Production: By Europod, in co-production with Sphera Network.

EUobserver is proud to have an editorial partnership with Europod to co-publish the podcast series “Briefed” hosted by Léa Marchal. The podcast is available on all major platforms.

Find the full transcript below: 

Chinese carmakers are taking an increasing share of the European car market, particularly when it comes to electric vehicles. Why are European carmakers now opening their factories to their Chinese competitors?

Until recently, the main concern in Europe was Chinese-made electric vehicles being imported into the EU. That’s why, two years ago, the EU imposed hefty tariffs on Chinese electric cars.

But Chinese manufacturers have found another way into the European market: they are setting up production here. Some are building factories of their own. Others are entering partnerships with European carmakers and using their existing production sites.

That’s the case with Stellantis and Chinese manufacturer Leapmotor. And now Dongfeng is also negotiating to produce cars at the French plant of Rennes La Janais. Because by moving production to Europe, Chinese manufacturers may be losing one of their main advantages, which is cheap labour.

But low labour costs are only one part of their competitive edge.

Chinese manufacturers also continue to benefit from state support. And setting up production in Europe doesn’t necessarily mean building brand-new factories.

In many cases, Chinese companies are looking to partner with European manufacturers and use factories that are already there — factories that are no longer operating at full capacity. That means they can save significantly on investment costs. And they can also rely on their European partners’ existing sales and distribution networks.

So how big is this Chinese presence in Europe becoming? For 2028, there are already 12 projects involving Chinese carmakers setting up production in Europe. Several are in Spain, with others in France, Belgium, Slovakia, Hungary, Sweden and Austria.

Now, why would European manufacturers allow their Chinese competitors to produce cars in their own factories? Part of the answer is that European carmakers are struggling to keep up in electric vehicles sells. And that is contributing to factory closures and job losses.

European manufacturers have to meet EU targets on average CO2 emissions each year. And producing more electric vehicles is necessary to meet those requirements.

So partnerships with Chinese manufacturers can serve two purposes: they can help European companies fulfilling their green cars objectives, while also keeping existing factories and jobs running.

Though there is a longer-term risk for European manufacturers. The more Chinese companies establish themselves in Europe, the more competitive pressure they could put on European brands — potentially even leading to takeovers. That has happened before: Volvo Cars, for example, was acquired by Chinese group Geely in 2010. 

In Germany, carmakers are for now refusing to open the doors of their production sites to the Chinese. But they do have partnerships with Chinese companies to produce vehicles in China, where they can benefit from lower production costs. That explains why they were very much opposed to imposing tariffs on Chinese electric vehicles.

But the situation is now changing. Volkswagen closed its Dresden factory last year, and other German plants are also facing closure risks. Germany’s car industry is therefore increasingly joining calls for stronger protection against Chinese competition.

And that brings us back to the Franco-German paper that is circulating in Brussels, which calls for measures to restrict Chinese access to the European market.

Because this debate goes well beyond cars. The EU is increasingly concerned about Chinese competition and dependence in a range of strategic industries. This will be discussed next week, when EU leaders meet in Brussels.

The European Commission could also present a new so-called “diversification” tool, either at the summit or around it. One possibility would be to require companies not to rely exclusively on China for certain critical materials. Something which could trigger what we call a trade war. I’ll be following that very closely!

Production: By Europod, in co-production with Sphera Network.

EUobserver is proud to have an editorial partnership with Europod to co-publish the podcast series “Briefed” hosted by Léa Marchal. The podcast is available on all major platforms.

Find the full transcript below: 

The EU wants to bring new countries on board faster. But after years of waiting, will the Commission’s new proposals actually make enlargement easier?

On Tuesday (6 October), the European Commission is expected to propose changes to the EU’s enlargement process. The goal is clear: speed things up. Some candidate countries have been waiting for more than a decade, without a single new member joining the EU.

And geopolitics is adding to the pressure. With Russia’s war against Ukraine and a changing global balance of power, EU leaders increasingly see enlargement as a way of strengthening Europe’s weight on the international stage.

But bringing one, two, or several new countries into the EU raises some very complicated questions. One of them is decision-making. Another is money. So, what is the Commission proposing?

First, it wants to change the way enlargement negotiations are approved. At the moment, EU countries have to agree unanimously on several key steps in the process — including granting candidate status and opening different chapters of negotiations.

The Commission wants to make some of those decisions easier and faster, while keeping unanimity for the final decision on membership.

The other idea is gradual integration. In other words, candidate countries could take part in more EU programmes and benefit from certain forms of integration before actually becoming full members.

This is not exactly new. MEP’s think tankers, EU member states have been raising that idea for a while. And candidate countries already have access to a number of EU programmes and funding mechanisms. The idea is to give countries something concrete while they are still going through the accession process.

Now, there is an even bigger obstacle: money. The EU would have to finance enlargement at a time when its budget is already under pressure.

Because none of the countries currently considered likely to join in the nearer term would be expected to become a net contributor to the EU budget. In other words, they would likely receive more from the EU than they would contribute.

Ukraine is the obvious example. Despite being a big country with a solid economy, its current situation makes it fragile and unable to contribute largely to the EU budget. 

Its accession could have a significant impact on EU spending, particularly through the Common Agricultural Policy and cohesion funds.

So the Commission is considering a transition period during which new members would not immediately have full access to all EU programmes.

That could make enlargement financially easier in the short term. But it doesn’t solve the problem permanently. Once the transition period ends, the same question comes back.

And there is a broader issue too: would the EU itself be able to function as a union of more than 30 countries? What could prove difficult, is that many important decisions still require unanimity — including areas such as foreign policy, taxation and parts of the EU budget.

Changing that would require treaty reform, which is politically extremely sensitive because member states would have to give up some of their veto powers.

Andrew Duff, a former British liberal MEP who has written about enlargement for the European Policy Centre, argues that the EU should have started thinking about this much earlier — particularly after Brexit. In his view, the EU has not carried out the kind of institutional reform that would prepare it for a much larger membership.

So in the end, today’s proposals could make the accession process more flexible and give candidate countries more opportunities to integrate before membership.

But they don’t resolve two of the biggest questions: how to finance enlargement, and how to reform EU decision-making.

Before we wrap up, a quick word on the countries which are believed to become members next. The frontrunner is Montenegro. The most optimistic forecasts suggest it could potentially become an EU member as early as 2028. Then comes Albania, which is also well advanced in the process.