From Robin J Brooks' substack, Dec. 9:
China's invasion of EM car markets
China's massive ramp-up in vehicle production mostly targets emerging markets
China is plowing massive resources into becoming a global player in cars. A lot of this push is happening in electric vehicles (EV), which is why you hear so much buzz about electrification in China. As I discussed on Sunday, this isn’t about being “green.” After all, 70 percent of China’s electricity production uses fossil fuels. Instead, this is mostly about the same old mercantilism that’s driven every other decision in recent decades. For whatever reason, China’s leadership decided that it needs to be a global player in cars, especially EVs. Lots of cheap electricity and the infrastructure that comes with that are necessary conditions for this.***China’s race to dominate the EV sector represents a major threat to European car makers. As I noted in yesterday’s post, cars imported from China are rising as a total share of car imports into the Euro zone, but what’s playing out in Europe is peanuts compared to what’s happening across emerging markets (EM). The left chart above shows the value of imports into the Euro zone from China in percent of total car imports. This number is up to 14 percent currently from around four percent back in 2019, i.e. just before COVID. The right chart shows the same ratio for Brazil, where it’s gone from 10 percent before COVID to 36 percent now. The threat to European car makers is twofold: (i) the threat of direct exports from China into the EU; (ii) a big increase in competition across EM as China floods these markets with cars....
....MUCH MORE