The Chinese ambitions in Europe: The old balance is changing
As the trade war between China and the US broke loose in 2018 and still seems to have a long way to recover, the decades-long EV development of China has unleashed itself in Europe in recent years, growing through remarkable acquisitions and huge investments as the two sides are eager to reach their zero-emission goals.
How China emerged as a strong player in the European EV industry is no surprise. According to Yves Helven, CEO of fleet management systems provider Ovidrive and APAC expert, it has been a long time coming.
China has been investing in the local EV projects for many years, as Yves Helven explains the solid reasons behind it:
- Pollution has become a significant problem, especially for the people living in big cities. As a member of the COP26 agreement, China has long before decided to push EV investments to meet decarbonization goals and deal with the pollution problem.
- China also doesn’t want to depend on foreign oil and gas, therefore mainly focusing on its vast coal reserves to produce electricity and leverage the environmental issues with EVs.
- One other reason is the remarkable transformation of China from being a mass low-tech products supplier to becoming a high-tech manufacturer.
With the government subsidies offered to EV manufacturers with specific criteria for meeting quality demands, China has become a successful EV manufacturer in an industry which requires high technology, complexity and sophistication. Now, Europe and China benefit from this successful evolution, according to Helven.
Europe has opened its doors
The rapid consolidation of the EV trade ties between Europe and China is also nothing new. The two sides reached an agreement on the European Union (EU)-China Comprehensive Agreement on Investment (CAI) in 2021. Even though not signed, the agreement signals the strengthening collaboration between the two sides, displaying itself in the EV industry.
CAI aims to increase market access mutually and reach sustainability in the Sino-EU relationship, as collaboration in the EV market seems to serve this goal perfectly. Perhaps the breakthrough in this area happened in August 2010, when the Chinese EV manufacturer Geely completed the acquisition of Volvo from Ford in August 2010. Geely did not stop there, acquiring 9.7% of the stake in Mercedes-Benz for $9 bn dollars in mid-2018.
The old balance has changed
It is economically a good move because China has now expanded its portfolio by 600 million people. What drives this is the will of China to meet its requirements. By accessing Volvo’s technology, China can now produce EVs even better. Also, European brands grabbed the chance to position themselves firmly in the Chinese market through collaboration.
Electrification in China started much earlier than in Europe. The experience they’ve been through helped them reach high technical know-how in EVs, which are better explained as a complex technology on four wheels. Thus, the interesting thing about the EV market is that Europe can learn more from Chinese OEMs than they can learn from their own, says Helven.
“The global economic point of gravity is changing,” according to Helven. “It is moving from the US and Europe to APAC, but not specifically China. What we see in the automotive industry is not unique but a more dynamic movement of Chinese investments over many industries. The old balance has changed.”
In which EV technology China will be more effective?
According to Yves Helven, you need to look at what China needs to answer this question. First, China wants to become stronger in EV as it is already in this technology for a long time. Second, becoming a dominant player in an industry will eventually help your other businesses thrive. One good example is the Chinese technology giant Huawei.
As of 2019, Huawei had the most 5G patents globally and ambitiously expanded its new communication technology infrastructure in many EMEA countries as we are moving towards smart cities and intelligent transport systems. We can have a little peek at Turkey, where, according to GlobalStats, Huawei has 11.75% of the mobile vendor market share as of January 2022. Xiaomi, another Chinese manufacturer, has grabbed an impressive 18.28% of the market share in a country with more than 55 million smartphone users.
“China is highly successful in setting up his vision,” says Helven. With a clear roadmap, the ambitious investments in Europe may put Chinese OEMs in the disruptor position, but this serves to everyone’s benefit and innovation. “Healthy competition benefits everyone. Chinese operate in Europe under European laws, so this keeps them under control.”
What will we see in the coming years from China?
The EV market is boiling, and China has a lot to do. According to Reuters, Chinese automakers, led by VW and GM local partner SAIC Motor, plan to invest more than $100 billion over the next decade.
European brands are also increasing their interest in China. Scania, a subsidiary of Volkswagen, announced its plan to establish a new commercial-vehicle production site in China in 2020. Scania describes the move as an advance in R&D, as well as getting the chance to access some of the world’s most innovative ecosystems.
China will look for the best solutions for its needs, says Helven. Investing in the mining business in Africa is an example, reflecting the economic conditions. And as China continues investments, the status quo will also constantly move. “No one is winning the game. What we are witnessing now is that the transition time from one balance to the other is getting shorter,” says Helven.
One critical factor Helven notes is the population. The US, Europe, Japan and many other vital players in the EV and tech industry are aging, while China has an immense young population. Having a young population, low salaries and being exempt from work regulations are all competitive advantages for China. In terms of productivity, China appears to have the most significant benefit.
Today, China has become an essential part of the daily global economy through its brands like Huawei, Alibaba and Geely. We will likely witness more fierce competition and swift developments in the EV industry in the coming years, where the end-users will be the winners.
Photo of Xpeng electric car store in Shanghai, courtesy of Shutterstock.