Volvo to shift EV production to Europe to escape China tariffs
thetimes.com
thetimes.com
The only scenario in which these tariffs make sense is if Chinese car makers are significantly ahead of EU car makers. But that would be an admission of a monumental failure of large parts of the EU economy and nothing which could be remedied by simple tariffs.
The right response isn't refusing the competition, the right response would be fighting China by creating an equal footing.
I think the situation has a huge asymmetry and the EU seems dedicated on eradicating the strengths of their own companies.
The market is also quite complex, often EU makers compete through JVs.
So they have to give up IP and control and part of their business to compete.
That does not seem fair since China based companies are not forced to do the same.
Can you even call them EU anymore? (since china typically requires 51% control to be chinese...)
They are selling their IP. It is business.
>That does not seem fair since China based companies are not forced to do the same.
Than maybe the EU can start there?
>Can you even call them EU anymore? (since china typically requires 51% control to be chinese...)
China does not own 51% of VW.
Is VW the JV used to sell in China?
> They are selling their IP. It is business.
they have no choice if they want to sell in China. Look at Google if you want to see what happens if they refuse.
> Than maybe the EU can start there?
I think tariffs work just as well and are less complicated. It's not like Chinese companies would accept the same conditions.
End result will be the same, decoupling. Long term this is better, more industrial infrastructure in EU serving global market. Less support for Chinese companies if they're limited to home country, less industrial base there to go to war.
What? No EU companies will serve any kind of global market. That is the point of Tarifs. The companies will suffocate and loose any kind of actual global presence.
Thats not how tarriffs work.
What will happen is Chinese exports will have to pay tarriffs to enter EU.
Most China can do is impose tarriffs or nationalize or whatever within their borders.
So less China<->EU trade.
More market in EU since China vehicles cant compete.
Now... here it becomes nicer.
US is also imposing tarriffs on China.
All of South east asia+India will impose as well since most are afraid of going to war with them.
So, more market where China cannot compete and EU companies can fill gap.
As such, tarriffs are good long term, they lose access to X but gain access to 3-5X.
They are bad for China since they are suddently overproducing and have nowhere to sell so they have to downsize, earn less, etc...
They're also bad for China because if they go after JVs they no longer get access to free IP to steal.
It's a good thing that the west is finally realizing China is and has been waging a silent war on foreign economies to tremendous effect.
How can this be true when EU companies have been extremely successful in China?
My previous company was very successful in the Chinese market. But to get pass regulatory hurdles in order to be allowed to sell there, they first had to sell off a fraction of the company to CIC
Nothing about it was ever explicit but the way things work was pretty clear.
if you can provid some examples where there was no mandatory transfer of technology
It's basically a polite mob shakedown. All that the likes of VW have to do is call up Scholz on speed dial and say "Look at all these thousands of workers and voters that depend on us selling more cars. You wouldn't want anything to happen to their jobs and families, would you? Think on how they'd vote if their livelihoods were to be impacted."
Pointing the fingers at a China for state subsidies is a bit hypocritical, but it's very effective argument at local companies getting more state subsidies.
Can you name specific numbers? I haven't found anything except for VW paying subsidies for EVs from their own pockets.
I think you got the situation reversed. VW, BMW, Mercedes are paying massive amounts of taxes, they and other large companies subsidize Germany, not the other way around.
This would be a lot more convincing if the companies you refer to were in favor of tariffs on Chinese EVs.
Who said they aren't? They also know it would be tit for that. All those German car makers who built unfathomable fortunes on sales in China would also now face increased tariffs.
On my cynical side I think the EU car makers have a huge leverage on the local manufacturing jobs and in consequence the public opinion. That can result in them bending laws to whatever they want (see the consequences for the dieselgate in EU so far). It's easy to not want to compete when you don't need to.
Even if you assume the argument for JV being bad for business is valid, why only bring that up now that they're against the wall on their own local market?
We have seen many examples of a small Chinese company suddenly shelling out billions to buy a much larger competitor. Where do you think that money came from??
There is geniune hatred towards China and it's gonna increase no matter what
What are you on about. EU car makers are currently competing heavily in China. China is VWs biggest market.
The situation is the exact reversal of what you portray.
Joint venture is a choice currently not a requirement. Tesla is also free of it.
Instead of fighting back and trying to make ground, the EU makes sure that their own companies loose China as a market.
This isn't about VW selling German cars in China. This is about every major car maker having set up large JVs. The distinction between Chinese and EU companies is increasingly blurred.
The EU cannot make the rules in China or regulate their market and China rarely plays by any rules anyway, even the ones they ostensibly set. In other words, China has broken trust on every possible occasion so any "ground making" today is worthless tomorrow. How many times would you invest in the hopes of "this time it will work" with a partner who keeps pulling the rug from underneath you every time?
Plainly false. It can do what is doing now, ruining it's local economy or it can fight to make sure EU companies can function from a position of strength.
>How many times would you invest in the hopes of "this time it will work" with a partner who keeps pulling the rug from underneath you every time?
EU car makers are very successful in China. Every German car maker opposes the Tarifs for that reason.
> I don't think you understand how the Chinese car market works at all [...] This is about every major car maker having set up large JVs. The distinction between Chinese and EU companies is increasingly blurred
Both of these quotes are yours. In a feat of extreme cognitive dissonance you can't seem to make up your mind about how that market works. So this and the large volume of your misinformed comments sure starts to sound like trolling to me.
