Growing collaboration expands complementarity between vehicle sectors in China, EU

Illustration: Xia Qing/GT

In October last year, the EU announced the imposition of anti-subsidy tariffs on Chinese-made battery electric vehicles (EVs), a move that was widely interpreted as an attempt to shield its domestic EV industry from the competitive pressures exerted by Chinese manufacturers. Despite this development, European carmakers have not lost their enthusiasm for strengthening collaboration with Chinese enterprises. This offers a fresh perspective, showing that the dynamics of international trade and cooperation are far more resilient than simple protectionist measures might imply.

In a recent development, Reuters, citing a person with direct knowledge, reported on Tuesday that Mercedes-Benz will develop smart driving cars for global markets equipped with Chinese tech firm Hesai's lidar sensors, marking the first instance a foreign automaker has sought to use such Chinese-made technology for models sold outside China. Another example also came on Tuesday, when Volkswagen's truck unit Traton unveiled its future development strategy, which represents a comprehensive shift toward a win-win development model with China.

In recent times, numerous Chinese auto brands and industry chain suppliers have garnered market recognition for their technological prowess, with their products and services approaching or even surpassing those of some European brands. Some analysts have noted that China's advanced production capabilities could bolster productivity in Europe and assist European auto manufacturers in accelerating their transition to electrification.

The auto manufacturing sector stands as one of the most extensive and wide-reaching industries in global supply chains, with each vehicle incorporating countless components. In China, some European auto companies have been deeply entrenched for decades. The vast Chinese car market attracts these companies to continuously increase their investments and expand production. Decades of interaction have made European firms highly familiar with their Chinese counterparts, as well as with the development and technological advancements of China's auto supply chain. This deep-seated familiarity has facilitated a continuous and deepening integration of the auto supply chains from both sides, creating opportunities for collaborative efforts that capitalize on each other's strengths for mutual benefit.

Two key factors are driving transformative changes in the automotive industry. First, the swift advancement of semiconductor technology, artificial intelligence (AI), and autonomous driving systems is hastening the pace of technological evolution within the sector. Second, fierce market competition is exerting relentless pressure on manufacturers to streamline their production processes and minimize costs. These dynamics are compelling automakers to exert their utmost efforts to keep pace with industry trends and bolster their competitive edge.

In this context, collaboration across the supply chain is emerging as a strategic response to these challenges, facilitating enhanced efficiency and competitiveness. Consequently, it is expected that this collaborative trend will continue to develop and expand.

Recent media reports on supply chain collaboration between Chinese and European enterprises are a reflection of this phenomenon. Such partnerships underscore the realities of the market and the genuine needs of European automakers.

It's undeniable that while there is cooperation between the Chinese and European auto industries, competition exists as well. This competition has stimulated protectionist sentiment within Europe, prompting the EU to adopt a protectionist stance in its policies toward Chinese EVs. However, such tariff policies overlook the broader trend of deeper integration between the Chinese and European auto supply chains, as well as the further impetus that emerging technologies provide for this integration.

As Chinese enterprises accumulate advantages in batteries, navigation and AI, analysts expect more China-EU corporate collaboration. This development signifies that the complementarity within the China-EU auto supply chain is widening. It's believed that European policymakers will sooner or later realize that this complementarity overrides competitiveness and is still expanding.

The author is a reporter with the Global Times.