![George Orwell](https://innovationorigins.com/app/uploads/2024/06/DALL·E-2024-06-22-15.51.59-A-detailed-signboard-in-front-of-a-car-dealership-with-the-slogan-Ignorance-is-Strength-prominently-displayed.-The-showroom-behind-the-signboard-sho.webp)
From January to May 2024, 140,713 electric cars (BEVs) were sold in Germany, compared to 167,256 units in the same period last year. The decline is significant but almost unique in Europe. Nevertheless, sales of cars made in China also increased in Germany. MG Roewe, Volvo, Smart (Geely), BYD, and GWM all bucked the trend, in some cases with vehement growth.
The EU recently announced that it would impose punitive tariffs on Chinese electric cars. These amount to up to 38.1% (SAIC), depending on the degree of disfavor of the individual manufacturers. The punitive tariffs start at 17.4%, for example, as in the case of BYD.
Punitive tariffs, mind you. This is because they come on top of the normal tariffs, which previously amounted to 10%. This means that VW’s partner SAIC can expect a 48.1% tariff when the new tariffs come into force.
EU against consumers, climate, and its carmakers
The CEOs of the German car manufacturers are not enthusiastic. In fact, the Audi, BMW, Mercedes-Benz, and VW executives have spoken out vehemently against punitive tariffs. This is because they fear a further decline in sales if China retaliates with measures – which seems inevitable. In addition, quite a few German electric vehicles are manufactured in China. Just think of Smart, the joint venture between Geely and Mercedes-Benz, the iX3 from BMW or the electric MINI, which is manufactured by Great Wall Motors.
The decline of Germany’s flagship industry
Before 2017, one in seven employees worked in the automotive industry in some form, but today, it is only one in twenty. The Chinese car market has also become one of the most important for German premium suppliers.
So why are punitive tariffs being imposed?
Ostensibly to protect the European car industry from cheap electric car imports from China (to the detriment of consumers and the climate). In reality, however, it is also about certain brands that have hardly played a role in China and, therefore, do not have to fear any decisive retaliatory measures. The most prominent advocate has been Carlos Tavares, CEO of Stellantis.
China will not only respond with tariffs
China is almost self-sufficient when it comes to electromobility. With CATL, BYD, and others, it has the global battery industry under control. With the necessary raw materials such as rare earths, copper, and lithium in its own country, the production of the most important components is secured anyway.
On the other hand, the European battery industry is coming under increasing pressure. Northvolt, one of the hyped start-ups, is currently in dangerous difficulties and has canceled its plans to build a new plant in Sweden.
Due to its early focus on electromobility, the Middle Kingdom has already outpaced European OEMs – they literally have to go to school with Chinese start-ups and OEMs in order to keep up. Not to mention the lack of digital know-how.
So, what will the trade war bring?
As the situation currently stands, nothing for the Germans and very little for Europe. On the contrary. The EU argued that the tariffs would give Europeans time to catch up with China. The aim is also to “entice” Chinese car and battery manufacturers to open factories in Europe in future in order to avoid the tariffs. After all, the Inflation Reduction Act has worked exceptionally well in the USA so far. However, this does not change the technological backwardness of local car companies.
The thick end
And unfortunately, unlike in the USA, the European, especially German, framework conditions are not right. Energy costs in Germany are among the highest in the world and bureaucracy is growing like a cancer in both the Federal Republic and the EU. Then there is the lack of planning security and lack of direction of the traffic light government.
George Orwell
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George Orwell’s greatest achievement was his description of changing language to disguise the truth. Today, we talk about “framing”. Whoever controls the language controls the people. Newspeak. At the EU, one gets the impression that one of the most important playbooks has become “1984”.
In this sense, Ursula von der Leyen and many commissioners fit the bill: ignorance is strength.