By the end of October, the European Union will make a final decision on what some analysts are calling the EU’s biggest trade case against China in more than a decade, CNBC notes.
But automakers and countries are divided over whether to impose tariffs – so far as high as 36.3 percent – on Chinese electric vehicles. A German auto trade association says they will hurt German automakers, which have a significant presence in China. Germany has a significant car trade surplus with the country. Italian and French automakers, meanwhile, have almost no presence there.
China exports cars to countries around the world, and both tariff advocates and trade and industry analysts point to China’s support for its domestic manufacturers as justification for the tariffs.
“We’re dealing with an economy in China where credit money is allocated by the state and not by the market, and the state chooses sectors it wants to promote,” said William Reinsch, senior adviser and Scholl president of International Business at the Center for Strategies and of International Studies, a bipartisan think tank in Washington.
“In this kind of economy — if you do that — you always have overinvestment, you always have excess capacity, you always have overproduction, and then that overproduction gets pumped into the rest of the world.”
The competitive advantage
Chinese automakers can produce a car for about $5,500, said Felipe Muñoz, a senior analyst at JATO Dynamics, while it costs European automakers closer to $20,000.
That huge cost advantage is partly explained by government subsidies, he said.
“But it’s also explained by the higher economies of scale,” Muñoz continued. “It is explained by lower labor costs and the fact that when it comes to electric cars, China, unlike the rest of the world, has already secured the supply chain for batteries.”
Source: OT
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