European automakers face Chinese competition

The European automotive industry is facing intense competition from Chinese manufacturers like Geely, Xpeng, BYD, Neo, and Chery, which have captured 7% of the EU market and are on track to reach 10%. These companies exported 7.1 million vehicles globally in 2025, including 2.5 million electric vehicles, with sales doubling in one year.

China dominates electric vehicle market

China has become the leader in the electrification of transport, controlling two-thirds of the global electric vehicle market. In contrast, the EU holds only 15% of this market. This shift challenges the EU’s core competitive advantages in automotive manufacturing, renewable energy, and electronics.

European "greenlash" slows decarbonization

The European automotive industry has experienced a "greenlash," a slowdown in commitments to decarbonization. Automakers and their association, ACEA, are pushing for "technological neutrality" and more flexible CO₂ rules. They argue that the transition to electric vehicles is economically risky due to inadequate charging infrastructure, inconsistent consumer demand, and high production costs.

Europe debates causes of crisis

Two main discourses dominate European discussions. One blames massive Chinese subsidies and planned price wars, while the other suggests that China’s success stems from its hypercapitalist economy, free from European regulatory constraints. Calculations show Chinese subsidies per vehicle are modest, with their real advantage lying in vertical integration and cost efficiency.

Chinese success rooted in policy and scale

China’s dominance in electric vehicles is partly due to its state planning system, described as a "Bayesian cognitive updating system" that reacts to market changes. European automakers, like Volkswagen, were slower to transition due to less government support and constraints from traditional industries. In contrast, Geely shifted to electric vehicles quickly, driven by government incentives and high costs of internal combustion engines.

Critical minerals and battery production

For the transition to electric vehicles to succeed, the state must intervene in five areas: securing critical minerals, battery production, embedded electronics, managing demand through subsidies, and deploying charging infrastructure. In Europe, the lack of coordination has led automakers to delay investments and oppose faster electrification.

Chinese battery dominance

Batteries represent 30 to 40% of the total cost of an electric vehicle. The Chinese government established its dominance in this sector by creating a "white list" of battery suppliers and offering subsidies tied to energy density and production efficiency. This allowed companies like BYD and CATL to become key players in the electric vehicle revolution.

European weaknesses in embedded electronics

European automakers showed structural weaknesses during the semiconductor shortage of 2020-2022. Their reliance on fragmented architectures and external suppliers like Bosch and Continental led to prolonged production halts. Unlike China, the EU lacks major digital giants to invest in the electronic components of electric vehicles.

China’s integrated ecosystem

Chinese automakers leveraged digital giants, dense electronic ecosystems, and component suppliers around Shenzhen to create global competitive hubs for electric vehicle electronics. Provincial and municipal governments supported this growth through public markets, local venture capital, tax incentives, and national programs like "Made in China 2025."

Managing demand and subsidies

Managing demand is crucial for new technologies to achieve commercial viability. European subsidies for electric vehicles often lacked technical requirements, leading to the subsidization of less efficient vehicles. In contrast, China excluded vehicles not meeting energy density and autonomy thresholds from public support, actively promoting electric vehicle adoption.