Battle for the electric car market
The EU and US fight to keep out low-cost electric cars from China has begun. While Brussels prepares punitive import tariffs, Washington says Chinese vehicles threaten national security.
SHENZHEN/BERLIN (own report) - The West’s battle against an export offensive by Chinese electric car manufacturers is getting serious. While the EU Commission pushes ahead with its anti-subsidy investigation, which could lead to hefty punitive tariffs on Chinese electric vehicle imports this year, US President Joe Biden has now announced that smart cars from China may pose a risk to American national security. With their cameras and sensors they are deemed capable of spying on the US. This is, Biden says, unacceptable and must be prevented. The biggest threat to Western manufacturers comes from the BYD Group, based in the south-eastern Chinese high-tech metropolis of Shenzhen. At the end of last year they became the world’s largest electric car manufacturer, ahead of Tesla, and are getting ready to expand into North America and, above all, into the EU. The company plans to sell 120,000 electric cars in Germany alone in 2026. This makes BYD a dangerous competitor for the Germany’s legacy automotive companies. Last week, the carmaker made headlines by exporting 3,000 electric cars to Germany in the first of its own specially-built car carrier vessel.
Becoming number one
The abbreviation BYD stands for the Chinese name Naman Biyadi, but is often rendered in the West with the slogan “Build Your Dreams”. The group was founded in 1995 in the high-tech metropolis of Shenzhen in the south east of the People’s Republic. It initially expanded rapidly as a battery maker and is still one of the world’s leading companies in the sector. According to various estimates, it is either the second or third largest producer of electric car batteries – after the Chinese number one, CATL, and before or just after South Korea’s LG Energy Solutions. After several failed attempts, BYD has achieved a breakthrough into automobiles in recent years, making not only with plug-in hybrids but also purely electric cars. In 2023, the company’s worldwide car sales passed the three million mark for the first time, including around 1.6 million plug-ins. BYD was still behind Tesla for the whole year, since the US company sold around 1.8 million electric vehicles. However, the Chinese rival is growing so rapidly that it will soon catch up: in the first quarter of 2023, selling almost 265,000 electric cars, BYD was still far behind Tesla (423,000 units); yet by the fourth quarter it was able to take the quarterly lead worldwide with 526,000 (Tesla: 485,000).[1]
Leaping to Germany
BYD has long been the leader in the electric car market within China. Indeed, it comes a close second to Volkswagen in the overall car market, including combustion engines. The company now has its sights on conquering European markets, including the German market. So far, its position is still weak, selling fewer than 4,000 electric cars across Germany last year. But given the opportunity, it can in future become one of the five largest carmakers in Europe, with a projected market share of 10 to 15 per cent in Germany. By 2026, it is expected to be selling 120,000 electric cars a year.[2] To achieve this, some one hundred BYD dealerships are to be set up across Germany. The aim is to enable 90 per cent of all potential German customers to reach a sales outlet within a maximum of half an hour. Business journalists note that electric car sales got off to a slower start than originally planned. BYD had to overcome all kinds of bureaucratic obstacles and adapt to the German business and marketing structures, which differ from the Chinese market. Nevertheless, BYD can already offer five models, and it will even be eight from 2025, which are tailored to different customer segments.
BYD Explorer No. 1
The current export offensive is obviously well planned. China became the world’s largest car exporter last year and is now focusing primarily on exporting electric cars. BYD is just one player in this push. Various manufacturers have built up excess capacities in their Chinese plants in recent years. Sales abroad are still failing to meet targets mainly due to transport bottlenecks.[3] Chinese shipyards are now engaged in a big expansion of roll-on/ roll-off vessels specially designed for vehicle transportation. These massive ships can deliver huge quantities across the world’s oceans. BYD has chartered its first such carrier and sent it fully laden on its journey to Europe from Shenzhen in mid-January. In the past few days it arrived at Vlissingen in the Netherlands before unloading car at Bremerhaven and finally at Zeebrugge in Belgium. This new ship, named BYD Explorer No.1, brought around 3,000 vehicles ashore at Bremerhaven alone.[4] The Chinese company reportedly intends to procure a total of eight such ships and focus on deliveries to Bremerhaven, which has one of the largest car terminals in the world.
