Chinese car subsidies threaten German industry

Chinese car subsidies threaten German industry

European automakers face a serious challenge from the Chinese market, which is flooding them with cheaply produced automobiles. The Chinese government's extreme subsidies support domestic car manufacturers and mean that German companies cannot compete with the low prices. During his trip to China, Chancellor Olaf Scholz emphasized that fairness is important, but did not address any clear consequences.

Often referred to as the “workbench of the world,” China has already achieved a dominant position in various industries, including the automotive industry. Chinese automakers have the capacity to produce up to 50 million cars per year, which is four times the country's current export volume. The Chinese government's strong support of the cars, photovoltaics and battery industries is also reflected in massive investments to stimulate the economy.

However, Chinese automakers are reportedly selling their products below their actual value and are struggling with a decline in domestic demand. This leads them to rely more heavily on the export market, which poses specific challenges for European car manufacturers. Carlos Tavares, CEO of Stellantis, emphasizes the need to attack Chinese manufacturers head-on to compete globally.

There is discussion in Europe about introducing customs hurdles for Chinese electric cars in order to protect the domestic market. Whether the EU will take steps to address Chinese overproduction remains to be seen. While Chancellor Scholz advocates open European car markets, he emphasizes the need for fair competition without dumping or infringements of intellectual property. Reactions to Scholz's trip to China remain controversial, while for some he has left Germany's medium-sized businesses in the lurch.