The opening of Tesla’s Shanghai factory in 2019 was a breakthrough for electric vehicles and for overseas carmakers: it was the first wholly foreign-owned plant in the world’s largest car market. But it also marked the start of an even bigger trend, which promises to upend the structure of global manufacturing, bring a new wave of deindustrialisation to Europe and trigger trade tensions of an intensity to match the 1980s. That trend is the emergence of China as a car exporter.
As Gregor Sebastian and François Chimits of the Mercator Institute for China Studies documented recently, China’s car exports are taking off, many of them are electric vehicles and most are going to Europe. From almost nothing a few years ago, China exported half a million electric vehicles in 2021, and its market share in Europe was second only to Germany’s. As the car market goes electric, Europe could quickly find itself running a trade deficit with China in automobiles.
That would be a dramatic shift in market structure. Europe and Japan now buy consumer goods from China, and send luxury cars — or their most vital components — in the other direction. The badges on Chinese vehicles arriving in Europe do not necessarily reveal their origins. About half of them are Teslas from Shanghai; other marques include Dacia, Polestar and BMW. Tesla has recently opened a European plant in Germany, but the production decisions of other makers suggest a meaningful cost advantage for China.