Europe faces EV challenges similar to those in US, production problems allow China to fill the void

Some nations in the European Union are regretting the bloc's aggressive push for electric vehicles, saying demand outstripping production has allowed China to step in and fill the gap. 

China is already the world's largest automakers, a title Detroit held until the 1970s.

According to the latest comprehensive figures available, China produced 27 million vehicles in 2022, roughly the same number as the next four countries combined – Japan, the U.S., India, and South Korea.

Top Chinese brands SAIC Motor, Dongfeng, FAW Group, and Changan will have to go a long way to match the name recognition of U.S.-based General Motors, Ford, or Tesla or European brands like Volkswagen, Mercedes-Benz, Ferrari, or Porsche. 

But it's not name recognition the old-world companies are worried about.

In the latest period, Chinese companies produced around 5.5 million fully electric vehicles, roughly half the world's total production of such cars. Every major car maker has a strategy to develop and sell more environmentally friendly vehicles, which means they're all essentially playing catch-up with China.

However, they face the question: Is the game of catch up being played on a level playing field?

The evidence appears to show it is not: Chinese car makers benefit from enormous government subsidies at every stage of production, financial backing that makes it nearly impossible for unsubsidized car makers to compete. 

Before most people could realize the extent of what was happening, China became a world leader in making and buying electric vehicles, according to 2023 MIT Technology Review article. 

The problem is most acute in the European Union, which has an ambitious plan to make the 27-nation bloc climate neutral by 2050.

The plan includes banning the sale of new gas and diesel cars by 2035.

The only countries to have a higher percentage of their country's vehicle fleet made up of electric cars than China are all in Europe: Norway (80%), Iceland (41%), Sweden (32%), and the Netherlands (24%). In comparison, the U.S. is at 6%. 

But the cost behind that high electric car adoption rate is the influence of China – boosting the country's weakening economy, increasing its "soft power," raising the possibility of security risks and eroding European social cohesion.

Now, a new generation of massive roll-on-roll-off cargo ships will increase the number of cars China can export even more. 

In addition, electric vehicle makers in the U.S. and in other countries are reliant upon batteries from China, which largely controls the mines that yield the minerals to make the batteries. 

The U.S. is confronting Chinese competition in part with it own subsidies.

President Joe Biden last announced $2 billion in subsidies to accelerate the transition to electric vehicles. Former President Donald Trump does not support incentives for electric cars and has instead vowed to slap a 100% tariff on Chinese cars made in Mexico, twice the levy he once promised.

European policymakers are considering both strategies, with calls for matching subsidies from European governments or new protective tariffs to increase the cost of the Chinese cars before they hit European markets.

Already, the European Commission has opened a wide-ranging probe to determine whether the Chinese strategy runs afoul of European competition laws. Meanwhile, China has vowed to do whatever it takes to make sure its companies succeed internationally. 

Stellantis was formed through a series of mergers: first, Italy's Fiat took over Detroit-based Chrysler, then that company merged with France's Peugeot. The company has a diverse portfolio of vehicle brands including Jeep and Dodge, as well as Fiat, Peugeot, Maserati, Citroen and Alfa Romeo. 

It is playing both sides of the battle against low-priced Chinese rivals.

One half of the strategy involves combining forces with Germany's Mercedes-Benz to spend at least $4.8 billion to build three electric vehicle factories in Europe – one each in Italy, Germany, and France –- to help boost the production of electric cars in Europe.

But Stellantis is also hedging its bets, acquiring a big stake in Chinese electric vehicle maker Leapmotor for $1.6 billion.

The deal gives Stellantis exclusive rights to sell Leapmotor vehicles outside China.

Soon after the deal was announced, Stellantis said it was mulling building Leapmotors cars in Europe, making the front lines of what will surely become a worldwide battle even less clear.