How Volkswagen might pave the road for Chinese EV’s in Europe
On 4 October 2023, the European Commission initiated anti-subsidy investigations into the surge of battery electric vehicle (BEV) imports from China. European Commission President Ursula von der Leyen pointed out that "huge state subsidies" were keeping the prices of these electric vehicles artificially low, leading to an investigation that might result in countervailing tariffs. Interestingly, amid this regulatory storm, Volkswagen Anhui, a joint venture between Volkswagen and Anhui Jianghuai Automobile Group (JAC), has begun production of the Cupra Tavascan, signaling a strategic move that could influence the trajectory of Chinese EVs in Europe.
Volkswagen & JAC
Volkswagen Anhui's venture into the European market is a key element of Volkswagen's broader strategy to electrify its lineup. The Cupra Tavascan, designed to meet the preferences of both European and Chinese consumers, is the first offering in this endeavour. The production coincides with the inauguration of Volkswagen Anhui's third MEB plant in China, emphasizing the company's commitment to the local electric vehicle manufacturing industry.
The move also raises questions about Volkswagen's choice to export EVs from China to Europe, especially considering the company's lobbying effort for the EU Commission's investigation into Chinese EV manufacturers. With Volkswagen's long-standing presence in China, Volkswagen Anhui emerges as a crucial player in the company's bid to cross the shifting automotive landscape.
Dual Circulation Policy in Action
The venture mentioned above is not merely a response to regulatory challenges but also aligns with China's economic strategy, particularly the Dual Circulation policy. Enacted to bolster domestic consumption and reduce reliance on foreign markets, the policy emphasizes the importance of both internal and external circulation of goods and services.
In the context of the automotive industry, this means that while Volkswagen Anhui focuses on catering to European consumers with the Cupra Tavascan, it simultaneously contributes to the domestic market, aligning with China's vision for self-sufficiency in key industries. The production of electric vehicles (EVs) for export to Europe serves as a prime example of how the Dual Circulation policy can be implemented, ensuring a balanced approach to economic growth.
China’s Overcapacity & European Market Growth
Chinese EV manufacturers are increasingly looking towards the European market due to overcapacity issues and slowing demand within China. With an estimated excess auto production capacity of 10 million vehicles annually, China is actively seeking export opportunities. Europe, with its stringent emissions regulations and favourable trade relations, has become a vital destination for Chinese electric vehicle exports.
Customs data indicates a significant surge in Chinese new energy vehicle shipments to the EU, with a notable 112% year-on-year growth in the first seven months of 2023. The European market share for Chinese EVs has risen to 8%, with projections indicating a potential increase to 15% by 2025.
Implications on the Road Ahead
The outcome of the European Commission's investigation will significantly impact both Chinese and European automakers and the global automotive industry. As sustainability and green energy continue to be focal points, incentives for producing environmentally friendly transportation are expected to persist.
There is potential for positive implications if joint ventures between Chinese and European manufacturers are established to serve the growing demand for EVs. Such collaborations could strengthen EU-China relations and contribute to sustainable mobility solutions for citizens on both continents. As Volkswagen Anhui's Cupra Tavascan inches closer to European roads, it becomes a symbol of a complex and evolving relationship between global automotive players and the future of electric mobility.
As we discussed in our article last year “What is happening with China’s EV market and its Exports to Europe?”, we expect more of these JV’s, like Volkswagen and JAC, are bound to be established in the near future. It’s only a matter of time before a Chinese car manufacturer goes to Europe and sets up a joint venture with a European car brand – on European soil.
Author:
Jonathan Xu
Sources:
Think Thank, European Parliament
“What is happening with China’s EV market and its Exports to Europe?”, Benelux Chamber of Commerce
VW’s China Venture Launches Debut EV, Caixin Global
Picture: ArenaEV.com