The European Union is being urged to encourage Chinese carmakers to establish more factories within the bloc as part of a potential deal to eliminate punitive tariffs on imported Chinese electric vehicles. This proposal comes from Ola Källenius, the head of Mercedes-benz and president of the European Automobile Industry Association (Acea). Källenius suggests that this approach mirrors the strategy China employed decades ago when it required European automakers to invest domestically to access its market.“No one disputes the fact that fair competition is a legitimate debate,” Källenius said in an interview. “The question is: which tool will you use? Do not rush the protectionist steps because we have a lot to lose.”
Last October, the EU imposed tariffs of up to 45% on Chinese electric car imports, citing unfair subsidies and launching investigations into dumping practices.Beijing retaliated by imposing tariffs and opening probes into European meat and dairy products. german automakers, including Mercedes-Benz, Volkswagen, and BMW, have been notably vocal in their opposition to these protectionist measures. They fear retaliatory actions from China and a further decline in sales, as Chinese brands like BYD continue to gain market share with their advanced and competitively priced electric vehicles.
Källenius highlighted the historical precedent of German automakers forming joint ventures with Chinese partners in the 1980s to establish themselves in the Asian market. “When we came to China, Chinese policymakers told us: Manufacture here if you want to seize control of the market,” he said. he believes a similar arrangement could be beneficial for both parties today.“My understanding is that European policymakers have said the same thing about the Chinese. I think these are legitimate talks, and this means that you will open the markets, create a great deal of fair competition, and then let the best player in the market win.”
The EU is also considering standards that would require Chinese companies to set up factories in Europe and share technological know-how. As a notable example, BYD plans to build vehicles in Hungary, while Chinese battery giant CATL has partnered with Stellantis to construct a €4.1 billion lithium battery factory in Spain.
Källenius warned that the current tariffs could harm the automotive industry,emphasizing China’s critical role in the global supply chain,from raw materials to advanced chips and components.“We just want to warn policymakers: Don’t forget what has made us so triumphant in this complex world,” he said.
The European Automobile Industry Association recently sent a letter to EU leaders, urging them not to respond to tariffs threatened by US President-elect Donald Trump. Mercedes-Benz,which relies on the Chinese market for about 30% of its global sales,is particularly vulnerable to escalating trade tensions.
key Points at a Glance
| Aspect | Details |
|————————–|—————————————————————————–|
| Proposed Solution | Encourage chinese carmakers to open factories in the EU to eliminate tariffs |
| Current Tariffs | Up to 45% on Chinese EV imports |
| German Automakers’ Stance | Opposed, fearing retaliation and declining sales |
| Historical Precedent | German automakers formed joint ventures in China in the 1980s |
| EU standards | Require Chinese companies to set up factories and share technology |
| Recent Developments | BYD to build vehicles in Hungary; CATL to construct a battery factory in Spain |
As the EU and China navigate this trade dispute, the automotive industry’s future hangs in the balance. will policymakers heed Källenius’s warning and prioritize fair competition over protectionism? Only time will tell.
