Europe "sleeping" while China accelerates to the forefront in the automotive sector

On the avenues of Shenzhen, the technology hub in southeast China, electric cars are overtaking internal combustion vehicles, illustrating the country's rapid transition to the forefront of the automotive industry.

On Shennan, the wide ten-lane artery that runs through the dense grid of skyscrapers in the city's financial district, the tallest building is the 550-meter Ping An Finance Center, cars with green license plates, the mark that distinguishes electric from internal combustion vehicles, are already predominant.

"We have one of the highest penetration rates in the world," said the mayor, Qin Weizhong. The goal is to reach 1.3 million units by 2025, he said.

Some 10,000 kilometers away, in Brussels, the president of the European Commission, Ursula von der Leyen, announced this week an investigation into the subsidies China grants its electric vehicle manufacturers. "The world markets are flooded with cheaper Chinese electric vehicles and their price is kept artificially low thanks to huge state subsidies," she explained in a State of the Union address.

Experts interviewed by the Lusa news agency counter that the problem lies in the "excessively heavy and slow structures" of European groups to adapt to an industry that is undergoing profound transformations. The investigation announced this week "indicates fear" that Europeans will not be able to compete in the electric segment, they say.

"Europe fell asleep and didn't believe that China was capable of developing the automotive sector," said Carlos Martins, who runs a factory for the Portuguese car components company Sodecia in the north-eastern Chinese city of Dalian.

Speaking to Lusa, the Portuguese, who has lived in China for ten years, highlighted the "completely different" speed at which local manufacturers operate, as opposed to their European counterparts, which have "very heavy" organizational structures and take "a long time" to make changes.

"It takes us a long time to adapt," he said. "We have very heavy structures, which are used to operating in a mature market, where competition is already more or less defined between two or three groups," he said.

The emergence of Chinese brands, some of which were founded less than a decade ago with an eye on the electric segment, promises to have a "big impact" on the industry, warned Carlos Martins.

Last year, almost six million electric cars were sold in China - more than in all the other countries in the world combined. The size of the Chinese market and strong state support have led to the rise of local brands, including BYD, NIO and Xpeng.

"Traditional brands are bringing analog toys to a digital playground," Tu Le, the director of consultancy Sino Auto Insights, told Lusa. "The automotive sector in China is dominated by computer programmers," he pointed out.

Some of China's biggest technology companies, including Huawei, Alibaba and Baidu, provide the digital basis for the country's vehicles, allowing smart, connected cars to be built.

"They're an extension of your cell phone: you can ask the car to adjust the temperature, open the back window, lock the door or do online shopping while you're driving," said Carlos Martins. "This is a huge leap forward in the way the driver sees the car."

For Tu Le, the investigation announced on Wednesday "says a lot about the lack of competitiveness of European [electric vehicles]".

"Politicians fear that European manufacturers will not be able to develop and manufacture competitive cars in the electric segment in the near future," he noted.

In 2014, Chinese leader Xi Jinping said that developing electric cars was the only way for China to become an "automotive powerhouse".

Since then, the Chinese authorities have introduced generous incentives for the purchase of electric vehicles.

In 2018, for example, the buyer of an electric model with a range of 400 kilometers received the equivalent of almost 6,500 euros from the central government and a further grant of the same amount from the respective local government.

The US think tank CSIS estimated that the industry in China received more than 55 billion euros in subsidies by 2018. Consulting firm Alix Partners estimates that between 2016 and 2022, state support will amount to 53 billion euros.

The units in China of European manufacturers Volkswagen, BMW and Renault and the US company Tesla have also benefited from this support.

Subsidies for the purchase of electric vehicles were progressively reduced and, at the end of 2022, Beijing completely eliminated this allocation, while maintaining the tax exemptions in force.

Tu Le stressed that brands now compete in China on price and quality. "It's no longer a question of subsidies," he noted. "It's the market at work."