“The danger that European industry will be destroyed.”

China’s economic problems are also becoming a problem for us. The country produces more than people buy. The result: cheap electric cars are flooding the market around the world.

At the end of February, one of the largest car transporters that have been traveling the world’s oceans for decades docked in Bremerhaven. But something was different this time. “BYD Explorer No. 1“ painted on the outside of the ship, the name represents the most successful manufacturer of electric vehicles in the world today. In the last quarter of 2023, BYD sold more electric cars for the first time than the former top dog, Tesla. “Explorer No. 1” is the first of eight planned BYD fleets that will transport the manufacturer’s vehicles from Shenzhen in southern China to Europe. About 3,000 vehicles left the 200-meter-long colossus in Bremerhaven, and hundreds of thousands are expected to follow. in the coming months and years. You can call this a success story. Or a declaration of war.

Because electric cars from BYD and all other Chinese manufacturers that have names like Cherry, Ora or Xpeng are cheaper than the German competition. In China, the entry-level model from BYD costs the equivalent of 10,000 euros – half as much as the planned ID.1 Volkswagen. And it shouldn’t come to market until 2027. Chinese cars, on the other hand, are already there. “International markets are now full of cheap electric cars. And their price is kept low by means of large government subsidies,†complained the President of the European Union Commission Ursula von der Leyen last September. And announced an investigation that could be followed by special tariffs on Chinese electric vehicles.

China produces more than it buys

Last year, China produced 30 million cars, but sold only 25 million cars domestically, says Jacob Gunter, senior economic analyst at China Merics Institute. Others were exported. “That was 50 percent more exports than in 2022.”

Chinese manufacturers are trying to sell more cars in their country with big discounts. But that works to a lesser extent because China’s economy is weakening and people are holding on to their money. The economy should still grow by around five percent this year, as Beijing’s parliament decided recently. However, due to the huge real estate crisis, the construction sector is no longer a driver of growth. Therefore, the industrial sector has to go down completely, that’s what the politicians want, the sector is artificially flattered. The result: Industrial production is growing faster than retail sales – so more is being produced than is being bought.

This excess capacity is “a feature, not a flaw, of China’s economic model,” says Jacob Gunter. He explains the problem of electric cars like this: The Beijing government wants to make the country a world leader in electric mobility with subsidies, tax breaks and loans. Tens of thousands of companies answered the call and new companies were founded across the country. The Beijing Plan: If subsidies are cut over time, the pressure on manufacturers to be better and more competitive will increase. Anyone who can’t do that will go bankrupt. What remains are a few companies that are so good that they are at the top of the world.

China could build ten million extra cars every year

However, according to Gunter, it is not only Beijing that has invested heavily E-Automatic-The industry increased, and regional governments were also involved. Each regional governor wants to produce his own champion, build a distribution industry, create jobs and meet growth goals. You can’t afford to make developers for a lot of money and then abandon most of them. So provincial governments that are already heavily in debt “would continue to feed these companies,” as Gunter says. “They are betting that they can do this for a longer time than other local governments.“

This is one of the reasons why China is currently able to build another ten million cars every year. “And investment in the auto industry remains high.” Many of them may one day be docked in European ports. And yet the small market shares of Chinese manufacturers in this country are growing.

What can happen if governments do not take countermeasures can be seen in the solar sector. “China’s production capacity is enough to supply the world with solar panels 2.5 times,” calculated the former President of the European Union Trade Council in Beijing, Jörg Wuttke, a few months ago. Handelsblatt before. There is no longer much competition in Germany. Solar manufacturer Meyer Burger has stopped production of modules at its factory in Freiberg, Saxony. Wind turbines may be next in line; Of course: energy transition is cheaper this way. But in Germany the price is still high.

“There is a real danger that Europe will go through a major phase of deindustrialization.”

The problem is with the Federal Republic, says Gunter. It is no comfort that inflation-stricken German consumers are benefiting from cheap Chinese imports. To understand this, look at the USA. Since China joined the World Trade Organization in 2001, entire industries have moved from the United States to the People’s Republic. “There aren’t very many people in America today who are convinced that this was a good thing,†said Gunter. “There is a real danger that Europe will go through a major phase of deindustrialization if it allows what the Americans allowed 20, 30 years ago. That is, that a large part of their industry is being destroyed just to have cheap products available.â