There's no "EU manufacturer" in China, there are EU brands and tech, and Chinese-EU JVs. As I said before China has broken trust with every opportunity and even has an internal legal framework to support that. What local EU/US car manufacturers are doing is chasing short term profit because the executives and shareholders want to get it in their lifetimes. Après moi, le déluge.
But EU/US interests are far longer term than the average company CEO's term. So "let's make a quick buck for the next decade or two and then realize we're outcompeted to an inconceivable degree" is not an option for anyone who's not looking to completely sabotage their internal economy.
The correct counter-strategy is that all major economies - USA, EU, India, etc. - enact tariffs.
Make better products, make products faster, make products more efficiently.
>The correct counter-strategy is that all major economies - USA, EU, India, etc. - enact tariffs.
This just means giving up. And admitting that you can't compete.
So what exactly would you do to make a European manufacturer competitive with Chinese one, that essentially uses slave labor?
Let's say you tell them - cut your costs by 30% or die. They can't do that and they die. What now?
Maybe, but only competition forces you into innovation. Companies very much like to do things they are already doing, that is easy.
The situation is far more complex than that and is primarily rooted in issues with Chinese real estate and their abortive attempt at a services-based economy.
Another example is the massive subsidies the government gives manufacturers.
What the EU car makers need is the competition, to actually stay continually ahead.
Chinese lax approach to human and employment rights is a form of subsidy that is countered by tariffs.
Not competing is the greatest threat to car makers. Which is why all major German car makers oppose the Tarifs.
Tarriffs as you say will hurt both ways but China more as its smaller then the global market.
This will ruin EU car makers. Abandoning a strong position because you are afraid you can't compete is a disastrous policy.
Why?, they can sell more in home region and rest of the world where China is also going to be tariffed.
Its not like access to China is free... they mak JVs where they lack control and give up their IP.
Pulling out means less unfair competition, less knowledge transfer to chinese auto makers.
The market is already saturated by them.
These companies will instantly loose a very significant amount of revenue and loose access to a big market. This can only mean cuts in the EU as well, as engineering and manufacturing for China is lost.
> The market is already saturated by them
there's market share to take from Chinese companies elsewhere since they are going to be tarriffed everywhere else.
> These companies will instantly loose a very significant amount of revenue and loose access to a big market.
You are missing the significant market being opened up and protected via tarrifs where China companies need to pull from. That's larger then China market
Where? In US? Because in majority of the world they will not get tarrifed. This is wishful thinking. You are closing the biggest market for yourself (China) and then you are not competitive in the rest of the world so either way you lose. The only way to win is to stay competitive.
US yes.
Also countries like Taiwan, Japan, Korea, Vietnam, Phillipines, India have territorial disputes with China.
If you add EU as well, what's left?
> You are closing the biggest market for yourself (China)
Biggest markets in the world are US and EU.
In china they cannot even compete without joint ventures they do not own. So it's not like they lose much, just 49% of a joint venture
Chinese companies can also move production to cheap labor EU areas like Slovakia, Hungary and Romania to escape tariffs, and if Chinese players move the goal posts on quality and innovation in the EV sector, then the EU domestic players are screwed, since the quality on affordable EU cars is nothing to write home about, leaving them banking on the brand prestige and domestic history to attract customers, but that goes away over time as proven by the success of Japanese and Korean players in the west which were also initially ridiculed for being knockoffs.
Consumers vote with their wallets, and the appeal of inferior domestic brands just because they're local is very limited. Do you see Americans rushing to fly Boeing just because they're an American brand?
China consumes less than it produces, they essentially give their workers less than what they produce. This helps Chinese manufacturers and Western consumers, but it harms Western manufacturers. Once Western manufacturers get destroyed, it may be too expensive to rebuild them and make them catch up with current Chinese technology.
I think for the most part, subsidies and tariffs don't have a moral dimension. They operate at a level above that, where there barely is "cheating", only balance of power and economics.
So neither is it evil that China is using subsidies to subvert Western industries, nor that the West responds in kind. Still, it needs to align with the real goal.
Fwiw I listened to a podcast on "the rest is history" (episode about Dickens I think) where they tangentially mention that late 19th century USA had no respect for foreign copyright, and IP theft from Europe was rampant. USA did it not because it is evil but because it could.
The West found itself in a different equilibrium for a few decades, where cooperating countries had more of a benefit from playing (mostly) by the rules than not. Now China is breaking these rules.
I'm concerned about where China, and indeed the West, are going, but not because either their subsidies or Western tariffs are morally wrong.
I fail to see the downside for EU manufacturers.
Currently EU manufacturers are competing in China. If a trade war happens that will end and both sides will retreat to their own respective regions, currently that is clearly worse for EU car makers. All German car makers oppose these tarrifs for exactly those reasons.
Yes but for how long? China was very successful at baiting Tesla and raising their own EV industry. If anything it's proving that businesses can't rely on Chinese markets even without a trade war.
>Yes but for how long
Depends on the EU regulations. If they don't want successful EU companies, not for very long.
All I'm saying is that perception of Chinese EVs is very inflated compared to objective reality. There are plenty of opportunities left in the automobile market.
But the other side of the wall is that all other low and mid price segment manufacturers (Renault, Stellantis, etc.) welcome the tariffs. Because that's where the automakers from China compete (unfairly).
Are you kidding? Do you know who VW is?
This is what you get when there is a gargantuan military industrial "defence" complex who was formed during the cold war and works best in the presence of an enemy.
The true enemy seems to be the average citizen in the long run of course.
So tariffs aren't going to hurt your options, you already have them.
You're not going to get a tesla at that price point.