The automobile is a German invention. When Carl Benz registered his “gasoline engine vehicle” at the patent office in 1886, he already knew that it would be an international business, since the first customer of the Daimler-Motoren-Gesellschaft (predecessor of Mercedes Benz) was Mulai al- Hassan I, Sultan of Morocco. The first automobile in China was received by the Dowager Empress Cixi for her 67th birthday in 1901.
It could not be foreseen that, some 120 years later, the Chinese automotive industry would become the toughest competition for the Germans, especially since both sides maintained close collaboration for decades. In China, Volkswagen was the first foreign company to produce vehicles in a joint venture in Shanghai since 1983. The Santana and Jetta dominated the streets of Chinese metropolises for decades. Even today, German luxury car makers make huge profits in the Chinese market, securing jobs in their home country.
Reviews from Berlin
However, three days after the European elections, the European Commission announced tariffs of up to 38.1 percent on electric cars from China, despite resistance from the German government and European manufacturers. The Commission justified the measure with distortions of competition, due to high Chinese state subsidies. Previously, the United States increased tariffs on electric vehicles to 100 percent.
Hildegard Müller, president of the German Association of the Automotive Industry (VDA), criticizes: “Another step further away from global cooperation.” Oliver Zipse, head of BMW, says: “The European Commission is harming European companies and interests.” The German Chamber of Industry and Commerce (DIHK) warns that the measure could lead to further trade conflicts. And German Economy Minister Robert Habeck, who is about to travel to China, is betting on negotiations and warning of a “tariff race.”
Green transformation “in danger”
The response from Beijing did not take long to arrive. Also on Wednesday night, Beijing’s Ministry of Commerce reaffirmed that it will implement all necessary measures to protect the interests of Chinese automakers. According to a spokesperson, the European Commission’s decision lacks any legal or factual basis.
“We need China to solve global problems,” says Müller of the VDA. “This is particularly true to successfully confront the climate crisis. China plays a crucial role for a successful transformation towards electromobility and digitalization. A trade conflict would also jeopardize this transformation.”
“Beijing will not impose tariffs on EU products it still needs,” says Jakob Gunter, an expert at the MERICS China Institute in Berlin. “This includes machinery, high-quality industrial goods, chemicals, medical technology and other goods. It should also not target the large European car manufacturers who invest massively in China, create jobs, pay taxes and contribute to growth. Instead, the “Agricultural, food and beverage products that Chinese consumers can do without or that Chinese producers can make in sufficient quantity, such as pork, could be in the spotlight.”
Good reasons for punitive tariffs
It is considered certain that Beijing has subsidized massively, according to DW economic expert Lars Halter. “However, no exact figures can be given on the amount of the subsidy.”
“It is indisputable that Chinese manufacturers enjoy unfair competitive advantages due to massive state subsidies,” Marcel Fratzscher, head of the German Institute for Economic Research (DIW) also said on German ARD television. Economists have observed for years that China, by selectively boosting certain industrial sectors, creates large surplus capacity and therefore prices on the world market fall. This distorts competition. In 2023, China became the world’s automobile export champion for the first time, surpassing Japan and Germany.
(ies/ms)
