The European automotive industry is currently encountering significant challenges, and while some may attribute its fragility to unfair Chinese practices, the issue runs much deeper. The recent decision by Brussels to impose countervailing duties on imports of Chinese-made vehicles may help alleviate criticism of Europe’s alleged naivety with regard to free trade, but it is unlikely to address the fundamental causes of the industry’s struggles.
It is imperative to recognise that the difficulties faced by the European automotive industry are not solely the result of unfair public subsidy practices. Instead, they are a consequence of strategic errors and a failure to keep pace with the rapid changes in the global automotive market.
One of the critical factors contributing to Europe’s challenges is its delayed shift towards electric vehicles. While China made the decision to prioritise electric vehicles in the early 2000s, European manufacturers waited until the dieselgate scandal to initiate the transition. This delay has put Europe at a significant disadvantage, particularly as Chinese manufacturers have focused on producing affordable electric vehicles for the mass market, allowing them to accumulate experience in reducing costs and benefit from greater economies of scale.
Furthermore, European manufacturers have traditionally targeted the high-end of the market, prioritising high margins over sales volumes. In contrast, Chinese brands have focused on mass production, enabling them to achieve a more significant market share. As a result, the European automotive industry is now grappling with the consequences of its strategic errors and lack of foresight.
While the imposition of taxes on imported Chinese vehicles may offer some temporary relief, it raises questions about the role of the European Commission in addressing manufacturers’ strategic shortcomings. Additionally, Chinese brands have the flexibility to adjust their pricing to offset European taxes, thereby minimising the impact of the imposed duties.
It is evident that the challenges facing the European automotive industry are complex and multifaceted. Adapting to the changing dynamics of the global automotive market will require more than the implementation of customs barriers. A fundamental shift in strategy, a focus on innovation, and a commitment to addressing the industry’s structural weaknesses are necessary to ensure its long-term viability and competitiveness.
In conclusion, while the imposition of countervailing duties on Chinese vehicles may address immediate concerns around unfair trade practices, it does not offer a comprehensive solution to the deeper issues plaguing the European automotive industry. Instead, a holistic approach that addresses strategic errors, promotes innovation, and supports the industry’s transition to electric vehicles is essential to secure its future success.