Overcapacity of Chinese EVs and their penetration into Europe

Jorge Costa Oliveira

U.S. officials have been insisting on the need for China to curb the “industrial overcapacity” of photovoltaic products, electric batteries, and electric vehicles (EVs), whose exports are estimated to have reached 127 billion euros in 2023 (+30% compared to 2022).

In a recent interview with The Economist, Macron stated that “today China has an overcapacity of vehicles and exports them on a massive scale, particularly to Europe.” Let’s examine whether this is indeed the case, focusing on the aspect of “massive scale exports [to Europe].”

According to the International Energy Agency (IEA), in 2024, the market share of EVs could reach 45% in China, 25% in Europe, and >11% in the U.S. The vast majority of EV sales in 2023 occurred in China (60%), Europe (25%), and the U.S. (10%). Comparatively, these three major markets represent 65% of total global automobile sales.

According to KPMG, BEVs manufactured in China accounted for only 10% of the 1.1 million BEVs sold in Europe in 2022.

According to the European Automobile Manufacturers’ Association (ACEA), China maintained its position as the leading source of new car imports to the EU in terms of value, with a growth of 37.1% and a market share of 17.7%. A significant portion of this growth is due to EVs. According to the European Federation for Transport and Environment (T&E), EVs manufactured in China are expected to account for 25% of total EV sales in Europe in 2024 (+5% compared to 2023).

T&E projections estimate that [among the EVs manufactured in China] Chinese brands will progressively gain larger market shares – 11% by 2024 and 20% until 2027. But it is important to clarify what “Chinese brands” means. In 2023, Chinese brands only represented a 2.5% market share of the European market last year, with 72% of that share belonging to MG, a British car brand controlled by the Chinese group SAIC Motor, MG being today a fully Chinese brand from production to design.

Without MG, Chinese brands have only a 0.6% market share in Europe. This discrepancy arises from the fact that most vehicles imported from China to Europe are not Chinese brand vehicles but rather vehicles manufactured in China by foreign brands. Tesla alone accounts for 68% of the EVs imported from China and registered in Western Europe.

It is possible that there is overproduction of Chinese EVs. Although it is doubtful that this is the main reason for the recent significant increase in EVs imported from China, there are reports of over 100,000 Chinese EVs currently parked in European ports. The main reasons are: (i) fear of the imposition of high tariffs or non-tariff obstacles by the EU; (ii) very difficult access to the U.S. market; and (iii) higher margins on sales in Europe.

The narrative of European political leaders combating Chinese “overcapacity” echoes the concerns of European manufacturers. The truth is that neither European manufacturers planned the transition well, nor did European politicians promptly define public policies for the sector and the EVs value chain, nor can the European public opinion free itself from the entropies of radical environmentalism. It is high time for European political and business leaders to stop looking for excuses for what they should have done and did not do.

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