Chinese Battery Overcapacity May Trigger EU Anti-Dumping Trade Protections

The European Parliament has expressed concerns that large-scale battery production in China, aided by government support, could lead to a dumping crisis in the European market. Consequently, the European Commission is likely to initiate trade protection measures. Although the electric bicycle and electric vehicle markets are growing rapidly, battery production is increasing at a similar pace, which could have significant long-term effects on the European market. In addition to the solar panel and steel industries in Europe, the bicycle and electric bicycle industry has also experienced market disruptions due to such events.

According to a report in the Financial Times last autumn, by 2027, China’s battery production could be four times its demand. By 2030, China’s excess production capacity could offset the supply-demand gap for batteries in Europe. European Parliament member Tom Berendsen raised questions about what measures the European Commission will take to prevent the dumping of Chinese batteries in the European market.

Concerns about China’s growing economic influence have prompted leaders to discuss the European Commission’s proposals to reduce Europe’s overreliance on China and diversify its demands to include Africa and Latin America. Due to the intermittent nature of renewable energy sources such as solar and wind power, Europe will need to find ways to store energy to achieve its goal of carbon neutrality by 2050. This is expected to result in a significant increase in the demand for lithium-ion batteries, fuel cells, and electrolysers, with projections indicating a growth of 10 to 30 times in the coming years. An EU document suggests that if strong measures are not taken, the EU’s dependence on China for lithium-ion batteries and fuel cells by 2030 could be as significant as its dependence on Russian energy before the Ukraine conflict.

According to statistics from the European Commission, in 2021, the EU imported over 40% of its total natural gas consumption, 27% of its oil imports, and 46% of its coal imports from Russia. Ceasing the purchase of most energy from Russia led to energy price shocks and skyrocketing consumer inflation, forcing the European Central Bank to significantly raise interest rates and dampen economic growth.

The document from the Spanish presidency states that lithium-ion batteries and fuel cells are not the only vulnerable sectors for the EU. Similar situations may also arise in the field of digital technology. Forecasts indicate that demand for digital devices such as sensors, drones, data servers, storage devices, and data transmission networks will sharply increase in this decade. By 2030, this dependence on foreign sources could seriously impede the productivity enhancements urgently needed by European industry and services and hinder the modernization of agricultural systems crucial for addressing climate change.

Trade Commissioner Valdis Dombrovskis responded, “The European Commission is aware of the risks of mid-term overcapacity in the battery market and continues to monitor market developments and policy actions in China in cooperation with European industries.” Dombrovskis added, “We believe that unfair competition due to illegal subsidies may not be in the interest of EU industry, the EU’s ambitions for sustainability, and its strategic autonomy.” Therefore, the Commission is still prepared to initiate trade defense investigations under EU trade defense legislation if it receives evidence that products are being imported under unfair and harmful conditions.”

We will be happy to hear your thoughts

Leave a reply

Shopping cart