Both China and Europe won! Did the number of new-energy vehicles exported to Europe increase or decrease?

One principle is non-discrimination: the EU has pledged that any measures applied to hybrid vehicles will apply equally to all import sources; the quota allocated to China will not be lower than that granted to any other importing country. The second principle is compliance: all measures must conform to WTO rules, and China reserves its full rights to resort to WTO dispute settlement mechanisms and demand trade compensation. According to legal experts involved in the consultations, the EU’s initial proposal was for China to voluntarily restrict its exports—a proposal rejected by China, as WTO rules explicitly prohibit voluntary export restraints. The EU then proposed a quota system targeting Chinese hybrid vehicles specifically; China opposed this again, insisting on the principle of non-discrimination. 3 Three Semi-Annual Reports Chery’s export figures for the first half of the year are as follows: the group exported a total of 943,800 vehicles, up 71.5% year-on-year—setting a record for Chinese automakers exporting over 900,000 vehicles in a single half-year. On average, one Chery-built vehicle departs for global markets every 16 seconds. Source: iFind In Europe, sales grew more than twofold in the first half of the year; in the UK market, Chery retained second place among all brands. First, Europe represents only one segment of Chery’s broader export footprint. In 2025, Chery exported 1.2944 million vehicles—ranking first among Chinese passenger vehicle brands for the 23rd consecutive year—and has already established operations in 16 European countries. Its markets are sufficiently diversified; quotas imposed on any single market cannot significantly hurt it. Second, Chery has relocated production overseas ahead of time. It formed a joint venture with Spain’s Ebro Group to restart Nissan’s former Barcelona plant, scheduled to begin production by late 2026 or early 2027. It is also negotiating with Nissan regarding contract manufacturing at the Sunderland plant in the UK. Under a quota system, vehicles produced locally are not counted as imports and therefore do not consume quota allocations. Looking at its revenue structure: new-energy vehicle revenue reached RMB 59.284 billion, up 63.8% year-on-year, accounting for 41.4% of total revenue—an increase of nearly 16 percentage points year-on-year. R&D investment in the first half totaled RMB 6.672 billion, up 28.3%, outpacing revenue growth. For a company heavily reliant on exports, investing such a proportion of revenue into R&D signals that it no longer intends to rely solely on low pricing to secure its position in Europe. Chery’s gross margin further confirms this strategy’s viability: overall gross margin stood at 16.1% in the first half—up 3.1 percentage points; passenger vehicle gross margin rose from 12.4% to 15.6%; and new-energy vehicle gross margin hit 12.8%, up 7.6 percentage points year-on-year. Quotas may constrain export volume, but they do not compress per-unit profit. For a company with a net profit margin of 6.3%, selling fewer units is not the worst outcome—selling cheaply is. BYD faces a different situation. Its revenue declined 7.13% and net profit fell 20.54% in the first half—driven not by Europe, but by domestic price wars and foreign exchange losses. Source: iFind While profits contracted, cash flow increased and gross margin rebounded. These three data points point to the same conclusion: BYD is deliberately shedding some low-quality sales. In Europe, BYD represents growth: overseas sales reached 790,000 units in the first half—up 68% year-on-year—covering over 120 countries and regions, and securing top brand sales positions in the UK, Brazil, and Thailand. Yet in Europe, BYD faces a 17.0% anti-subsidy tariff—lower than SAIC’s 35.3%, but still a cost burden. Thus, BYD’s real moves aren’t happening at the negotiation table—they’re happening inside factories.

Why can’t the EU resolve its current predicament?

A deeper impact is industrial relocation abroad. A large number of longstanding German chemical enterprises—including BASF—have chosen to shift production capacity overseas due to excessively high domestic energy costs. Industrial relocation directly leads to tax revenue loss and reduced domestic employment, further shrinking the tax base. Inflation erodes household purchasing power; wage growth lags behind rising prices, and ordinary citizens feel a tangible decline in living standards. The security reshaping triggered by the Russia-Ukraine conflict brings another unavoidable, massive bill: defense spending. For decades after the Cold War, Europe relied heavily on NATO’s security framework, with many countries essentially free-riding on U.S. defense commitments—keeping military expenditures consistently below 2% of GDP and channeling saved fiscal resources into welfare, education, and healthcare. As the U.S. shifts its strategic focus toward the Asia-Pacific region, it is no longer willing to unilaterally guarantee European security and has repeatedly pressured NATO members to raise defense budgets. Security anxieties stemming from the Russia-Ukraine conflict have forced Europe to reluctantly accept reality: security is no longer cheap. Defense spending constitutes a rigid, newly added expense. With the overall fiscal pie fixed, every extra euro spent on defense means one less euro available for pensions, public transportation, public hospitals, and social subsidies. Faced with the dual imperatives of mandatory defense increases and politically untouchable welfare commitments, governments find themselves trapped between a rock and a hard place: whether choosing to raise taxes or cut benefits, either option risks igniting public protests. Third, global industrial realignment: China’s industrial rise has brought long-term, structural competition, squeezing Europe’s future growth space. Much public discourse overlooks a critical point: Europe’s anxiety stems not only from current inflation but also from losing dominance in future industrial sectors. Historically, Europe firmly controlled high-value-added sectors—including automobiles, photovoltaics (PV), wind power, construction machinery, and energy storage—relying on technological barriers and brand premiums to sustain stable profits and support high-wage domestic jobs. As China’s industries continue upgrading, we are no longer confined to low-end processing and manufacturing. In sectors including new-energy vehicles, the full PV supply chain, energy storage equipment, lithium batteries, and rail transit equipment, China has built complete industrial clusters. Leveraging economies of scale, rapid iteration capabilities, and cost advantages, Chinese firms have entered global markets and engaged in head-to-head competition with European counterparts. New-energy vehicles represent the flashpoint: traditional European automakers—including Volkswagen, Renault, and Stellantis—have lagged in their electrification transitions, while surging Chinese exports continue capturing European market share, squeezing local automakers’ profits and forcing layoffs and R&D cutbacks. Europe’s once-dominant PV industry has seen its domestic production capacity virtually wiped out. Of course, competition is not a one-way zero-sum game. China is also the largest incremental market for European luxury goods, high-precision instruments, specialty chemical materials, and advanced medical devices. Many leading European firms rely heavily on sales to China to generate substantial profits—offsetting sluggishness in their home markets. This is precisely the root cause of internal EU divisions: domestic new-energy industries and labor unions advocate strict restrictions on Chinese products, whereas luxury-goods and high-end equipment exporters strongly oppose comprehensive decoupling, fearing loss of the vast Chinese market. Nonetheless, this industrial competition undeniably compresses the growth potential of Europe’s green transition—a sector upon which Europe had pinned high hopes for renewed economic expansion and solutions to its chronic growth stagnation. With the competitive advantage in this sector diluted, Europe lacks alternative engines for long-term growth—making its persistent low-growth trap exceedingly difficult to break.

European Corporate Earnings Set to Get a Boost from Energy Windfall

22 hours ago

LSEG forecasts indicate European STOXX 600 companies expect 21.9% quarterly earnings growth, driven by energy majors posting 134.1% higher profits amid oil price volatility. Broader sectors face moderate gains despite improved revenue outlooks.

reuters

2026-10-22

European Corporate Earnings Set to Get a Boost from Energy Windfall

European Corporate Earnings Set to Get a Boost from Energy Windfall

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