According to media reports, executives from several European car manufacturers expressed during an event that European automotive giants have limited time to restructure their business and product lines to compete with emerging Chinese automakers, and tariffs have virtually no effect on protecting the status quo.
European trade regulators previously stated that they might impose new tariffs on Chinese electric cars based on the results of anti-subsidy investigations.
On May 21st, Ursula von der Leyen, President of the European Commission, stated that Europe would conduct a "tailored approach" investigation, and any potential tariffs imposed would be "proportionate to the level of harm." The European Commission will notify Chinese electric car manufacturers subject to temporary tariffs by June 5th.
However, several automotive industry executives stated that the EU's actions cannot stop the impact of lower-cost Chinese electric cars on European automakers and their traditional suppliers.
Data released by the Rhodium Group shows that Chinese automakers enjoy a cost advantage of 30% or more over their European competitors. Last year, Chinese electric vehicles accounted for 19% of the European electric vehicle market, compared to 16% in 2022.
Thomas Schmall, a member of the Volkswagen board, stated at an industry conference in Munich, "The window is closing. In my view, we have another two to three years, and if we don't act quickly, the German automotive industry will struggle to survive. Today, it's no longer about size determining survival, but speed."
Carlos Tavares, CEO of Stellantis, stated that European automakers have "little time" to adjust their business and need to eliminate "regulatory confusion and bureaucracy in our backyard."
Automotive executives noted that the surge in Chinese car exports and the prospect of China building factories in Europe are forcing European automakers to explore cooperation with long-time competitors, pressure suppliers to cut costs, and intensify discussions with European unions about the future of factories and jobs.
Renault and Volkswagen terminated negotiations last week on developing low-cost electric cars due to disagreements over where to produce the vehicles.
Luca de Meo, CEO of Renault, stated during the VivaTech summit in Paris that European carmakers not only face "asymmetric competition" from China but also from clean vehicle subsidies in the United States. "Ultimately, the best thing you can do is to remain competitive," he said.
Li Bin, founder of Chinese electric car manufacturer NIO, stated on May 23rd that despite uncertainties regarding tariffs, he plans to continue expanding his business in Europe.
In Europe, cutting labor costs has never been easy as unions have political and legal means to prevent layoffs.
Tavares stated, "The quality of our dialogue with European unions is quite high. They see the risks and also see how we are working hard to manage and navigate this situation."
European political figures such as Italian Prime Minister Giorgia Meloni have recognized the risk of reduced employment opportunities in the automotive industry. Meloni hopes that Stellantis will increase its annual production in Italy from about 750,000 vehicles in 2023 to 1 million vehicles, rather than relocating production to other countries with lower labor costs.
Since the merger in 2021, Stellantis has reduced its workforce in Europe by 13% to about 125,000 people, with most job cuts made through voluntary agreements with unions, and more than half of the laid-off workers are in Italy.
On May 23rd, Arno Antlitz, Chief Financial Officer of Volkswagen, stated at a conference that the company aims to cut costs by €10 billion (about $10.8 billion) by 2026, with some of the savings coming from early retirement for employees. "Especially our German factories must be prepared for tougher competition," he said.
Stellantis will launch a small electric car under the Citroën brand priced at €20,000, which Tavares stated is "very competitive" and can compete with Chinese car manufacturers.
Maxime Picat, Stellantis' global procurement director, stated in an interview in Munich that the company is pushing its suppliers to match costs with Chinese suppliers, partly using data collected from cooperation with Chinese automaker Zero Run.
Tariffs may temporarily narrow or eliminate the cost advantage Chinese automakers gain from the supply chain. However, German automakers warned that if China takes retaliatory measures, Europe will pay a high price, not only with tariffs on French cognac but also on Mercedes, Volkswagen, or BMW cars produced in Europe. Mercedes generates about 16% of its global revenue from China.
