Auto File: China revs up tariff push

TDK

17/09/2024 16:00

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. 
 
Recommended reading: 
    * Automated systems distract drivers.  

    * Teamsters weigh U.S. presidential endorsement  

    *         Francine hits oil, gas production 

 
    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)