China Extends EV Lead as Europe and U.S. Back Away
- China is strengthening its dominance in the global EV market as Europe and the U.S. retreat from aggressive EV mandates.
- Despite tariffs in the U.S. and EU, Chinese EVs remain competitive, and exports are increasingly shifting toward emerging markets in Latin America and Southeast Asia.
- Rising EV penetration in emerging markets boosts Chinese exports as Western automakers scale back EV investments.
China’s dominance in the global electric vehicle market looks set to deepen as policy reversals in Europe and strategic pullbacks by U.S. automakers reduce competitive pressure just as Chinese EV makers push aggressively into overseas markets.
China’s booming EV market has its own set of issues to address, especially the battery and manufacturing overcapacity denting the profits of the EV makers. However, the race to the bottom and the price wars in China’s electric vehicle market have sunk costs so much that China has a competitive advantage in foreign markets with its affordable vehicles.
Facing tariffs in the U.S. and the EU, China is taking over the booming emerging markets in Latin America and Southeast Asia, and still has competitive advantage in Europe.
For China, the export market has shrunk over the past two years amid hefty tariffs in the United States, where vehicles face 100% tariffs, and levies in the European Union of between 17% and 38%, depending on the manufacturer.
EU Retreats from Gasoline Car Ban in 2035
Europe was losing the race with China, but even with tariffs, Chinese EVs are competitive in the EU as legacy European carmakers have faced soaring energy costs, supply chain delays, and slower EV adoption than previously thought.
Even with tariffs, Chinese carmakers “have enough edge to compete” in Europe, Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight, told Bloomberg.
This week, the EU took another step back in the competition for EV supremacy. Under pressure from Germany, Italy, and the auto industry, the European Commission proposed easing of the de facto ban on new sales of combustion-engine cars from 2035.
The new regulations will allow for plug-in hybrids (PHEV), range extenders, mild hybrids, and internal combustion engine vehicles to still play a role beyond 2035, in addition to full EVs and hydrogen vehicles.
The EU’s motivation is to keep the industry competitive. But the industry is anything but.
The EU auto industry has suffered in recent months from the U.S. tariffs, the Chinese curbs on rare earth exports, falling EU demand, and competition from the cheaper vehicles made in China despite tariffs on China-made electric vehicles.
The easing of the 2035 ban was met with mixed reactions in European industry. Volvo, for example, said that “Weakening long-term commitments for short-term gain risks undermining Europe's competitiveness for years to come.”
Germany’s Volkswagen praised the move, saying that “Opening up the market to vehicles with combustion engines while compensating for emissions is pragmatic and in line with market conditions.”
Market conditions forced Volkswagen to shut down its first production site in Germany in its 88-year history. The Transparent Factory in Dresden, where the electric ID.3 was manufactured, stopped vehicle production this month, for good.
While the decision was difficult, it was “absolutely necessary from an economic perspective,” Thomas Schaefer, chief operating officer of the Volkswagen brand, has said.
The German auto industry association, VDA, slammed the EU’s proposal to ease the ban as a “disastrous” package of measures in “What appears to be greater openness is fraught with so many obstacles that it risks remaining ineffective in practice.”
T&E, a European advocate group for clean transport and energy, said “extending the sales of combustion engines would divert investment from EVs while China races further ahead.”
Top U.S. Carmaker Backs Off EVs
The U.S. is also falling behind in this race. Ford Motor Company this week announced a major overhaul of its strategy, taking a $19.5-billion charge, as it “no longer plans to produce select larger electric vehicles where the business case has eroded due to lower-than-expected demand, high costs and regulatory changes.”
The reset prioritizes affordability, choice, and profits amid the Trump Administration’s withdrawal of subsidies and a regulatory shift that could ease fuel-economy requirements for automakers.
EV sales in the U.S. are slowing and face uncertainty due to policy changes, while China dominates the global EV market, with over half of vehicles sold there now electric, BloombergNEF says in its global EV outlook.
China Takes Over Emerging EV Markets
Meanwhile, “some emerging economies are experiencing record sales as more low-cost electric models arrive targeting local buyers,” BloombergNEF’s research found.
Vietnam and Thailand in Southeast Asia, as well as Brazil have seen EV sales surge over the last two years, with EV penetration now at a higher rate than in wealthier countries.
Emerging markets outside China are driving global EV sales growth, clean energy think tank Ember said in a report this week.
For example, Indonesia has reached a 15% EV share this year, surpassing the United States for the first time, according to Ember’s analysis. Thailand has reached 20% and has sold more EVs in the first three quarters of 2025 than Denmark. Singapore and Vietnam have reached EV sales shares of around 40% each, overtaking levels seen in the UK and the EU. In Latin America, Uruguay, Mexico, and Brazil are seeing booming EV sales, too.
And all these emerging markets are driving the growth in Chinese EV exports, Ember says.
Since mid-2023, almost all the growth in Chinese EV exports has come from non-OECD markets, the analysis has found. Brazil, Mexico, the United Arab Emirates (UAE), and Indonesia are among the ten largest destinations for Chinese EV exports as their governments have introduced policies to support EV adoption.
“Emerging markets will shape the future of the global car market,” said Euan Graham, Global Electricity and Data Analyst at Ember.
With Europe and the U.S. backing off EV pledges and production plans, China is well-positioned to extend its lead in the race to conquer the global EV market.
By Tsvetana Paraskova for Oilprice.com
No comments:
Post a Comment