The rise of right-wing populism in Germany comes at a time when globalization policies are backfiring and hitting Europe's industrial core. The German automotive industry is in a deep crisis, with layoffs and production cuts, as European leaderships allowed cheap Chinese electric vehicles to flood an already struggling market. The result is the gradual loss of market share by European automakers, with BYD at the forefront of the Chinese invasion.
BYD "grabs" the European market
According to Bloomberg, new data from Schmidt Automotive Research shows that Chinese brands accounted for 10.7% of car sales in Western Europe in the second quarter, up from just 3.4% two years earlier. This development demonstrates how quickly BYD Motors, with electric vehicles selling for around $34,000, is gaining market share at the expense of domestic European brands. The momentum of Chinese electric vehicles is now such that their quarterly registrations in the European Union have surpassed those of Japanese automakers. Harald Hendrikse, an analyst at Citigroup, estimates that Chinese brands could capture up to 30% of the EU market by 2035, provided no additional protection measures are implemented.
"Axe" to jobs
The immediate consequence of the invasion of Chinese EVs into the European market is already visible in employment. Volkswagen has warned that more than 100,000 jobs could be cut by the end of the decade, as the German giant faces an extremely difficult environment. More recently, Jaguar Land Rover announced plans to cut roughly 10% of its workforce. The crisis, however, is not limited to car manufacturers themselves. The wave of layoffs is extending to companies within the automotive supply chain, as component suppliers also come under heavy pressure.
Germany shifts stance and prepares tariffs
Germany, which previously resisted the imposition of stricter trade barriers, is now preparing for the imposition of tariffs on Chinese hybrid vehicles as it sees its industrial base eroding. This development comes at a time when Alternative für Deutschland (AfD) is gaining political strength, as the weakening of German industry and job losses fuel social discontent. Berlin's shift toward greater protection of domestic production reflects the need to give European automakers time to restructure their operations and face Chinese competition.
China's "weapon": Batteries and rare earths
However, Europe faces a major problem. China dominates the production of batteries and rare earths, enabling Beijing to respond with countermeasures should the EU move forward with stricter trade restrictions. Thus, Europe's effort to protect its car industry turns into an extraordinarily difficult balancing act. On the one hand, European governments want to stem the influx of cheap Chinese EVs. On the other hand, reliance on China for critical raw materials and technologies creates the risk of a new trade war.
The automotive industry is now a matter of national security
The rapid weakening of the European automotive industry is not merely an economic problem, but is also evolving into a matter of national security for Europe. The factories, skilled workforce, and supplier networks of the European automotive sector constitute critical infrastructure for the production of defense equipment. At a time when the Russia-Ukraine war is escalating and the conflict in the Middle East is widening, the weakening of the European industrial base comes at an extremely critical juncture. Europe stands before a necessary new cycle of rearmament, which requires a strong manufacturing base. And precisely at the moment when European countries need more industrial power for their defense, the automotive industry – one of the most vital pillars of European industry – is suffering an unprecedented blow from Chinese competition.
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