China poses greatest risk to Europe’s automakers: Allianz Trade report

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Chinese-built electric vehicles pose the greatest risk to Europe’s automakers and could cost them €7bn ($7.7bn) a year in lost profits by 2030 unless policymakers take action, according to an Allianz Trade report.

Policymakers need to meet the challenge with reciprocal tariffs on imported cars from China, do more to develop EV battery materials and technologies, and also allow Chinese carmakers to build cars in Europe, according to the report released on 2023 May 9 by the unit of German insurer Allianz.

The study echoes a warning by Stellantis CEO Carlos Tavares at this year’s CES that the European auto industry faces a “terrible fight” over with Chinese importers.

Europe’s car companies face a dual threat from the prospect of falling sales of their own vehicles in China, where local EV makers have been growing market share, and from rising sales of imported Chinese EVs — built in China by Chinese or Western automakers.

Global automakers have pledged to make a comeback in China with a large number of EVs in a fast-moving market where the pressure to cut prices is getting more intense.

A crowded market for all-electric SUVs in China is putting pressure on local automakers to export more vehicles to Europe. Chinese EV imports could cost the European Union over €24bn in economic output in 2030, or 0.15% of the bloc’s gross domestic product, Allianz Trade said.

But the “automotive-dependent economies of Germany, Slovakia and Czech Republic could face an even bigger hit” of between 0.3% to 0.4% of GDP, said the report, titled: “The Chinese challenge to the European automotive industry.

The stakes are high for Europe’s automotive industry: four out of five cars sold in Europe are assembled locally,” the report added.

Europe is also the world’s export powerhouse in the sector, with car trade generating between €70bn and €110bn in trade surplus for the European economy every year over the past decade.

The report said the U.S. Inflation Reduction Act (IRA) had made Europe a target for Chinese exports.

While Europe remains comparatively open to imported EVs — Tesla for instance, accounts for 20% of fully-electric car sales in Europe — the U.S. is “set to be a much tougher market to crack for Chinese vehicles” because of the IRA, the report said.