy that is countered by tariffs.
If these tariffs result in a major trade war between the EU and China hundreds of thousands of manufacturing and engineering jobs in the EU will be lost. EU car companies and their suppliers heavily rely on selling to China, if they can't do that they will have to shrink.
Not competing is the greatest threat to car makers. Which is why all major German car makers oppose the Tarifs.
> and rest of the world where China is also going to be tariffed
Where? In US? Because in majority of the world they will not get tarrifed. This is wishful thinking. You are closing the biggest market for yourself (China) and then you are not competitive in the rest of the world so either way you lose. The only way to win is to stay competitive.
All China has to do is build more US and Mexico factories for tariff avoidance. China's already in the US with Volvo and will be in Mexico in a year or two with BYD and others. They won't be boxed in and any suggestion they will be comes from someone who doesn't even understand USMCA and other mainline trade agreements.
>Why?, they can sell more in home region and rest of the world where China is also going to be tariffed.
The market is already saturated by them.
These companies will instantly loose a very significant amount of revenue and loose access to a big market. This can only mean cuts in the EU as well, as engineering and manufacturing for China is lost.
Oh no, the JV where china owns 51% is going to go bankrupt.
> The market is already saturated by them
there's market share to take from Chinese companies elsewhere since they are going to be tarriffed everywhere else.
> These companies will instantly loose a very significant amount of revenue and loose access to a big market.
You are missing the significant market being opened up and protected via tarrifs where China companies need to pull from. That's larger then China market
VW maintained its technological lead over Chinese competitors in internal combustion engines for decades, despite JV and tech transfer agreements. The tech transfer is much less significant than you seem to think.
China’s competitive advantage is cheap labour brought about by poor workers rights and a low quality of life. Innovation has nothing to do with it. It is hilarious that you think European economies want to compete with that. The tariffs eliminate the exploitation that China can leverage that European manufacturers cannot. They are actually levelling the playing field in this market - you know - making it more competitive through innovation (the thing you apparently like) vs maximising exploitation of the workforce.
The situation is far more complex than that and is primarily rooted in issues with Chinese real estate and their abortive attempt at a services-based economy.
Japanese cars didn't originally just appeal in the US because they were cheaper than the domestic ones, but because they were of higher quality and more advanced than the crap GM or Ford were shoveling out the factory doors.
Chinese companies can also move production to cheap labor EU areas like Slovakia, Hungary and Romania to escape tariffs, and if Chinese players move the goal posts on quality and innovation in the EV sector, then the EU domestic players are screwed, since the quality on affordable EU cars is nothing to write home about, leaving them banking on the brand prestige and domestic history to attract customers, but that goes away over time as proven by the success of Japanese and Korean players in the west which were also initially ridiculed for being knockoffs.
Consumers vote with their wallets, and the appeal of inferior domestic brands just because they're local is very limited. Do you see Americans rushing to fly Boeing just because they're an American brand?
BMW, EV, and Seriously - that's something I can't agree. I see the opposit. They are lagging behind technologically. They put their stakes on conventional cars and didn't invest much in EV for a long time.
I recommend the work of Michael Pettis, his views are becoming mainstream in the West and economists are increasingly supportive of these tariffs.
China consumes less than it produces, they essentially give their workers less than what they produce. This helps Chinese manufacturers and Western consumers, but it harms Western manufacturers. Once Western manufacturers get destroyed, it may be too expensive to rebuild them and make them catch up with current Chinese technology.
A lot of comments in this thread put an almost moral dimension to this. "China is forcing this by slave labour/subsidies". "No they aren't". "It's still wrong".
I think for the most part, subsidies and tariffs don't have a moral dimension. They operate at a level above that, where there barely is "cheating", only balance of power and economics.
So neither is it evil that China is using subsidies to subvert Western industries, nor that the West responds in kind. Still, it needs to align with the real goal.
Fwiw I listened to a podcast on "the rest is history" (episode about Dickens I think) where they tangentially mention that late 19th century USA had no respect for foreign copyright, and IP theft from Europe was rampant. USA did it not because it is evil but because it could.
The West found itself in a different equilibrium for a few decades, where cooperating countries had more of a benefit from playing (mostly) by the rules than not. Now China is breaking these rules.
I'm concerned about where China, and indeed the West, are going, but not because either their subsidies or Western tariffs are morally wrong.
I don't think that there are any doubts that tariffs work. But I don't see a scenario where this isn't a very significant downside for EU car manufacturers.
China is VWs biggest market. BMW, Renault, Mercedes all have massive interests in China, which very quickly end the second China retaliates on the tariffs.
Currently EU manufacturers are competing in China. If a trade war happens that will end and both sides will retreat to their own respective regions, currently that is clearly worse for EU car makers. All German car makers oppose these tarrifs for exactly those reasons.
Yes but for how long? China was very successful at baiting Tesla and raising their own EV industry. If anything it's proving that businesses can't rely on Chinese markets even without a trade war.
I think it's hard to say that Tesla products are at fault here when Tesla has been clearly setup to grow Chinese EV industry and now can't compete due to Chinese regulations, subsidies and a massive campaign to promote Chinese cars. Just tune in to tiktok - it's very blatant.
All I'm saying is that perception of Chinese EVs is very inflated compared to objective reality. There are plenty of opportunities left in the automobile market.
German automakers oppose it because they will be hit the hardest. They focus on premium market. They don't have much competition in that market especially for conventional cars. And they don't care much what will happen later and with others.
But the other side of the wall is that all other low and mid price segment manufacturers (Renault, Stellantis, etc.) welcome the tariffs. Because that's where the automakers from China compete (unfairly).
Some part of the inflation now is also because of the import new import tariffs (my country first). Countrys with new high import tariffs have a higher inflation rate.
yeap. US dictated decoupling and deglobalisation which will lead to increased geopolitical tensions and maybe WWIII. Fun.
This is what you get when there is a gargantuan military industrial "defence" complex who was formed during the cold war and works best in the presence of an enemy.
The true enemy seems to be the average citizen in the long run of course.
I agree with everything here, though I'd add that part of the "success" of the military industrial complex is distorting how the average citizen thinks about far-flung countries it wants to be perceived as "enemies" - the anti-Chinese sentiment and misinformation, even on HN, in is simply staggering. The current world feels like a real-life incarnation of 1984.
hopefully we will be able to buy €10,000 EV such as BYD Seagull in the UK - otherwise, as seems most likely, we will stupidly follow EU / US tariffs, “kill” the non existent UK car manufacturers (Tata, Renault Nissan, Ford, GM) and give up on a way to go net zero affordably - ie the worst of both worlds [no doubt the chinese would happily invest in UK onshore screwdriver factories maybe without the massive state subsidies that the EU makers demand
The only scenario in which these tariffs make sense is if Chinese car makers are significantly ahead of EU car makers. But that would be an admission of a monumental failure of large parts of the EU economy and nothing which could be remedied by simple tariffs.