[[{“value”:”
China is investing heavily in electric vehicle assembly plants, battery plants, and transition technologies abroad to counteract Western tariffs.
Chinese companies are not only expanding manufacturing capacity but also exporting technology, engineering, supply chain, and financing expertise globally.
European and U.S. companies are struggling to compete with cheaper and often superior Chinese EVs.
China is investing in EV factories, battery plants, and all sorts of other transition tech around the world. It is building EV factories and battery plants abroad to retaliate against a tariff push in the West that may prove to be just as counterproductive as sanctions on Russia.
In June, the media reported that European governments were competing for Chinese financial attention. At the EU level, there was increasingly louder talk of import tariffs as the bloc tried to build its own transition supply chain very much from scratch in a bid to protect local industries from cheaper—and superior—Chinese tech. At the national capital level, however, money talked louder.
Hungary is one beneficiary of what the Financial Times reported was a “tsunami” of transition investments across the world. The central European country, which is often at odds with the central EU government in Brussels, hosts two South Korean battery plants and EV giant BYD has picked it for the location of its first European factory. Poland is another beneficiary of Chinese transition investment—China’s Leapmotor and its new joint venture partner, Stellantis, will build an EV factory there.
Meanwhile, BYD is also planning an EV factory in Mexico for the same reasons it is building one in Europe: the tariff push. Naturally, this tactic of setting up local production to beat the tariffs has raised Washington hackles. U.S. politicians are now trying to pressure Mexico into being less hospitable to Chinese investors, as Reuters reported in August. The pressure campaign worked, too, with the Mexican authorities refusing to provide Chinese EV investors with any incentives available to other carmakers. The problem: they could just take their business elsewhere.
The FT reported that Chinese investment abroad rose by 12.5% to the equivalent of some $112.2 billion over the first eight months of this year. A lot of the money invested abroad by Chinese companies is going into transition technologies, the report noted. One Australian research firm reported 130 transition investment transactions since the start of 2023 worth a combined $109.2 billion in final investment decisions on projects abroad, the firm, Climate Energy Finance, said.
Interestingly, Climate Energy Finance director Tim Buckley told the FT that Chinese companies were not only investing in new manufacturing capacity abroad. They were also exporting “technology, engineering, supply chain and financing capacities.”
“Outward direct investment [from China] is growing on a scale we can’t ignore and compares with the largest global investors like the US and Japan,” Oxford Economics researcher Betty Wang told the FT. A Climate Energy Finance added that this surge in investment comes amid plunging transition technology costs at home. Essentially, it seems China is exporting cheap transition. In Europe and North America, however, companies are struggling to bring their costs down—and are often failing.
EVs is one sector where this is particularly obvious. The FT again reported this week that European carmakers were bracing for a prolonged downturn amid falling sales. “We’ve all assumed that things would normalise but they are taking a turn for the worse. All of a sudden there is an acceleration in negative factors and the magnitude of the deterioration is big,” one Jefferies analyst told the publication.
One could argue that what is happening is a natural consequence of processes jumpstarted a couple of years ago and, as such, is not at all unexpected. The downturn results from rushed pro-EV policies that twisted carmakers’ arms to start producing more of these while ignoring the demand part of the equation.
Now it turns out that European EVs cannot compete with Chinese EVs on price—and often on quality, it seems—so they are struggling, and the EU is helping by implementing protectionist policies that the Chinese go around by setting up local factories. The picture is the same across transition technology. It was not an accident that in a recent report, Wood Mackenzie stated facts plainly: no China, no energy transition. That statement concerned copper, but it increasingly looks like it is valid for the energy transition as a whole.
By Irina Slav for Oilprice.com
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