German leader tells carmakers to 'not be afraid' of Chinese competition

The German Chancellor has backed his country’s automotive industry amid increasing competition in the electric vehicle (EV) market from China.

Speaking to attendees at the opening of a new Mercedes-Benz battery recycling facility, German Chancellor Olaf Scholz called for the nation’s carmakers to back themselves in the showroom battle against China.

“Some say that China can do much better with electric motors than us,” Mr Scholz said, according to Reuters.

“German companies need not be afraid of this competition.”

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While Mr Scholz reportedly referenced how German brands have previously staved off competition from South Korea and Japan, he also continued his calls for Chinese EVs to not be hit with tariffs, as has now been mandated by the European Commission.

“I’m against tariffs that harm us,” he said.

In June, the European Commission announced it would impose tariffs ranging from 17.4 per cent to 38.1 per cent – on top of its existing 10 per cent tax on all imported vehicles – on EVs coming from China.

SAIC Motor – the parent company of MG and Maxus/LDV – is facing a 36.3 per cent tariff, while Chery, Great Wall Motor (GWM), Leapmotor, Nio, Xpeng and all face tariffs of 20 to 21 per cent.

Geely – which owns Volvo, Polestar and Lotus, among others – had its tariff revised to 19.3 per cent, while BYD was initially hit with a 17.4 per cent tax rate, since reduced to 17 per cent even.

Tesla, which builds the European-delivered Model 3 in China, was initially slugged with a 20.8 per cent tariff, though this doesn’t apply to the German-built Model Y or the Model S and X that are built in the US.

Following further investigations by the European Commission, Tesla had its tariff reduced to just nine per cent, though this doesn’t include the existing 10 per cent import tax.

The tariffs have been introduced in a bid to protect Europe’s auto industry, however the impact of Chinese competition has already been felt, with even Volkswagen – long the region’s top seller – last month saying it’s considering closing some factories.

However, Europe’s tariffs on Chinese EVs could see retaliation in the latter market, with a government-affiliated auto group suggesting the country raise its tariffs on imported internal combustion sedans and SUVs with engines larger than 2.5 litres from 15 per cent to 25 per cent.

Exports of such vehicles from Europe to China totalled 196,000 units in 2023 in an 11 per cent year-on-year increase, according to data from the China Passenger Car Association.

Reuters additionally reports Germany’s exportation of sedans and SUVs with engines larger than 2.5 litres to China brought in US$1.2 billion (A$1.77 billion) in 2023.

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