How Can China's Electric Vehicle Industry Avoid Isolation Amid Western Trade Blockades? (AI Translation)

【周刊提前读】欧美封堵 中国电动车产业如何避免孤立？

On May 14, the U.S. government started a new phase of the trade war against China by imposing a 100% tariff on electric vehicles (EVs) exported from China, raising the total tariff rate to 102.5% [1, 2]. Despite the symbolic significance of this move due to the minimal number of Chinese EVs exported to the U.S., it follows a trend of restrictive policies including the U.S.-China trade conflict of 2018 and the 2022 Inflation Reduction Act which excluded Chinese automakers from a $7,500 tax credit [2, 3, 4].

U.S. Treasury Secretary Janet L. Yellen urged the Group of Seven (G7) nations to adopt a unified stance on China's "excess capacity" in EVs, with countries like the EU, Turkey, Brazil, and India showing concerns [para. 5]. The European Union started an anti-subsidy investigation on Chinese-made EVs in October 2023 and is contemplating imposing duties as high as 60% [6, 7]. This aligns with recommendations from the American think tank Rhodium Group, which proposed a 40% to 50% duty to control the influx of Chinese EVs [para. 8].

The trade tensions affect the Chinese automotive industry's global market strategies. The China Passenger Car Association reported that NEVs accounted for nearly 50% of new vehicle sales in early April 2024 [para. 9], signaling a shift towards mainstream adoption in China. In 2023, China exported 4.91 million vehicles, including 1.203 million NEVs, illustrating their growing global presence [10, 11].

Trade disputes are not new in the auto industry. In the early 1980s, Japan "voluntarily" limited car exports to the U.S., leading to joint ventures like Toyota's partnership with General Motors [para. 12]. Chinese manufacturers seek a similar path but face more risks and uncertainties under current geopolitical fragmentation and trade protectionism [para. 13].

Concerns of overcapacity plague Chinese EV exports. Yet, market research groups and the Chinese Ministry of Commerce dispute this, citing that major Chinese car companies have a high capacity utilization rate [32, 34], and export prices for Chinese EVs are higher overseas, contradicting low-cost dumping accusations [para. 34]. The Chinese market's intense competition fosters continuous innovation [para. 29], with NEV exports climbing 2.3 times year-on-year by April 2024 [para. 27].

Despite protectionist measures from the U.S. and Europe, Chinese NEVs are more cost-effective compared to their Western counterparts [43, 44]. The U.S., grappling with higher EV production costs and market dynamics skewed towards large gasoline vehicles, projects slower EV market growth compared to China [45, 46, 47].

Innovation and investments in battery technologies, like lithium iron phosphate (LFP) batteries, drive Chinese companies' competitive edge [53, 55]. CATL leads the global battery market, overcoming technical limitations to enhance LFP battery efficiency [para. 55].

European and U.S. auto giants remain committed to China, reflecting collaborations like Toyota's partnerships with Tencent, and Nissan with Baidu [64, 65]. Moreover, companies like Volkswagen and Stellantis are engaging in joint ventures with Chinese firms like XPeng and Leapmotor to retain a competitive edge globally [66, 70].

Chinese manufacturers are also expanding production overseas, aiming to mitigate geopolitical risks. BYD and Chery are negotiating to set up plants in Turkey, aligning with the trend of Chinese investment in global markets [para. 74].

For enduring global success, Chinese car manufacturers must secure a significant market share outside China despite rising protectionism [para. 77]. Efforts to enhance market openness and cooperation with foreign car manufacturers can further mitigate risks of market isolation [para. 78]. The globalization journey for Chinese EV manufacturers has just begun, and achieving a foothold in key overseas markets is crucial for their continued growth and success [para. 79].