The switch to electric vehicles (EVs) has exploded into a transformative and intricate transition that spans the entire life cycle of plug-in electric vehicles (PEVs), significantly challenging the traditional automotive landscape. A recent report by École Polytechnique analyzed the regulatory frameworks of China, Europe and the United States, shedding light on their respective roles in the evolving global market.

The report, among other things, points out the threats to the European automotive industry, showing China as one of its main competitors, and offering guidelines for regaining competitiveness through decarbonization.

China's dominance and strategic measures

China's staggering share of 57% of global sales, 60% of the electric vehicle fleet and 75% of battery production capacity by 2022 reflect a sustained effort that began in the 1960s with unusual earth development and blossomed through strategic policies such as "Made in China 2025". Focused on battery electric vehicles (BEVs) since 2012, China imposed regulations that drove improvements in vehicle performance and facilitated large-scale investments (between €110 billion and €160 billion by 2022) across the PEV lifecycle. In particular, protectionist measures strengthened Chinese companies, creating an almost undisputed dominance.

Source: École Polytechnique

US potential and European challenges

On the other hand, the report claims that in the US, proactive measures such as ambitious sales targets, substantial funding (around EUR 10 billion per million vehicles per year between 2023 and 2032) and incentives from the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) position it for an active PEV manufacturing hub. However, Europe faces obstacles due to heavy reliance on China's battery value chain and regulatory loopholes that hinder the ambitious goal of 100% zero emission vehicles (ZEVs) by 2035.

Industry perspective and transition dynamics

European car manufacturers, immersed in the PEV value chain, are confronted with the monumental growth of ZEVs. Although European champions prioritize battery cell production, the current pace is not sufficient to rapidly reduce dependence on China. The urgency for the European Commission to institute regulatory frameworks to even out regional disparities and drive the growth of the electric vehicle industry is evident.

Global sales surge amidst declining market

The scenario does not appear to be so negative, as, according to the report, despite a very uncertain geopolitical and economic context, 2022 saw a remarkable 55 % increase in PEV sales, totaling around 10.5 million vehicles. In particular, market share surpassed the 1% mark in 2017, with a strong acceleration after 2020, mainly driven by BEVs which consistently account for more than 70% of sales.

Towards a competition with a balanced scale

The comparison between the Chinese, American and European automotive industries highlight China's definitive influence in shaping the global electric automotive landscape. The undisputed dominance of the Asian giant in the PEV value chain and market share further confirms the market presence of Chinese battery manufacturers in the first half of 2023. It also indicates a clear trajectory towards global automotive industry leadership across all fuel types. While Europe faces intense competition and innovation from China, benefiting from technological advances and battery suppliers in the region, it faces challenges to remain competitive in the evolving electric mobility sector.

Europe faces a challenging landscape with China as a strong competitor. Despite having strong regulations for electric vehicles (EVs), Europe struggles to establish key standards and is hampered by protectionism from other regions. To balance competition, it needs comprehensive approaches that incentivize localization of raw materials, boost battery technology and strengthen electric vehicle infrastructure. These measures could enable European manufacturers to compete with China by the end of the decade and promote a more balanced global auto industry.