Editor's Note: Greetings! Chinese electric vehicle exports to the EU have recently experienced a significant 20% decline in early 2024. What are the reasons behind this sharp drop? Stay informed about China-EU dynamics with the latest edition of the CCCEU Weekly Update. Enjoy your read and have a pleasant weekend!

Focus

The reading is rather discouraging: recent data from China's General Administration of Customs registers a significant decline in China's electric vehicle exports to the EU27. Between January and February 2024, exports plummeted by nearly 20%, from 94,102 units to 75,626 units compared to the same period last year. This decline was also reflected in export value, which amounted to $780 million, marking a one-third decrease.

Understandably, this decline raises concerns, prompting analysts to perceive it as a significant signal. Speculation revolves around whether the EU's anti-subsidy investigation into China's EVs has exerted a dissuasive effect or is subtly influencing the dynamics of import-export trade.

This decline transcends a mere statistical anomaly, shedding light on the complex challenges China faces internationally. In October 2023, Brussels launched a formal anti-subsidy investigation against China's EVs, citing suspicions of subsidies. Subsequently, they labelled Chinese EVs as products of "overcapacity," expressing apprehensions regarding their implications for national security.

In March of this year, the EU swiftly introduced a nine-month customs registration procedure for electric vehicles imported from China, purportedly aiming to facilitate the imposition of potential retroactive tariffs and other regulatory actions.

Apart from conventional trade measures, the EU's green barriers against Chinese electric vehicles are exerting additional pressure on the development of Chinese enterprises. Several Chinese enterprises in the automotive supply chain sector have noted that certain European customers are requesting Chinese manufacturers to establish factories in Europe, citing concerns about carbon footprints. Furthermore, the EU's supply chain due diligence requirements have introduced obstacles and necessitated adjustments across various sectors.

As we revisit the decline in electric vehicle exports to the EU, it stands somewhat at odds with the broader trend of China's global electric vehicle exports. In the last two months, China's overall electric vehicle exports have increased by 8%, totaling 248,211 units.

Examining the export value, the sharper decline may also be attributed to exchange rate fluctuations. While China's global electric vehicle exports rose in the first two months, the export value in US dollar terms decreased by 13%.

Taking into account certain seasonal factors, the extended Chinese New Year holiday in February 2024, leading to a reduction in effective working days, also coincides with the traditional manufacturing industry's off-season. This circumstance impacts related production and operations, as well as market activity to some degree, potentially influencing the export situation of electric vehicles.

Amidst the challenges posed by Europe and the United States, China's electric vehicle industry is demonstrating resilience and vitality by actively pursuing new markets. The Regional Comprehensive Economic Partnership (RCEP) has affirmed its significant potential for promoting trade.

During January–February 2024, China's EV exports to RCEP partner countries reportedly surged by 36% compared to the same period, with remarkable year-on-year growth rates of 10 times, 7 times, and 1 time for South Korea, Indonesia, and Japan, respectively.

Amidst the global shift towards new energy, China and RCEP members have promising collaboration prospects. ASEAN countries, with a burgeoning automotive industry base, are attracting significant investment from the top 10 global electric vehicle manufacturers, highlighting their potential in the EV market.

Additionally, many ASEAN nations are developing strategies and policies to foster the EV industry amid the global low-carbon transition.

China's prominent role in the EV industry enables fruitful partnerships within the RCEP, fostering market expansion and technological integration. Furthermore, Central Asia is emerging as a new export destination for Chinese EVs, with shipments increasing notably in recent months.

Despite challenges, China's EV sector actively seeks new export opportunities, which are crucial for enhancing competitiveness and shaping the global EV market's future landscape. This proactive stance highlights China's strategic agility in navigating international trade dynamics.

Hot Topics

EU leaders agree to open membership talks with Bosnia and Herzegovina

EU leaders have agreed to open negotiations with Bosnia and Herzegovina on joining the bloc, while also stressing the Balkan country would have to undertake more reforms before the talks could begin, the Guardian reported.

Apple, Google to be hit by first probes under EU Digital Law

Apple and Alphabet's Google are set to face European Union investigations into their compliance with a new law for Big Tech firms, paving the way for potentially hefty fines, Bloomberg Law reported on Thursday.

The European Commission is gearing up to announce probes into the firms under the bloc's Digital Markets Act in the coming days, according to people familiar with the matter.

China advocates for global EV cooperation, rejects protectionism amid reported US-EU restriction measures

In response to EU's mandate for customs registration and possible retrospective tariffs on electric vehicle (EV) imports from China, the Chinese Foreign Ministry has voiced opposition against the trade protectionism measures, advocating for cooperation and mutual benefit in the industry, Global Times reported.

During a regular press briefing on Friday, Chinese Foreign Ministry Spokesperson Lin Jian underscored the integral role of division of labor and cooperation for achieving mutual benefits within the global EV market.

Lin also highlighted the strong presence of international brands such as Mercedes-Benz, BMW, and Volkswagen in China, noting that according to reports, while the West is feeling uneasy about Chinese electric cars in overseas market, approximately one Volkswagen car is sold in China every 10 seconds.

BYD announces start of passenger car sales in Greece

Chinese automaker BYD on Thursday announced the start of sales of BYD passenger cars in the Greek market. The first two BYD models to be distributed in Greece are the BYD ATTO 3 and the BYD SEAL. Sfakianakis Group has been appointed BYD's national dealer partner in Greece. BYD has already opened its first store in Athens, while a second store is set to be launched in early April.

Deals totalling 8.54 bln USD inked at China-France Forum

Deals worth 60.6 billion yuan (about 8.54 billion U.S. dollars) covering 58 projects were signed at the 7th China-France Forum on Urban Sustainable Development held in Wuhan, capital city of central China's Hubei Province, on Wednesday. The deals cover the fields of ecosystem protection, green economy and urban construction, and involve 11 France-invested projects.

What are experts talking about?

Analysis of the EU's Economic Security Strategy

Source: China Security Studies
Author: Dong Yifan

The EU, under the principle of "de-risking," aims to bolster economic security through enhanced institutional mechanisms, policy frameworks, and international collaboration at the supranational level. However, this approach poses significant concerns for the global economy and development. Departing from its previous stance of embracing globalization for economic security, the EU's revamped strategy now entails a broader identification of economic risks, a fusion of internal and external approaches to security, and the association of economic security with specific nations. Consequently, this shift may accelerate the EU's isolation within its economic system, contribute to the fragmentation of the global economic and technological landscape, and potentially entail developmental costs for the EU due to its risk-mitigating measures.

A new political map: Getting the European Parliament election right

Source: European Council of Foreign Relations
Author(s): Ivan Krastev, Mark Leonard

The expectation is that the election will see a massive surge in support for the far right, powered by European publics' dissatisfaction with the latest wave of illegal immigration. In an attempt to address this challenge, mainstream parties and European political elites appear to be settling on a two-fold strategy. Firstly, they are attempting to neutralise migration as a political issue by aping right-wing policies. The European Union's new migration compact passed in December was a clear example of this strategy, as was the migration law recently adopted in France, which was largely framed by the right and far right. Secondly, European elites are hoping to change the narrative in their favour by promoting a vision of European success centred around the EU's response to Russia's war on Ukraine, the climate crisis, and the covid-19 pandemic.

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.