China car subsidies: level playing field required

China car subsidies: level playing field required

China is flooding the European market with low-cost automobiles that German companies cannot compete with due to the Chinese government's extreme subsidies. This development affects various sectors, including the automotive industry, and is causing economic difficulties in Germany. During his trip to China, Chancellor Olaf Scholz emphasized that competition should be fair, but did not name any clear consequences.

Chinese automakers have the capacity to produce up to 50 million vehicles annually, although the country currently only exports about five million new vehicles. This shows that China is capable of producing and bringing to market an enormous amount of cars. The Chinese government continues to place high expectations on the automotive industry and other key sectors to drive economic growth even as the country struggles with declining economic performance.

The strategy of many Chinese automakers to sell their vehicles below value is causing a collapse in demand at home and encouraging sales abroad. For German car companies, the Chinese market is becoming a serious competitor, which requires them to actively combat Chinese manufacturers. New German registrations of electric vehicles have also fallen as the federal government's abrupt end to e-car funding dampened demand.

To protect European car manufacturers, the EU is considering introducing tariff hurdles for Chinese electric cars. Other countries such as the US, Brazil and Mexico have already taken similar steps to insulate themselves from subsidized Chinese exports. EU Commission President Ursula von der Leyen emphasizes the need to ensure fair competition conditions and protection against overproduction and intellectual property infringements. The EU's decisions will show whether these measures are sufficient to defend the European market against overproduction by Chinese manufacturers.