EU investigates anti-subsidy for electric vehicles? It's all business!

On June 24, local time, the European Union spokesperson revealed that the European Commission will hold talks with China this week on the anti-subsidy investigation of electric vehicles, but the spokesperson did not specify the exact negotiation time.

In October 2023, the European Commission officially launched an anti-subsidy investigation into electric vehicles produced in China. On June 12, 2024, the European Commission plans to pre-disclose the preliminary ruling and impose temporary anti-subsidy tariffs on electric vehicles produced in China starting from July 4. According to the European Commission's ruling, different automotive companies will face varying tariff rates ranging from 17.4% to 38.1%. SAIC Motor was identified by the European Commission as a non-cooperative company in the investigation and will be subject to a punitive tariff of 38.1%.

As early as November 2023, Xingkong predicted all of this in advance, all for business.

Xingkong jokingly told his friends, "I have never missed the industry trends."

However, the readership of this article is unbelievably low, but this also aligns with Xingkong's predictions for the trends in the self-media industry.

During my school days, there was a phrase that left a deep impression on me: First-class companies set standards, second-class companies build brands, and third-class companies make products.

As the level of understanding of the complex world continues to change, Xingkong's understanding of this phrase has deepened.

Above standards, there is a more "advanced" play: setting entry regulations.

Taking cars as an example, more than a decade ago, we often heard about how strict the EU standards were. Later, with the popularization of China's National V and National VI standards, we found that China's emission standards were gradually catching up with EU standards.

Xingkong once naively thought that these standards were for environmental protection and safety (to some extent). Later, after learning about the different treatment of brands like Volkswagen, BMW, and Ford in the United States due to emission cheating, it became clear that the more important reason was to set industry entry barriers.

Europe is one of the world's three largest automobile consumer markets (China, Europe, United States). Entering the European market means a share of the pie, and the EU restricts non-system brands from entering the market with almost harsh emission standards, protecting European brands like Volkswagen and BMW (as one of the world's largest automobile consumer markets, China's emission standards and new energy credits are also part of long-term planning).

When China's electric vehicles enter the European market with zero emissions standards, the EU came up with the "New Battery Act."

01 New Battery Act

The EU's New Battery Act officially took effect on August 17, 2023, and will be enforced from February 18, 2024.

The act emphasizes regulating the entire battery lifecycle involving battery material procurement, manufacturing, use, and recycling. Core aspects of the New Battery Act include battery passports, carbon footprint disclosure, renewable material usage ratios, and time-based monitoring The carbon footprint refers to the direct or indirect carbon dioxide emissions generated throughout the entire lifecycle of a battery, including upstream raw material extraction and processing, midstream battery production and manufacturing, transportation, and downstream consumer emissions. A battery passport is a data management system for the entire lifecycle of a battery, which records data throughout the battery's lifecycle.

According to this regulation, starting from February 18, 2027, all batteries in EU member states should have a QR code. LMT batteries, industrial batteries (with a capacity greater than 2kWh), and electric vehicle batteries should provide a battery passport.

By the end of 2027, in EU countries, the recycling rates of key battery materials cobalt, copper, and nickel must all reach 90%, and the recycling rate for lithium metal is required to be 50%.

On the surface, this regulation appears to be "fair," but in reality, many carbon footprint aspects for batteries located outside the EU are not recognized.

To obtain EU certification, a significant amount of core business secrets and sensitive data need to be shared with the EU, which may violate domestic information security laws.

In other words, the essence of the "New Battery Law" is to compel battery companies to move their factories to Europe.

This is the true high-end game.

02 How should Chinese battery companies respond?

According to the latest data released by the South Korean research institution SNE Research, the global market's installed capacity of power batteries from January to September this year was approximately 485.9GWh, a year-on-year increase of 44.4%.

In the list of the top 10 companies in the global power battery installation market, Chinese companies still occupy 6 seats, with a market share of 62.9%. CATL and BYD together still account for over half, reaching 52.6%.

It can be said that this "New Battery Law" is specifically targeting Chinese power battery companies.

During the 2022 CPPCC session, the chairman of CATL, Zeng Yuqun, submitted four proposals, all related to new energy, one of which is about "Accelerating the research on the carbon footprint of batteries in China and establishing a Sino-European mutual recognition mechanism."

Regarding the carbon footprint, Zeng Yuqun proposed leveraging China's advantages in the complete industrial chain and rich data application to accelerate the research on the methodology of the carbon footprint of batteries in China, actively communicate with the EU, establish a cooperative exchange mechanism, and promote the coordination and mutual recognition of the carbon footprint methodology of battery products between China and the EU.

Relevant departments can update and release China's power carbon emission factors annually and by region, establish a carbon emission factor database for various links in China's battery industry chain based on this, update it in a timely manner, and report it internationally; strengthen international cooperation on green power certification, research green certification management systems suitable for China's battery industry development and product demand, and ensure their rights through digital technologies such as blockchain, 5G, and the Internet of Things.

In my opinion, Zeng Yuqun's ideas are not wrong, but they may be too naive. This is the intellectual's humanized understanding of cold political realities.

This level of market cooperation is either achieved through a show of strength or through exchanging interests. For example, when Macron visited China, China bought 160 Airbus planes, France allowed the use of China's 5G technology, promised to accelerate the airworthiness certification process, and then China and France signed 18 agreements For domestic power battery companies, besides waiting for official and EU negotiations on the mutual recognition mechanism for interests, there is only one option: to go overseas and build factories.

03 Futile Struggle

In addition to the EU, the United States is also using similar methods to restrict China's new energy vehicles. However, new energy vehicles are not yet popular in the United States, mainly controlled through subsidies: only subsidizing domestically produced new energy vehicles.

In this way, the development of China's new energy vehicle industry chain is restricted from the source.

But in the opinion of the author, for increasingly difficult Europe, this is futile.

Firstly, China is the world's largest single automobile market and the largest new energy vehicle market. In the worst case scenario, Chinese new energy vehicle companies only need to supply the Chinese market to sustain the entire industry chain;

Secondly, unlike before, although carbon footprint is a barrier, it is not a technological barrier for Chinese companies, at most it is a political barrier. In fields such as QR code identification, Chinese companies have already achieved world-leading status. As long as the issue of mutual interest exchange is resolved, Chinese new energy vehicle companies can quickly integrate;

Furthermore, Volkswagen, BMW, Mercedes-Benz, Volvo, and other traditional European car companies have basically made investments. For example, Volkswagen acquired Guoxuan High-Tech, BMW increased its investment in China, Mercedes-Benz's first and second largest shareholders are BAIC and Geely respectively, Volvo was fully acquired by Geely... Chinese new energy vehicle companies can achieve win-win situations through cooperation with capital parties