In a groundbreaking event held in California, Tesla unveiled its ambitious vision for the future of transportation during its Robotaxi Day, aptly named "We, Robot." Elon Musk made a notable entrance in an autonomous taxi, dubbed the Cybercab, showcasing a vehicle that is devoid of conventional driving elements like a steering wheel or pedals, relying entirely on Tesla's Full Self-Driving (FSD) softwareMusk's goal for the cost of the Cybercab is to be below $30,000, paving the way for its commercial viability.

Alongside the Cybercab introduction, Musk also introduced the Robovan, a self-driving cargo van resembling a large business vehicleThe Robovan, like its counterpart, operates without a steering wheel or brake pedals, again utilizing the FSD technology, and is capable of carrying up to 20 passengers or being used for transporting goods.

Musk's ambitions extend beyond merely launching new vehicle models; he envisions transforming the approach towards how smart vehicles are utilized

Owners of Cybercabs will have the opportunity to place their vehicles on a ride-sharing platform, essentially converting them into machines that generate incomeThe concept even allows for an individual to manage a large fleet, likening the operation to that of a shepherd tending to a flock of sheep, thereby optimizing fleet management.

"This represents a new future," remarked a professional involved in the new energy vehicle sector after attending the Robotaxi Day"Musk views smart vehicles as four-wheeled robots, emphasizing that intelligence is critical, with Tesla leading the way in the FSD domain."

Just a week prior to this event, on October 4, the European Commission voted on whether to impose a five-year anti-subsidy tax on Chinese electric vehiclesThe proposal was approved with support from 10 countries, while 12 abstained and 5 opposedThis decision allows the Commission to levy punitive tariffs on Chinese automakers like BYD, Geely, and SAIC, on top of the existing 10% automotive tax in the EU.

With the launch of the Cybercab and Robovan potentially giving Tesla a first-mover advantage, and now facing the hurdle of EU tariffs, the question arises: can China's electric vehicle industry navigate these challenges successfully?

Due to well-known restrictions, Chinese new energy vehicles are virtually barred from entering the US market

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Consequently, the European market, known for its legacy brands, plays an irreplaceable role in the journey of Chinese EV companies towards internationalizationUnlike developing countries with weaker industrial foundations, conquering an established market like Europe, which has stringent policies and advocates for green energy, serves as a stronger testament to China’s core competitive advantages in the automotive sectorDespite facing numerous challenges, automotive manufacturers are keenly investing heavily, viewing the EU as a tough but essential nut to crack.

With their high cost-performance ratio, Chinese new energy vehicles have seen a steadily increasing penetration rate in the European marketBy 2022, China had become the largest automotive import source for the EUIn 2023, China exported 1.55 million electric vehicles, with 40% heading to EuropeIn June of this year alone, new registrations of Chinese electric vehicle brands in the European market surpassed 23,000, setting a historical high, and the growth rate of Chinese new energy vehicles in Europe has been double that of overall EV market growth in the region.

The rapid ascent of Chinese automotive enterprises has prompted protective trade forces within the EU to become active

In October 2023, the European Commission initiated an anti-subsidy investigation of pure electric vehicles from ChinaFollowing a protracted period of investigation, the official announcement came on October 4. Reports indicated that SAIC, Geely, and BYD would face additional tariffs of 35.3%, 18.8%, and 17%, respectively, while Tesla, which applied for a separate examination, would be subject to a 7.8% tariff.

In response to the news, various Chinese governmental and business associations, including the Ministry of Commerce and the China International Trade Promotion Committee, expressed strong opposition, citing disappointment over the EU's erroneous decision and emphasizing that the additional tariffs would ultimately harm European companies and consumers.

Interestingly, there appears to be a dichotomy within the EU regarding this proposalReports cite that France, among key EU nations, supported the decision, likely due to the French auto industry's underperformance in the new energy sector, compelling the government to protect local enterprises

Conversely, Germany voted against the measure, with major German auto manufacturers like BMW, Volkswagen, and Mercedes firmly opposing the EU's stanceVolkswagen argued that imposing extra tariffs would not enhance the competitiveness of European carsMercedes appealed for continued negotiations with China, believing the EU should postpone its flawed decisionBMW labeled the voting outcome as a "deadly signal" for the European automotive industry.

In a notable move, the EU's official announcement hinted at a willingness to explore alternative solutions with China, with reports suggesting technical discussions occur almost daily to potentially secure "price commitments." The negotiations may continue until the end of October, while the proposed tariffs are not set to take immediate effectSpecifically, the EU seems inclined to have Chinese automakers raise vehicle prices, control export volumes, and invest in the EU during the transition period to mitigate harm to European companies in exchange for nullifying the tariffs.

Analyzing the current climate, industry insiders assert, "The rationale behind the tax legislation is twofold: to curtail market share encroachment by Chinese firms and provide domestic manufacturers and supply chain enterprises with the necessary space to grow, while simultaneously using tariffs as leverage to negotiate for technology transfers and investments from China."

It is crucial to underscore that Germany's opposition to applying tariffs against Chinese enterprises does not stem from a benevolent attitude towards China, but rather from a desire to safeguard its industrial base

Germany, with its robust automotive manufacturing legacy, understands the paramount importance of maintaining communication and cooperation with China, as isolating itself could jeopardize its own interests far more significantly than in peer EU nations lacking complete automotive production capabilities.

