Is the flood of Chinese electric cars likely to be stemmed by customs barriers? After a nine-month investigation, Brussels believes that China is infringing World Trade Organization rules, and has therefore decided to apply countervailing duties on imports of made-in-China vehicles of up to 48%, compared with the current 10%.

This decision has more to do with political than economic objectives. It will undoubtedly help to mitigate criticism of Europe's alleged naiveté with regard to free trade. However, the competitiveness gap with China will not be bridged by a surge in customs barriers, but by a forced catch-up of its industrial and technological lag in this sector. Taxes will only buy a little time, while Europe has already fallen far behind.

Attributing the fragility of the European automotive industry to unfair public subsidy practices is reassuring, but a little short-sighted. The problem runs much deeper. The situation is unprecedented: Since the invention of the automobile over a century ago, Europe has no longer been at the forefront of innovation. In the early 2000s, China decided to go electric. On the Old Continent, manufacturers waited for the dieselgate scandal to finally make the transition.

Painful awakening

In addition to this delay, Europeans are now paying for their strategic errors. While the Chinese attacked the electric vehicle market by concentrating on affordable models for the masses, manufacturers on the Old Continent targeted the top end of the market. In this segment, margins are high, but sales volumes are low. As a result, the Middle Kingdom's brands have accumulated experience in reducing costs earlier, while benefiting from much greater economies of scale – a decisive factor in this industry. If the Europeans had opted for massification from the outset, the two markets would be equivalent in size today, and they would be fighting with the same weapons. It's hard to fault the Chinese for making the right choices.

Today, it' a rude awakening. The first European models under €20,000 are just starting to hit the market. It will take time for them to take off. From this point of view, taxes on imported Chinese vehicles are welcome but it is legitimate to ask whether the role of the European Commission is to correct manufacturers' strategic errors. Moreover, Chinese brands have considerable margins to counter European taxes: Vehicles currently exported to Europe are sold at half the price in China. They will have to adapt by cutting into their margins.

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