Tesla‘s Shanghai factory, which opened in 2019 and was the first entirely foreign-owned facility in the world’s largest automotive market, was a watershed moment for electric vehicles and international automakers.
But it also signalled the start of a larger trend that threatens to upend global manufacturing, usher in a new phase of deindustrialization in Europe, and elicit trade tensions on par with the 1980s. The development of China as an automobile exporter is one example of this tendency.
China’s automobile exports are booming, according to Gregor Sebastian and François Chimits of the Mercator Institute for China Studies. Many of them are electric vehicles, and the majority of them are headed to Europe.
China sold half a million electric vehicles in 2021, up from nearly nothing only a few years before, and its market share in Europe was second only to Germany’s. As the car market shifts to electric vehicles, Europe may soon find itself in a trade imbalance with China in this sector.
The impact would be enormous if batteries replace combustion engines and China dominates automobile manufacture. Automobile manufacturing is critical to Europe’s and Japan’s economic growth. Millions of people are employed in steady, skilled manufacturing employment by companies like Toyota and Volkswagen, as well as their supplier chains.
They provide the foundation for national current account surpluses. A transfer in vehicle production site would have a much bigger impact than previous migrations of steel, electronics, or shipbuilding.
To read our blog on “Chinese cars’ unprecedented rise in Australia” click here.