A threat to national security?
The BYD export offensive is causing major alarm in the West. Tesla boss Elon Musk, for example, has been quoted as saying that the company can produce more cost-effectively than most other carmakers. “Frankly, I think if there are not trade barriers established, he said in January, “they will pretty much demolish most other companies in the world.”[5] And the US administration is now preparing to do just that. Electric cars from China are not widely available in the US due to the high import tariffs imposed by the Trump administration. BYD is, however, planning to build an assembly line in Mexico. From there, the United States could be supplied without tariff imposition because Mexico is within the USMCA (United States - Mexico - Canada Agreement) free trade alliance. US President Joe Biden has come up with a new barrier. Chinese cars could, he says, pose a threat to national security in the US if licensed for American roads. Smart cars, with their sophisticated IT, could ostensibly transmit sensitive information to China. He has instructed Secretary of Commerce Gina Raimondo to examine this threat and take appropriate measures if necessary.[6] This could even be used to justify a complete import ban on Chinese-made cars.
Punitive tariffs planned
The EU is also preparing to hinder electric car imports from China, but with a different approach. Last September, Commission President Ursula von der Leyen announced that the Commission was launching an anti-subsidy investigation into electric vehicles produced in the People’s Republic. Their prices are “kept artificially low by huge state subsidies” and “this is distorting our market,” she claimed.[7] The probability that the EU will actually impose punitive tariffs on imports of vehicles produced in China is considered high in industry circles. There is talk of tariffs set at 10 to 20 per cent, which would be added to the 10 per cent import duties that already have to be paid.[8] Initial worries that barriers would also hit vehicles exported by German manufacturers, or by Tesla, from China to Germany are unlikely to be confirmed. The European Commission announced last autumn that its investigation was specifically targeted at Chinese brands, including BYD.[9] The Commission’s decision is expected later this year. However, observers warn that Chinese can be expected to respond with countermeasures, not least because electric car production is also heavily subsidised in Germany.
Locations in Europe
BYD is already proactive in the face such obstacles. The company is building at least one factory in the EU, since vehicles manufactured here would not be subject to punitive import tariffs. The building of an assembly line in Szeged, Hungary, has already been agreed. Experts envisage an annual production capacity of around 200,000 cars.[10] Indeed, BYD recently confirmed at the Geneva Motor Show that it was also in talks with the Italian government about setting up another European facility in Italy.[11]
[1] Christoph Rottwilm: So rollt BYD den Weltmarkt für Elektroautos auf. manager-magazin.de 05.01.2024.
[2] Wie BYD Europas Markt für E-Autos erobern will. tagesschau.de 26.02.2024.
[3] Thomas Stölzel: So bereitet China den Auto-Tsunami vor. wiwo.de 09.12.2023.
[4] Thomas Stölzel: Dieses Schiff ist eine Kampfansage an Deutschlands Autoindustrie. wiwo.de 28.02.2024.
[5] Keith Bradsher: How China Built BYD, Its Tesla Killer. nytimes.com 12.02.2024.
[6] Mögliche Spionage: Präsident Biden bremst Autos aus China. Frankfurter Allgemeine Zeitung 01.03.2024.
[7] 2023 State of the Union Address by President von der Leyen. ec.europa.eu 13.09.2023.
[8] See also: Paradebranche unter Druck (II).
[9] Patrick Freiwah: EU-Strafzölle gegen Elektroautos aus China? Deutsche Hersteller atmen auf. merkur.de 19.01.2024.
[10] BYD baut neue Elektroauto-Fabrik in Ungarn. faz.net 22.12.2023.
[11] BYD hat keine Angst vor EU-Untersuchungen. Frankfurter Allgemeine Zeitung 28.03.2024.
