Germany’s most extensive vehicle market in China
As it grows larger, is it pushing Germany out?
Affordable and reliable electric vehicles are being mass-produced
Last year, China’s BYD introduced the small electric Seagull, priced at approximately $9,380, making it exceptionally competitive. The automobile industry is concerned about the potential impact of these affordable vehicles entering overseas markets.
Currently, the U.S. tariff on eco-friendly Chinese vehicles is around 25%. However, this may not be sufficient to counter the influx of low-priced Chinese cars. In response, the U.S. government has increased tariffs to 100%. Additional sanctions are also expected in related areas, such as batteries and solar cells, to mitigate further the competitive threat these low-cost vehicles pose.
Europe’s tariff policy towards China
Germany is the first to say NO
The European Union has also implemented countermeasures to address the influx of Chinese automobiles into the global market. The European Commission has established regulations that impose additional tariffs of up to 38.1% on Chinese EV manufacturers. However, the German Association of the Automotive Industry (VDA) issued an official statement urging against raising tariffs on Chinese EVs.
The concern is that the entry of cheap Chinese vehicles could undermine the competitiveness of German cars in the European market. So, why does Germany oppose tariffs on Chinese vehicles? The answer lies in the potential for Chinese retaliation. If Europe imposes tariffs, China will likely respond with retaliatory measures, which could negatively impact German and European industries that rely on the Chinese market.
In the past, joint ventures provided immediate benefits
Until now, the Chinese market has been one of the largest markets for German vehicles. Given this situation, the German industry is wary of retaliation from China, a significant export market where hundreds of thousands of units are sold annually. Consequently, German auto brands oppose the European Union’s tariff increase.
However, despite these efforts, German vehicle sales in the Chinese market have declined. This is partly due to the rise of Chinese vehicles. In the past, foreign companies had to establish joint ventures with Chinese firms to enter the Chinese market. German companies, recognizing the potential of the Chinese market, embraced these joint ventures and initially recorded substantial sales. However, this partnership has had a vast butterfly effect, where the initial decision led to unexpected outcomes, such as the strengthening of Chinese automotive capabilities and increased competition for German brands.
Evaluation of raising potential big competitors like tiger cubs
China is closely chasing Germany
Through joint ventures, German automobile manufacturing technology was introduced to China, significantly contributing to developing the Chinese EV industry and strengthening the Chinese EV market. However, the three major German automobile companies, initially hesitant about electrification, have become less competitive in the evolving Chinese market. As a result, Chinese consumers do not necessarily prefer purchasing more expensive German vehicles.
Changes in the Chinese automobile market are ongoing. BMW’s sales volume has decreased by 4.2%, and Mercedes-Benz’s by 6.5%. Meanwhile, Chinese luxury EV brands such as Li Auto, Nio, and Seres are rapidly gaining market share, challenging the dominance of traditional German auto brands.
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