According to insurers Allianz Trade, China's decision to invest heavily in EV production over the last 15 years has made it the global leader in this sector. In the late 2000s, Chinese authorities recognised the potential that EVs had to address critical domestic issues such as air pollution and energy security.
In 2022, Chinese manufacturers sold over twice as many EVs as their European and US counterparts combined, while also holding a competitive edge in nearly all aspects of the EV value chain.
Chinese brands have seen their global market shares climb from less than 40 per cent in 2020 to close to 50 per cent in 2022. This is heavily bolstered by an 80 per cent market share in their densely-populated home country.
At the same time, three of Europe's best selling EVs were Chinese imports in 2022. With EVs anticipated to eventually grow to account for all new car sales in Europe, Europe-made cars are likely to be substituted by those made in China – irrespective of whether they are manufactured by a Chinese, American or European company, the report said.
It anticipates that Chinese carmakers will further increase their local market share over the coming decade, resulting in falling production from European firms which could see collective losses of £6bn in profit annually from the latter.
Given the strategic importance of the automotive sector for the European economy, the report recommends that policymakers could seek reciprocal trade terms with China and the US, as well as promote EV adoption through improved charging infrastructure.
Allowing Chinese investment in local car assembly could also bolster regional production, while increasing self-sufficiency in raw materials critical for battery manufacturing.
Currently, six out of the 10 largest battery manufacturers are based in China and control about two-thirds of the global market. But increased investment in next-generation battery technologies could help to keep Europe's automotive sector competitive with other markets.
The report finds that as scale and technology improvements help EVs reach price parity with traditional vehicles, foreign carmakers will not have a business case to make substantial sales in China. This could lead to international carmakers withdrawing from the market altogether in the coming years – a trend that is already at play.
