Electric Car Wars

One of the main topics that has been occupying the economic agenda recently, which seems to be sticking around, is the EV wars. Although its name is automobile, we also include SUV vehicles in this word. The issue negatively affects our country, and the world's major economies such as the US and the EU, especially Germany.

US FRONT

The US has had a bad experience with automobiles in the past. The US automobile industry, with its high prices and high consumption, first lost ground to Japanese cars. Then, it suffered another blow with cars produced in neighboring Mexico. However, we can say that Chinese automobiles are dealing the heaviest blow. 

In response, the US plans to take measures in two different ways. 

The first one is to apply the same tariffs on iron and steel products that it imposed against China to lithium-ion batteries for EVs or critical minerals and EVs in general. We all know that one of Donald Trump's election promises was to impose a 200% tax on Chinese EVs.

The second is to ban the import of Chinese EVs together with Russia. The US Department of Commerce plans to ban the sale of internet-connected cars using Chinese and Russian technology, citing national security risks. In a way, US claims that these vehicles are basically spies and that security, not the economy, is at the forefront of the argument.

EU FRONT

The EU, which we can call the world's largest automobile manufacturer, especially Germany, is almost helpless against China.

The fact that Europe's largest automobile manufacturer is in a position to close some of its factories in Europe is the clearest indicator of this desperation. In Germany, the automotive sector accounts for 5 percent of total added value and 3 percent of the country's employment. Seventy percent of the cars produced are exported. These figures are enough to tell us how significant the automobile sector is for Germany.

The decline in the EV market in Germany and the failure to take the necessary action in the production of EVs have put the sector in difficulty. The fact that the electric vehicle sector in China is very strong, that Chinese manufacturers sell large volumes of EVs compared to Europe and Germany, and that they have great cost advantages has made this even more apparent.

The European Commission could not remain indifferent to this situation. As a result of a subsidy investigation into EVs produced in China, the EU Commission imposed additional duties on EV imports for 5 years. The additional tax was imposed because the electric car value chain in China was found to benefit from unfair subsidies, causing economic damage to EU producers.

OUR SITUATION

Having our own automobile brand has been the dream of every Turk, myself included, for the last 70 years. While countries with much smaller populations and economies have their own automobile brands, it is perceived as a disgrace that our country, which is the leading automotive and automotive products export country, does not have one. Although it was a success story, the sad story of the “Devrim” branded vehicle, which failed in 1961, is also remembered. I may have exaggerated a bit, but it had become a necessity to produce an automobile unique to Turkey.

Why was it started as an electric vehicle? I personally asked this question to Mr. Fikri IŞIK, the Minister of Science, Industry and Technology, who initiated the study. He explained that the EVs were chosen because fossil fuel engine technology had developed a lot, and it was not possible to compete with existing manufacturers in this regard, but electric engines were just emerging, the future was in EVs, and it was appropriate to start at the same time as everyone else in terms of competitiveness. 

Unlike fossil-fueled vehicles, TOGG created a special tax package for electric vehicles but still faced the inevitable challenge of being unable to compete with Chinese EVs. As a precautionary measure, Türkiye imposed additional customs duties on EVs produced in China, as well as additional obligations on service requirements.

CHINA HAS NOT BEEN IDLE 

The conclusion to be drawn from these statements is that no Western country can compete with China on EVs. China knows this as much as the importers do. It is pursuing two main strategies to remove the measures.

China is using the rights granted to it by being a member of the World Trade Organization:

China has complained to the WTO about the discriminatory economic policies applied to its products by both the US and the EU. It has requested Türkiye to hold a WTO consultation on the measures taken by Türkiye.

According to the WTO's “non-discrimination” rule in foreign trade, member countries cannot discriminate against any other member country. Therefore, a measure against a product manufactured exclusively in China, as opposed to other member countries, would be a violation of this rule. Moreover, under the “most favored nation” rule, a privilege granted to one member state is enjoyed by all member states. China is basing its submissions to the WTO on these two rules.

On the other hand, international organizations require the parties to discuss the matter among themselves before acting as arbitrators to resolve disputes between member states. This is called consultation.

- China tends to invest in regions where they have difficulty in exporting:

As a second method, when they face import difficulties in a country or region, they pursue a strategy of reaching the market by producing there. With this method, tariff and non-tariff barriers to imports are overcome, and at the same time, they have the chance to find a market in the geography where the product is produced. However, it would not be wrong to say that it does not make the same mistake as the West and prioritizes assembly-oriented investment without teaching technology.

THE STORY OF THE YELLOW OX

There is a famous story: Once there was a herd of oxen that the lions in the neighborhood could never defeat. One day, one of the lions thought of a trick and went to the head of the herd and said, “We don't really want to bother you, but this yellow ox is really distraction; if you give it to us, you will be saved and we will be relieved”. The leaders of the herd gathered and accepted this offer to save the herd and handed over the yellow ox to the lions. Afterwards, the lions asked for and received other sacrifices in the same way. After a while the oxen lost the strength to resist the lions. One of them asked, “When did we lose this war?” “We lost this war the day we gave away the yellow ox,” the other said tearfully.

The Western world lost the war the day it accepted China's membership in the WTO and added insult to injury by teaching their technology.