How China’s EV overcapacity has come to a head after 15 years, and what’s in store for the industrial policy race with US and EU
- Fresh US tariffs targeting China’s new-energy sector are imminent, threatening to thwart export efforts aimed at alleviating a market oversupply
- Analysts break down what this means across green and new-energy industries, and why the overcapacity scenario is not like those in China’s past
Fresh sparks are flying as risks associated with an overcapacity overflow in China’s electric vehicle (EV) industry have turned up the heat between Beijing and the West, intensifying frictions and hearkening back to ghosts of trade past.
With demand unleashed amid Beijing’s policy blessings to rev up the green transition over the past several years, the EV and other green industries saw a steady build-up of capacity – widely viewed as the tip of China’s hi-tech-manufacturing iceberg.
Back in 2009, China began pushing its carmakers to develop cutting-edge EV technology, with an eye on leapfrogging the global makers of petrol-powered vehicles.
But the blowback from abroad has ramped up relatively recently, as the fruits of China’s exhaustive EV undertakings truly began to be realised. Having long led the global pack in automobile and hi-tech manufacturing, the United States and European Union now find themselves scrambling to erect roadblocks to safeguard those sectors at risk of being upended by Chinese exports.
“The intention to hype up China’s overcapacity is to contain China’s industries that have an edge,” said an opinion piece in People’s Daily, adding that China was being made a “scapegoat” for the decline of various American sectors.
Meanwhile, some analysts contend that China’s EV glut is inherently different from the excess or idle capacity issues that once plagued other industries. Market mechanisms and Beijing’s strained ties with the West, they say, have also become factors at play as Chinese EVs sit squarely in the cross hairs of American and European politicians.
