Chinese-made electric vehicles (EVs) pose the greatest risk to Europe's carmakers and could cost them 7 billion euros ($7.7 billion) a year in lost profits by 2030 unless policymakers take action, according to an Allianz Trade report.
According to the report released on Tuesday by the unit of German insurer Allianz (ALVG.DE), policymakers need to meet the challenge with reciprocal tariffs on imported cars from China, do more to develop EV battery materials and technologies, and also allow Chinese carmakers to build cars in Europe.
Europe's carmakers face a dual threat from the prospect of falling sales of their own vehicles in China, where local EV makers have been growing market share, and from rising sales of imported Chinese EVs - made by Chinese or Western carmakers.
Global carmakers have pledged to make a comeback in China with a large number of EVs in a fast-moving market where the pressure to cut prices is getting more intense.
Chinese EV imports could cost the European Union over 24 billion euros in economic output in 2030, or 0.15% of the bloc's gross domestic product, Allianz Trade said.
But the "automotive-dependent economies of Germany, Slovakia and Czech Republic could face an even bigger hit" of between 0.3% to 0.4% of GDP, said the report, titled: "The Chinese challenge to the European automotive industry".
"The stakes are high for Europe's automotive industry: four out of five cars sold in Europe are assembled locally," the report added.
"Europe is also the world's export powerhouse in the sector, with car trade generating between 70 billion and 110 billion euros in trade surplus for the European economy every year over the past decade."
The report said the U.S. Inflation Reduction Act (IRA) had made Europe a target for Chinese exports.
While Europe remains comparatively open to imported EVs - Tesla (TSLA.O), for instance, accounts for 20% of fully-electric car sales in Europe - the United States is "set to be a much tougher market to crack for Chinese vehicles" because of the IRA, the report said.
($1 = 0.9071 euros)
