The automotive industry is in tension over who will win the race for electric cars. A fight in which, in reality, it is governments that are playing a more active role, because none of them want to see investment fall and factories close, with the job losses that this implies.
In this fierce struggle, there are above all three protagonists: a divided European Union (there is no consensus among the member countries), the United States and China. Meanwhile, manufacturers are trying to adapt to the demand, production and labor costs of each country, as well as to aid for manufacturing, the purchase of electric vehicles and the development of charging facilities.
Today, the European Union is the furthest behind in this global scenario, as it is unclear what will happen to tariffs on imports of Chinese electric vehicles, sales of plug-in vehicles are falling and there are already companies in difficulty and even announcing layoffs.
The fierce fight against customs tariffs
The United States has clearly opted for 100% tariffs that will stop the arrival of electric cars from the Asian giant. It will also ban the import of components and vehicles with software connected to the Internet, due to the risk of espionage that they may present. On the other hand, the European Union still does not know what trade policy it will implement.
A year ago, the President of the European Commission (EC), Ursula von der Leyen, announced an investigation after detecting anti-competitive trade policies, as China subsidizes its car manufacturers to ensure that electric vehicles manufactured in that country are cheaper than those assembled in Europe. The derivative, the implementation of a tariff system on its models ranging from 8% to 35%.
A year has passed since the Commission announced the investigation and there are still no definitive tariffs – they have been revised downwards – and diplomacy continues. A few days ago, the EC’s economic vice-president, Valdis Dombrovskis, and the Chinese Minister of Commerce, Wang Wentao, met in Brussels with the prospect that the tariffs would be maintained. But, at the same time, there is a “political will to continue and intensify efforts to find a mutually acceptable solution”, according to Brussels.
There are still weeks of negotiations before the states vote on the tariffs that are finally on the table. And there is no clear consensus. Partly for Spain. During his recent trip to China, the Prime Minister positioned himself against tightening the screws on Asian manufacturers. “All EU members and the Commission must reconsider our position. We do not need another trade war. We must seek an agreement between the European Commission and China within the framework of the WTO [la Organización Mundial del Comercio]” assured Pedro Sanchez.
Germany also favours a deal that avoids a struggle between economic blocs. The same as Sweden. Before the summer, Swedish Prime Minister Ulf Kristersson said that the EU should not “dismantle world trade” and that “a broader trade war in which we block each other’s products is not the way forward for industrialised countries like Germany and Sweden”.
To stop the tariffs that have finally been decided, 15 member states representing at least 65% of the EU population must take a stand against them, which is unclear as negotiations, also with companies, continue to develop.
A request that does not pull
Europe is talking about tariffs at a time when sales of electric cars are plummeting. In August, they fell by 44% across the EU, according to the latest data from the European Automobile Manufacturers’ Association (ACEA), the trade association that brings together car, truck and bus manufacturers.
In Germany the drop was even greater, over 68%. In Italy it remained at 41% and in France at 33%. In Spain, which is far behind other European countries in terms of penetration of electric vehicles, the evolution during this month of August was a little better, but it was not spared from the fire, as the drop was close to 25%.
For European employers, these data send “an extremely worrying signal” to both industry and public administrations. That is why they call on “the European institutions to present urgent relief measures before the new CO2 targets come into force”. In other words, decarbonisation is not happening so quickly. “The current rules do not take into account the profound change in the geopolitical and economic climate of recent years and the inherent inability of the law to adapt to real-world changes further erodes the competitiveness of the sector”, laments ACEA.
Instead, it calls for a battery of measures aimed primarily at creating “a competitive manufacturing environment, affordable green energy, tax and purchasing incentives, and a secure supply of raw materials, hydrogen and batteries.”
Job cuts begin
If this slowdown in demand continues, it could compound the industry’s problems. Spain has no local manufacturers, but it does have 16 factories from the world’s leading carmakers, making it the EU’s second-largest car producer. And it is pulling strings to ensure that some of the factories that China wants to set up in Europe, for brands such as MG and Polestar, are set up here.
The drop in demand is already leading to job cuts. Swedish electricity and battery manufacturer Northvolt is to lay off a fifth of its workforce, or around 1,600 people. All of them, in their own countries.
In Spain, the production of low-emission products is progressing positively. In the first eight months, the manufacture of electric, plug-in and conventional hybrids and models using natural gas increased by 15% compared to the same period in 2023, with a total of 380,598 units. On the other hand, the production of all cars – including combustion cars – decreased by 1.5% compared to the same period in 2023.
In other markets, such as Germany, the problems are more serious. So much so that the giant Volkswagen is experiencing an earthquake, which could lead to a savings plan of up to 10 billion euros, which would lead to plant closures and layoffs, something that had not happened until now.
This forecast led the Minister of Economy, Robert Habeck, to meet the main German manufacturers (VW, Mercedes-Benz or BMW) and the powerful union IG Metall, to analyze the measures aimed at stimulating the industry and the demand for vehicles. For the moment, there is no agreement.
“We do not need straw smoke, otherwise the market inflates and then deflates as if it were a soufflé. In that case, it is better that there are no measures than that there are,” he said in statements collected by Efe.
