Summary
- EU expected to allow Chinese access to European subsidies in exchange for technology transfer
- New resolution to be confirmed before new EU grants for battery manufacturing in December
- China upset with EU tariffs on imported EVs, negotiations ongoing
- China previously required foreign automakers to enter joint ventures with local companies
- Complicated arrangement acknowledges EU’s need for China’s help, unclear if tensions will ease or if it will result in cheaper EVs for Europeans
Article
EU to Allow Chinese Access to European Subsidies
The EU is expected to allow Chinese access to European subsidies in exchange for transferring technology and IP to European companies. This decision is anticipated to be confirmed before new EU grants for battery manufacturing become available in December. China was previously displeased with the EU’s tariffs against imported EVs, resulting in negotiations that could potentially lead to a breakthrough in talks between the two entities.
Negotiations Between the EU and China
Earlier this year, EU member states implemented tiered tariffs on imported Chinese EVs. The tariff, which added up to 35.3% to imported Chinese EVs, was based on investigations alleging that China unfairly subsidizes its EV industry. Despite months of negotiations, the tariff was only reduced by a small amount. The EU and China continued to negotiate, leading to the possibility of Chinese businesses transferring technology and intellectual property to European companies in exchange for access to European subsidies.
Historical Context of China’s Joint Venture Program
China previously had a joint venture program where foreign automakers had to enter a 50-50 relationship with a local Chinese company to access the Chinese market. The program aimed to allow local Chinese companies to learn from established ones, although critics argued that it was a way to transfer intellectual property from the West to China. China officially ended the joint venture requirement in 2022, with Tesla entering China under special circumstances without creating a joint venture with a local Chinese company.
Complexities of the EU-China Arrangement
The arrangement between the EU and China is complex, as it signifies the EU’s recognition that it needs China’s help to compete and achieve its climate goals. However, it remains unclear whether this arrangement will ease tensions between the EU and China. China has advised its homegrown brands to be cautious when investing in Europe, potentially impacting the outcome of the agreement. The implications of this agreement on the cost of EVs for European consumers are also uncertain.
Potential Impact on US-China Relations
The incoming Trump administration has expressed a desire to take a harsher stance on China. However, there have been indications that Trump is not opposed to Chinese EV or supply chain manufacturing being established in the United States. This suggests that a similar arrangement between the United States and China could be on the horizon. The evolving dynamics between the EU, China, and the United States will likely have significant implications for the global EV market.
Conclusion
The potential agreement between the EU and China reflects a strategic shift in international relations, with implications for the EV industry and global trade. As negotiations progress and new developments emerge, it will be crucial to monitor how this agreement shapes the competitive landscape for EV manufacturers. The impact on technology transfer, intellectual property rights, and consumer pricing will be key factors to consider as the EU-China relationship continues to evolve.
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