Grinding Gears

Articles From: Finimize
Website: Finimize

What’s going on?

China’s accelerating pace in the electric vehicle (EV) world has triggered a little road rage from the EU.

What does this mean?

China’s been looking to growth in EVs and green tech to offset its wobbly property sector. And so far, it’s working out. Just peek at Europe: Chinese EV brands are zipping through the market, and look set to claim 15% of Europe’s EV pie in a mere two years. But not everyone’s happy about that. The EU, for one, is crying foul, complaining that these affordable Chinese rides are only kept so cheap by hefty state subsidies. But China’s not one to be backseat-driven, and it responded to the bloc’s investigation pretty predictably: by claiming that its lead is down to nothing but innovation and efficiency. So watch this space – the EU’s probe could lead to tariffs on Chinese EVs, much like those already in force stateside.

Why should I care?

For markets: Good news for everyone else.

Chinese EV giants like BYD and Nio, eager to conquer Europe, didn’t anticipate this kind of speed bump – and this sudden disruption to their expansion plans saw their stocks take a dip. For lagging European automakers, that could provide a welcome chance to catch their breath. And as for the market leader, Tesla – well, the firm’s probably relishing the reduced threat of clashing bumpers with its arch nemesis BYD on European turf.

The bigger picture: Equal and opposite reaction.

This EU-China tiff is the latest episode in the global trade drama. But it’s a risky game. Higher EV prices could slow adoption and slam the brakes on Europe’s green transition. And if China hits back, then Europe’s car giants could feel the pinch – especially since China holds the keys to the EV battery kingdom. Plus, less competition might also mean less innovation in the longer run, and that’s a road no one wants to take.

Originally Posted September 14, 2023 – Grinding Gears

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