The detente between London and Brussels is supported by the Chinese threat

For Ursula von der Leyen, a tougher stance towards China was worth more than punishing Britain. As she heads to Beijing to protest “unfair” trade practices, the president of the European Commission proposes a postponement of post-Brexit rules that would have imposed tariffs on trade in electric vehicles between the United Kingdom and the EU. The indulgence says more about the efforts to toughen up against Beijing than about the relations between the bloc and its former member.

Batteries are the battlefield chosen by the EU to catch up in the energy transition. As China has cornered the global solar panel market, electric vehicles offer the opportunity to combine green technology with traditional manufacturing champions. The problem is that China is already a formidable competitor: it dominates the market for battery materials and its car producers are large exporters of electric vehicles.

Trade barriers between Britain and Brussels could have made it even more difficult for European groups such as Stellantis and Volkswagen to fend off Chinese competition. Under the agreement reached by Boris Johnson in 2020, any car with less than 45% of its parts coming from the United Kingdom or Europe had to impose tariffs of 10% from 2024, with the threshold rising to 55% in 2027. This would have cost to the industry 4.3 billion euros in three years, according to the European Automobile Manufacturers Association. Most electric cars still rely on Chinese batteries.

Brussels initially resisted requests from the United Kingdom to delay the rules by three years. But such a hard line would have made Chinese manufacturers in Britain more competitive against their EU counterparts, which in 2022 shipped almost £10 billion (€12 billion) worth of electric vehicles across the English Channel. . By then, China was already the second largest car exporter to the United Kingdom, behind the EU, according to the British Society of Automobile Manufacturers and Traders.

This growing threat puts pressure on the EU to support its own industry. In October, Von der Leyen opened an investigation to determine whether Chinese subsidies for electric vehicles constituted illegal state aid. But the investigation may be more of a concession to Member States’ frustrations than an effective countermeasure. By now defending the European car industry – and offering up to €3 billion in new subsidies alongside the tariff-free extension – Brussels will also demonstrate that it is willing to defend its economic interests ahead of its first in-person summit with Chinese leaders since 2019, which is celebrated today.

The reading for the United Kingdom is less clear. It is true that Brussels has backtracked on its refusal to tweak the Brexit trade agreement. But it also wants to make further delays in rules of origin requirements legally impossible. And it has no incentive to play nice in other areas where Britain might want looser terms, such as financial services. There are more dangers waiting.

Nio

The Chinese electric manufacturer Nio won a modest victory on Tuesday: its net loss was reduced to 4.6 billion yuan (600 million euros) in July-September, 25% less than in the previous quarter. Investors gave him credit for the good news. Hong Kong-listed Nio’s stock rose more than 4% on Tuesday. These results do not reflect CEO William Li’s decision to eliminate some projects and cut staff by 10% amid a general slowdown in electric sales in China.

But Li is already sacrificing some of the potential savings. In the last three months, it has more than doubled its sales staff, up to 5,700 employees, and is spending more than 3 billion yuan (400 million euros) to buy manufacturing assets from its partner JAC (Anhui Jianghuai).

Its effort to make more efficient and profitable green machines is a work in progress: the cost of sales grew 56% year-on-year, above the 47% increase in revenue, despite the drop in machine material prices. batteries and new financial support from the Government. Priced at less than 2 times estimated 2023 sales, according to LSEG, Nio also falls behind its counterparts Xpeng and Li Auto.

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