European companies have historically looked to China, the world’s second-largest economy and (still) boasting growth rate far above those of many G7 economies, as a major source of earnings growth, many carmakers among them. However, with domestic consumer demand flagging, China is not importing as much as it used to.
The lingering troubles in the property sector have sapped consumer confidence. To spur growth, Beijing has turned to exports. This new dynamic can be seen clearly in the evolution of car imports and exports.
European Union exports of cars to China have fallen by 28% over the last two years, to levels last seen during the Covid-19 lockdowns.
At the same time, Chinese exports, particularly of electric vehicles (EVs), have shot up, rising by more than 180% since 2021.
If current trends persist, the EU could soon be a net importer of vehicles from China.
