China is flooding the European market with cheaply produced cars. Extreme subsidies support car manufacturers. Olaf Scholz advises fairness on his trip to China.
Beijing – Chinese dominance now has entire industries in its grip. Be it the solar industry, online shopping or the automotive industry; The cheap products are driving German companies to ruin. German manufacturers cannot keep up with the low prices, supported by subsidies from the Chinese government. Chancellor Olaf Scholz (SPD) knows this - but didn't say a word to China about the consequences.
Subsidies for car manufacturers – Chinese economy with “poor performance”
“The Workbench of the World” is more than just a nickname for China. No country produces as many goods as the country under Xi Jinping. In some industries, China almost has a monopoly; for example, neither photovoltaics nor car production would function without the Middle Kingdom. As Die
Zeit
reported, China's automakers have enough capacity to produce up to 50 million cars per year. That would be twice as many as the country is currently selling. Instead of the around five million new cars currently exported, China could deliver four times as many.
The Chinese leadership continues to have high hopes for the automotive, photovoltaics and battery industries. It was only at the National People's Congress in March that Prime Minister Li Qiang spoke out in favor of further supporting these industries - this was necessary to stimulate the economy again. According to
CNN,
China's growth
in 2023 had one of the "worst performances" in the last three decades. To support key industries, China is pumping massive flows of money into factories. There is a problem: they are already producing at the limit.
China's car manufacturers are selling below value - German demand has collapsed
Apparently there is no longer much potential for improvement. Only a few manufacturers produce profitably, many sell their products well below value. The lack of willingness to buy among their Chinese compatriots further exacerbates the problem. Companies are increasingly only seeing the solution as selling their products abroad.
This has a clear impact on markets beyond Chinese borders. “My competitors are primarily the Chinese car manufacturers,” the US news network
CNBC
quoted Carlos Tavares, CEO of Stellantis. “It will be a big fight. There is no other way for a global automaker like Stellantis, which operates all over the world, than to attack Chinese manufacturers head-on. There is no other way."
And the market in Germany is also under pressure, especially for electric cars. According to the Association of the German Automotive Industry (VDA), new registrations of battery-electric vehicles and plug-in hybrids recently fell by five percent. Because the federal government abruptly stopped supporting electric cars, demand collapsed.
Europe is weighing up tariff hurdles for Chinese electric cars – protection for domestic car manufacturers
This had already caused a reaction in countries such as the USA, Brazil, Mexico and Turkey - they were shielding their markets from subsidized Chinese exports with tariff hurdles. There are already similar mind games in Brussels, although the European mills are grinding slowly as usual. “The EU cannot be the only market that remains open to Chinese overproduction,” said EU Commission President Ursula von der Leyen to the
Germany editorial network
.
Chancellor Olaf Scholz, in turn, spoke out in favor of open European car markets, but called for equal competition. “The one thing that must always be clear is that competition must be fair,” he said in Shanghai. There should be no dumping, no overproduction, no impaired copyrights.
Whether that is enough remains to be seen. In any case,
WirtschaftsWoche
's
headline on Scholz's trip to China was that the Chancellor had abandoned German medium-sized businesses.