At one time, a powerful impetus for the development of the Chinese automobile industry was the rule that required foreign automakers to create joint ventures with Chinese partners and provide them with access to their technologies in order to localize the production of cars. Similarly, EU authorities now want to push the development of the European market for traction batteries and electric vehicles.
Image source: BYD
The new initiative of the European Commission, as noted by the Financial Times, involves the allocation of up to 1 billion euros in subsidies for companies intending to build enterprises in the European Union to produce components for “clean technologies”, including traction batteries. Foreign companies will be required to share their technological competencies with local ones. If such a subsidy scheme proves itself in the field of localizing battery production, then the European Union will begin to apply it in other areas.
Last month, the European Commission set an additional five-year tariff on imports of Chinese-made electric vehicles, up to a maximum of 35% on top of the base 10%. In addition, the conditions for subsidizing the production of hydrogen fuel cars in the European Union provide for a ceiling of 25% of components in electrolysis systems manufactured in China. It is believed that after taking office as US President, Donald Trump will put pressure on European allies to create more serious barriers to Chinese goods entering regional markets.
In the production of batteries, Europe is heavily dependent on Chinese imports, since products from the Middle Kingdom are cheaper for local companies, and given the not the best state of the EU economy, it is simply not profitable for Europeans to get rid of ties with China.
The Chinese company CATL has already invested billions of US dollars in the construction of traction battery plants in Hungary and Germany. In the USA, it is ready to share its battery production technologies with Ford and Tesla on mutually beneficial terms. European clients want to achieve similar benefits for themselves. According to the Financial Times, earlier this year, Chinese authorities warned national manufacturers against too deep localization of products in the European Union, urging them to limit everything to the most primitive operations.
European businesses’ own attempts to establish large-scale production of traction batteries are not always successful. The Swedish company Northvolt, for example, is now teetering on the brink of bankruptcy, having barely begun producing batteries. Without cooperation with Chinese battery manufacturers, who are leaders in the global market, the European industry will not be able to produce competitive electric vehicles. In the cost price of modern electric vehicles, the battery can take up from one third to half, so the component base is important for the strategic development of the entire industry. European legislators need to strike a balance between prohibitions and incentives so as not to hamper the implementation of planned environmental reforms.