- China, the world’s factory, is known for producing affordable goods quickly.
- But Chinese EV makers shouldn’t take advantage of their price advantage in the long term, Bain consultants said.
- In a move to protect the European economy, the EU plans to impose tariffs of up to 48.1% on EV imports from China next month.
Over the past 40 years, China has served as the world’s factory and established itself as the world’s second largest economy.
The ability to quickly manufacture affordable products is one of China’s key advantages in many product sectors.
But this is not something Chinese electronics makers should take advantage of in the long term, one management consultant said on Wednesday.
“The price advantage will eventually disappear. Product quality, technology and brand recognition will be key to Chinese automakers’ success,” Helen Liu, a partner at consulting firm Bain, told reporters in a statement to the South China Morning Post.
Liu’s assessment came after the European Commission announced it would impose tariffs of up to 38.1% on electric vehicle imports from China starting next month, on top of the current 10%.
The move follows a months-long investigation into Chinese subsidies to Chinese EV makers.
In a statement, the European Commission said China’s EV value chain benefits from unfair subsidies, which poses a “threat of economic harm” to EU EV makers.
The latest blow to Chinese EV makers Joe Biden announced a series of sweeping tariffs in May. Tariffs on $18 billion worth of Chinese imports, including a 100% tax on Chinese-made cars.
Chinese-made EVs barely have a presence in the United States but account for 8% of the EV market in auto powerhouse Europe, posing a geopolitical challenge for the industry.
Western countries criticize China for excess production capacity
Western countries have in recent months been accusing China of flooding global markets with cheap exports, accusing them of dumping and unfair trade practices that are hurting their economies.
But Beijing has consistently denied Western accusations that it is dumping cheap products onto global markets, which Chinese officials say are protectionist and aimed at curbing China’s economic growth.
One area of contention between the two sides is the hot new energy sector.
China is producing many of the new energy products as it weathers a painful economic transition from an economy dependent on real estate and low-cost manufacturing to one that is ballooning. The “New Three” Sectors Electric vehicles, lithium batteries, solar panels, etc.
But Western countries are also taking notice of these fast-growing industries.
Philip Notard, director of insights and strategy at car services company Cox Automotive, told Business Insider’s Tom Carter on Wednesday that the EU’s tariff hikes won’t be enough to scare Chinese EV companies away from Europe.
This is because major Chinese EV companies like BYD have “highly efficient” manufacturing supply chains that allow them to adjust their strategies very quickly.
“Chinese companies have the potential to redefine electric vehicles and convince customers around the world that their products are competitive in terms of performance and technology,” Bain’s Liu told the South Carolina Morning Post.
