We can argue about whether the Chinese cars are subsidised by the state or are simply manufactured more efficiently by companies that have brilliantly mastered the technology in a very short space of time (the truth is probably somewhere between the two).
And yet leaving that aside, one point is certain: it will stall their advance. It is hard to compete when you face a 50pc tax on each car you sell.
The trouble is the policy is going to backfire spectacularly on the EU and of course on the UK if we are foolish enough to impose similar levies. There are three reasons for that.
First, anyone who thinks the Chinese will simply shrug their shoulders is simply kidding themselves. It will inevitably mean retaliation. There are already reports that China will respond with tariffs on large-engine imports from the EU, specifically targeting the high-end, luxury vehicles that sell best in that country.
Given that the EU exports €18bn of vehicles to China every year, and has even more money tied up in local joint-venture operations, that is going to be very painful for European manufacturers.
Tariffs may well be targeted at other EU goods as well. It is not as if China does not have a robust trade policy or that it is ever slow to defend its industries. In the wake of the announcement, €4.5bn was wiped off the value of the major German auto manufacturers as investors braced themselves for the inevitable response.
With grim inevitability, the EU’s giants will end up paying a high price and will end up locked out of what will soon be the world’s largest market. It is hard to see that as a great victory for anyone.
Next, the European manufacturers will inevitably grow flabby behind tariff walls. We have a long history of trade wars, tariffs and protectionism to teach us that the result is always the same. The protected industry does not have to compete anymore, it doesn’t bother to innovate and it simply puts up prices to milk easy profits out of customers who no longer have the choice of going elsewhere.
EVs are still a new technology, and there need to be huge improvements in driving range, battery life, vehicle weight and most of all price if they are to become the standard way of getting around.
That is only going to happen with ferocious competition between lots of different companies. Once a cosy cartel is established, they will just stagnate. The result? Even if they are protected at home, the European manufacturers will be steadily less competitive on the global market where they can’t hide behind tariff walls.
