Auto File: China revs up tariff push
By Nick Carey,
European Autos Correspondent
Greetings from London!
After a summer of rising trade tensions over the European Commission's proposed tariffs of up to 35.3% on electric vehicles made in China, a vote by EU member states on whether to back the duties could come as soon as Sept. 25 next week.
The European Commission has rejected offers from Chinese EV makers for minimum import prices into the EU to avoid tariffs and says the deadline for such offers has now passed.
In the meantime, aside from expressing disappointment over that rejection, China has been mounting a big push both publicly and behind the scenes to flip enough EU member states’ votes against tariffs.
Which brings us to today’s Auto File…
China leans on EU states over tariffs
Northvolt struggles dim Europe battery hopes
BYD goes big on China jobs
China’s good cop, bad cop routine
When EU member states vote on tariffs on Chinese-made EVs, opponents need 15 member states representing 65% of the bloc’s population for a vote against. That is a steep hill to climb.
To tip the scales in its favour, China has adopted a carrot-and-stick approach, which my Reuters colleagues Mei Mei Chu, Joe Cash and Ellen Zhang sum up nicely here.
China has threatened tariffs on pork, dairy and brandy exports that would hurt tariff-supporting member states like Spain, France and Italy, while also offering sweeteners to tempt them to support China’s stance.
One such sweetener consisted of a Chinese company announcing a $1 billion plant in Spain to build machinery for hydrogen production.
Lo and behold, after sitting in a Chinese EV during a visit to Beijing, Spanish Prime Minister Pedro Sanchez abruptly changed his tune and called on the EU to reconsider its position on tariffs.
The implied threats and cajoling continue.
On Monday, Italy’s foreign minister said the country backs the EU tariffs.
Barely a day later, China’s commerce minister said the EU’s tariff probe has seriously affected Chinese automakers’ confidence in investing in Italy, knowing full that Italy has been courting those companies in a push to bolster its auto industry.
Subtle, it is not. We will know soon enough how many other EU members will follow Spain’s lead and shift their positions on tariffs.
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Northvolt sinking Europe’s battery hopes
Long held up as Europe’s best chance of creating a homegrown EV battery champion, Northvolt’s announcement that it will shrink its operations and cut jobs has dealt those hopes a major blow.
The EU has pushed for a domestic battery industry to rival that of China’s, but those efforts so far have resulted in little in the way of a truly European battery industry.
Northvolt had attracted large investments and customer contracts from the likes of Volkswagen and BMW making it look like the real deal, but amid a slowdown in EV demand, the wheels have started to come off at the Swedish firm.
As my Reuters colleague Marie Mannes reports here, after struggling with order delays and the loss of a $2 billion BMW contract in June, the company said it would stop producing cathode active material (CAM) - a crucial battery component - scrap plans for a Swedish facility and seek investors for a Polish plant.
Northvolt has thus abandoned its dream of being a one-stop shop with control over the entire battery supply chain from battery material production to recycling, raising questions about the company’s ability to be a major player on the European stage as automakers make the shift to electric.
So far, instead of battery independence, much of Europe’s battery production looks likely to come from plants built by Chinese battery makers.
BYD aids China’s job creation push
Chinese auto giant BYD has given an assist to the Chinese government’s push to create more jobs, above all for college graduates as its economy weakens.
As you can read here, BYD has ramped up its hiring and now has a payroll of more than 900,000 people, making it one of China’s largest employers.
That is a 20% increase in headcount since the end of June when it employed 750,000 people.
Just to put that in perspective, even at its peak in 1979, the United Auto Workers had fewer than 1.5 million members representing workers at U.S. automakers and suppliers, during an era where there was far less factory automation than today.
This comes during a vicious EV price war in China that is putting pressure on profits and has legacy automakers and their Chinese joint venture partners cutting staff instead of hiring.
BYD’s hiring spree also coincides with a big push into foreign markets requiring hefty investments.
Those in Europe and the United States who argue that Chinese government influence over and support for its automakers justify tariffs will likely point to BYD’s massive payroll as another example of why duties should stay in place.
GM looks at CATL batteries for US production
General Motors is in talks to buy EV batteries using licensed technology from China’s CATL and that would be built at a new U.S. plant, according to a source familiar with the matter.
The plant would be funded and operated by Japanese consumer electronic firm TDK Corp and is expected to be in the southern United States.
The source told my Reuters colleagues David Shepardson and Nora Eckert that a deal could help GM produce lower-cost batteries and avoid new tariffs by assembling them in the United States.
You can read about it here.
Ford already has such a deal in place with CATL, but has encountered pushback from Republican politicians.
The need to sign licensing deals with Chinese battery makers brings us back to Northvolt’s problems.
The United States does not have much of a viable battery industry and the need to develop more affordable EVs naturally favours doing deals with the Chinese.
Fast Laps
Chinese carmaker Chery could spend billions of euros to sell its Omoda and Jaecoo brands to European customers over the next three years, according to the head of its Italian operations.
The U.S. House of Representatives has approved legislation to tighten rules limiting Chinese content in vehicles qualifying for U.S. electric vehicle tax credits.
Stellantis has suspended production of the fully electric Fiat 500 small car at its Mirafiori plant in Turin for four weeks due to sluggish demand.
Ford will restart manufacturing at its factory in the southern Indian state of Tamil Nadu, two years after it halted production in India, the world's third-largest car market.
Volkswagen and union IG Metall will start talks at the end of September for new labour contract for six German plants after the automaker canceled a job security scheme.
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Editing by Alexandra Hudson
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