By the end of October, the EU will make a final decision on what some analysts say is the bloc’s biggest trade case against China in more than a decade.
But automakers and countries are divided over whether to impose tariffs on Chinese electric vehicles, which have so far been as high as 36.3%. Germany’s auto trade association said they would hurt German carmakers with significant operations in China. Germany runs a large automotive trade surplus with the country. Meanwhile, Italian and French carmakers have almost no presence there.
China has been exporting cars to countries around the world, and tariff supporters and trade and industry analysts have pointed to China’s support for domestic manufacturers as justification for the tariffs.
“We are dealing with a Chinese economy where credit is allocated by the state rather than the market, and the state chooses the industries they want to promote,” said William Reinsch, senior adviser and Sauer chairman of the Department of International Commerce. and the Center for International Studies, a bipartisan think tank in Washington, D.C.
“In this kind of economy, if you do that, you’re always going to have overinvestment, overcapacity, overproduction, and then that overproduction gets passed on to the rest of the world.”
Felipe Muñoz, senior analyst at JATO Dynamics, said it costs Chinese automakers about $5,500 to produce a car, while European automakers’ costs are closer to $20,000.
This huge cost advantage is partly the result of government subsidies, he said.
“But this can also be explained by higher economies of scale,” Muñoz continued. “This is because labor costs are lower and when it comes to electric vehicles, unlike other countries in the world, China has secured the supply chain for batteries.”
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