Europe should pursue more open market, not green protectionism
Published: Jul 24, 2023 10:20 PM
Illustration: Chen Xia/Global Times

Illustration: Chen Xia/Global Times

Mercedes-Benz will make China, the world's top auto market, central to its next electric vehicle (EV) campaign starting in 2025, CEO Ola Kaellenius was quoted as saying. The importance that Europe's auto brands attach to China's consumer market should remind Western policymakers to work together with China to promote mutual market openness and stop advocating de-risking.

From 2025, all of Mercedes-Benz's new vehicle platforms will only make EVs under a strategy that the German luxury automaker outlined in 2021, Reuters reported on Sunday. This means the role of China's EV market has grown increasingly significant for Mercedes-Benz as it shifts focus to the EV sector.

The overwhelming majority of electric car sales are concentrated in three markets - China, Europe and the US, and China leads global sales by a large margin. The country accounted for about 60 percent of all new electric cars sold worldwide in 2022, which means "more than half of the electric cars on roads worldwide are now in China," the International Energy Agency (IEA) said in its report released in April this year. 

China has gained an absolute advantage in terms of the share of sales. Europe is the second-largest EV market and the US is the third, but their sales shares are much lower than China's.

It is understandable that Western auto manufacturers attach importance to the Chinese market. China always welcomes foreign investors, and has pledged to further open its economy to overseas firms, allowing them to share the dividends of China's economic growth. Western automakers have significant sales and manufacturing operations in China.

Against this backdrop, what people worry about is a rise of green protectionism in the US and European countries. In August 2022, the US passed the Inflation Reduction Act (IRA), which provides generous subsidies for electric cars, batteries and renewable energy products made in the US.

Now, media reports said the EU is relaxing rules on government tax breaks and other benefits for clean-tech companies, part of its effort to prevent businesses being lured to the US by new subsidies offered under the IRA. 

Europe is China's largest trade partner for electric cars. In 2022, the share of electric cars manufactured in China and sold in the European market increased to 16 percent, up from about 11 percent in 2021, according to the IEA. Some people worry that the rise of green protectionism in the US and EU will create new obstacles for China's EV exports.

It is understandable that European countries seek to protect their companies amid the increase in anti-globalization and trade protectionist rhetoric, but this does not necessarily mean Europe has to bow to green protectionism. What Europe's EV makers need is sales growth in the global market, especially in China, not green protectionism that undermines international trade rules and fragments the global market. 

It is our sincere hope that European countries can work with China to jointly open up their domestic markets through enhanced economic cooperation. It won't make much sense if European companies enjoy the dividends of China's economic growth, and at the same time Chinese firms face protectionist pressures in Europe.

As for China, the more the US and some European countries pursue green protectionism, the more China needs to accelerate the development of its EV industry, and continuously expand its market advantages. 

Global sales of EVs increased in 2022, with China leading the way. China's EV sales reached about 6.89 million in 2022, skyrocketing 93.4 percent year-on-year, data from the China Association of Automobile Manufacturers showed. In Europe, electric car sales increased by only about 15 percent in 2022. 

As long as China maintains its market attractiveness to Western companies, green protectionism and economic decoupling will come to a dead end.

The author is a reporter with the Global Times.