European businesses have expressed concern over China’s focus on investing in electric vehicle capacity, arguing that it has overshadowed efforts to stimulate domestic consumption. The EU recently launched an anti-subsidy probe amidst fears that Chinese exports could flood the European automotive industry, similar to what happened to the solar panel sector. China’s policy of prioritizing manufacturing and exports, particularly in the electric vehicle sector, has raised questions about the sustainability of this approach.
The European Chamber of Commerce in China highlighted the need for “demand-side policies” and a more predictable policy landscape to support domestic consumption and reduce the need for excessive savings. They called for a balance between supporting manufacturing and stimulating consumer demand. The chamber also expressed concerns about the rapid scale-up of electric vehicle production, which may exceed market demand.
Analysts at UBS predict that China’s expertise in electric vehicles will lead to a significant shift in the industry. By 2030, they anticipate that Chinese brands will account for 20% of cars sold in Europe, compared to just 3% in the previous year. However, foreign executives argue that China’s strategy of overinvestment and excess capacity, fueled by subsidies and local government support, has harmed other industries.
China’s lithium-ion battery factories have experienced low utilization rates, with only 45% capacity utilized last year. This excess capacity is expected to increase further with the country’s pipeline of new projects, surpassing the demand for converting the entire car fleet to battery electric power by 2030. Analysts estimate that China’s automotive industry already faces output that far exceeds demand.
The European Chamber of Commerce has called on the Chinese government to prioritize market forces, increase productivity, and create a business environment that is less politicized. They also urge China to allow for open discussions and debate about the economy, as well as continue its low-carbon transition.
It remains to be seen how China will respond to these concerns raised by European businesses. The EU’s trade deficit with China has been steadily increasing, highlighting the need for a more balanced economic relationship between the two regions. As EU trade commissioner Valdis Dombrovskis prepares for talks with China, fair and transparent principles will be essential in addressing these issues.
Sources:
– European businesses urge China to stimulate domestic consumption. Retrieved from [source]
– China’s electric vehicle capacity sparks concern in Europe. Retrieved from [source]