Europe's efforts to promote green, low-carbon policies cannot be separated from China's electric vehicles and battery products.
The Korean Herald reported on its front page that the push for the "Buy European Products" bill highlights dependence on China's electric vehicle supply chain.
Korean battery and electric vehicle manufacturers have limited gains because the Chinese supply chain remains deeply rooted.
The EU's newly proposed Industrial Accelerator Act - often described as Europe's response to the US Inflation Reduction Act - seems less strict towards Chinese electric vehicles than expected.
In fact, this policy has not only failed to curb China's control over the electric vehicle supply chain but also highlights the difficulties Europe may face in reducing its reliance on Chinese batteries and components. This reality may bring new challenges to South Korean automakers and battery manufacturers, who are the second-largest electric vehicle market in the world.
What is the European Industrial Accelerator Act (IAA)? The European Commission proposed an International Automotive Agreement on Wednesday, requiring that when governments purchase or subsidize electric vehicles, wind power equipment, and other clean energy technology products, a minimum proportion of their production must be carried out within Europe. This regulation is expected to take effect six months after it is passed.
This move is widely interpreted as an initial step to limit China's growing influence in the European electric vehicle market. According to Bloomberg, in November last year, Chinese brands accounted for a record 12.8% of the European electric vehicle market.
According to the proposal, electric vehicles purchased by European governments must be assembled in the EU. At least 70% of their components (excluding batteries) must also be manufactured in Europe. Why is this important? Currently, this regulation applies only to public procurement, which accounts for a relatively small proportion of the entire electric vehicle market.
However, analysts say that this policy may eventually expand to cover private purchases. Professor Lee Ho-gon of Daedeok University's Department of Automotive Engineering said that this proposal marks the first time the EU has attempted to introduce specific local content targets for electric vehicle procurement. "Although the EU currently applies these restrictions only to the public sector."
Lee said, "If the procurement of local components proceeds smoothly without major issues, there is more than a 90% chance that similar rules will be extended to the private electric vehicle market."
Nevertheless, this regulation reflects Europe's difficulties in reducing its reliance on the Chinese supply chain. Lee said, "Excluding batteries from the 70% local production requirement illustrates this reality. Without relying on competitively priced Chinese vehicles, it would be difficult for Europe to increase the adoption of electric vehicles."
Completely banning Chinese batteries could lead to high costs for consumers, a factor that policymakers are cautious about.
Lee mentioned that in 2023, UK officials warned that a policy could increase the cost of each car by between £5,000 and £10,000 (US$6,700 to US$13,300), affecting household costs. As a result, the UK decided to delay its net-zero vehicle target from 2030 to 2035.
Impact on South Korean Battery Manufacturers: The International Automotive Agreement (IAA) still allows electric vehicles equipped with Chinese-made batteries to qualify for public procurement, provided they meet other requirements. This effectively enables suppliers like Contemporary Amperex Technology Co., Limited (CATL) to continue exporting low-cost batteries to Europe, limiting any direct competitive advantage for South Korean battery manufacturers - LG Energy Solution, Samsung SDI, and SK On - despite their local production bases in Poland and Hungary. According to data from market tracking agency SNE Research, the market share of these three South Korean companies in Europe has significantly declined.
Original article: toutiao.com/article/1859010810858560/
Statement: This article represents the views of the author.