The automobile industry is a pillar of the German economy, providing about 5% of its jobsFor a long period, and still a significant player globally, iconic German brands such as BMW, Volkswagen, and Mercedes have commanded consumer admiration and loyaltyGermany's automotive exports to China represent around 30% to 40% of its total automotive export volume.

However, with China's new energy vehicles rising quickly, the traditional dominance of German automotive companies has been challengedInitially, domestic brands began their conquest of lower-priced segments, but as they have upgraded, competition has intensified, with many new energy vehicle producers targeting the high-end market dominated by German automakers

Furthermore, leaders in this sector have adopted innovative marketing strategies, positioning themselves against well-known brands.

According to financial reports, the first half of 2024 saw significant revenue declines for BMW, Volkswagen, and Mercedes, with downturns in both profit and sales numbers as wellThe data reveals dwindling sales figures for the German manufacturers in China, with BMW's deliveries declining by 4.2%, Mercedes dropping by 6.5%, and Audi barely slipping by 1.9%.

During a conference call, words like "challenging," "intense competition," and "market contraction" have frequently characterized discussions surrounding the Chinese marketBMW lamented that it has become the lowest-performing market globally, failing to meet board expectations.

Despite still enjoying the prestige associated with luxury vehicles, even German media concede that Chinese firms have outpaced them in electric drive and battery technology, highlighting China's impressive number of patents in charging stations and battery innovations

In the era of internal combustion vehicles, the German automakers wielded both the definitions and pricing power for luxury carsYet, in the new energy landscape, marked by Tesla's redefinition of industry standards and the increasing sophistication of domestic brands, the narrative is shifting, reducing the influence of traditional German manufacturers.

If China were to retaliate against EU tariffs, the fallout could disproportionately affect German automakers, who lack technological advantages in intelligence and pricingIn terms of strategy, aligning with Chinese companies would better serve German interests today.

Despite the challenges spotlighted by the emergence of domestic Chinese electric vehicles, the age-old European automotive giants still possess unique advantagesIndustry leaders within the European supply chain assert that there’s a depth of historical experience and understanding in production elements critical to automotive manufacturing, especially in specific components due to their legacy brands

In contrast, while Chinese supply chain companies have made rapid advancements, their sheer number and competition make it difficult for any single entity to refine products to a high standard.

Although European automakers excel in elements like vehicle chassis and regulatory components, they lag in technology focused on smart driving, smart cabins, and batteries, where Chinese firms benefit from large-scale electronics industries and digital engineering innovations.

Consequently, Germany's investment in China reached a historic high in the first half of 2024, totaling 7.3 billion eurosLeading car brands are actively seeking partnerships with Chinese suppliers and forming joint ventures to develop new electric vehicle technologies collaboratively.

Rather than positioning themselves in opposition to the EU, the traditional automotive sector appears to be leveraging cooperation in ways that maintain viability within the evolving landscape.

In reality, European car manufacturers have tried to promote local new energy enterprises, yet the attempts have been lackluster

Recently, Northvolt, Europe's largest battery manufacturer, found itself in dire financial straitsOnce hailed as "Europe's CATL," the Swedish battery company has announced a dramatic layoff of 1,600 employees due to unfavorable market conditions, leading to the resignation of its flagship factory manager.

Northvolt's CEO admitted, "We are taking necessary actions in response to adverse automotive market conditions." Established in 2016 by a team with Tesla roots, Northvolt initially received enthusiastic support from the EU and European investors, perceiving Tesla as its main competitor rather than Chinese newcomers.

Following its establishment, Northvolt joined EU initiatives aimed at battery industrialization, raising approximately $15 billion in funding thus far, making it Europe's highest-funded startup in recent times, with backing from notable brands like Renault, Volkswagen, and the European Investment Bank.

However, as it turns out, Northvolt has fallen short of managing the high expectations placed on it by the EU

Its ambitious range of operations in both battery production and raw material supply chains could not be fully realized due to the scarcity of local mineral resources, with Europe lacking substantial lithium depositsIn comparison, China dominates the global market for battery electrode materials, accounting for 95% of the total shipments.

Despite boasting numerous contracts, Northvolt has struggled to scale its operations to harness the benefits of economies of scale, facing criticism for failing to deliver on agreements with major automotive manufacturers, which have voiced concerns about lagging product performance.

As of 2023, Northvolt's revenue was merely $128 million, but its losses reached a staggering $1.168 billionIn June, BMW canceled a $2 billion order, opting to collaborate with Samsung SDI instead, which exacerbated Northvolt's ongoing operational crisis.

Interestingly, these challenges faced by Northvolt coincided almost perfectly with the EU's decision to impose tariffs on Chinese automotive manufacturers, raising suspicions about the timing's correlation

As market forces fail to sustain the competitiveness of local European enterprises, the EU may resort to regulatory measures to slow China's rapid momentum in the new energy vehicle sector, simultaneously stabilizing European firms in the process.

In the new energy vehicle space, European firms are operatively playing catch-up but, given their strong brand names, possess opportunities to swiftly realign their supply chains"With such fierce competition domestically, if European automakers extend invitations to domestic suppliers, these suppliers would readily align themselves to meet demands, provided that nothing significantly prevents them," quipped an executive from a new energy supply chain company"However, that would necessitate abandoning collaborations with local suppliers, which isn't feasible."

The industry professional summarized, "The top tech companies in the US boast robust intelligent technologies, and should robotics become widespread, production efficiency could see substantial improvements