Europe faces industrial wipe-out

Chinese cars
One in three electric cars sold in Britain last year were manufactured in China - STR/AFP
  • Oops!
    Something went wrong.
    Please try again later.

In the United States, there are massive subsidies. In China, there is an industrial strategy pursued with ruthless effectiveness. And yet in Europe, there are just “deadlines and fines”.

Luca de Meo, the boss of the giant French car manufacturer Renault, didn’t mince his words when he called this week for a coherent response from Britain, France, and the rest of the major European industrial nations, to the threat posed by imports of cheap foreign electric vehicles.

Sure, it would be easy to dismiss that as just another industrial leader calling for soft loans and tariffs to rescue an uncompetitive industry. And yet de Meo is on to something. Net zero has turned into a Chinese weapon aimed right at the heart of Western competitiveness.

If we don’t wake up and recognise soon that we have to figure out a better way of combatting climate change, our industries are about to get wiped out.

The transition from petrol to battery-powered vehicles is not working quite as planned. It was meant to spark a wave of investment, create a swathe of “well-paid green jobs” and dramatically cut carbon emissions at the same time.

Renault, in turn, looked set to play a leading role. With models such as the ZOE, the company was an early pioneer in the space of relatively affordable EVs. It looked as if it was all set to become a global leader.

Right now, that seems far from the case. Chinese firms are about to dump millions of cheap EVs on the European market.

“The UK may no longer be part of the EU, but on this issue I think we face the same challenges together,” argued De Meo in an article for Autocar.

“With the internal combustion engine, our leadership was undisputed…and it was a barrier to entry for newcomers. Today, Europeans find themselves in a position of relative fragility”. His argument is that the EU and the UK have to work together to fight back, and protect what remains one of the continent’s most significant industries.

He is certainly right about that. In the US, President Biden has launched a tax credit scheme that will pour nearly $400bn into subsidies, and while not all the money will be well spent it will give America a chance to build a substantial industry.

Meanwhile, China has funnelled massive amounts of money into building EVs, it has taken control of critical minerals needed to make them cheaply, and it is now about to flood the West with models that could well outcompete European manufacturers on both quality and price.

Instead of sparking a manufacturing renaissance in Europe, the pursuit of net zero is leading instead to imminent deindustrialisation. It might be starting with the mighty automotive industry, in which the Continent once led the world, but it is being repeated again and again elsewhere.

Indeed only this week a group of major European industries launched the “Antwerp declaration”, calling on the EU to relax regulations, lower energy costs and increase investment, while it still has some industry left.

Signed by 73 major companies, from 17 sectors including chemicals, pharmaceuticals and engineering, it argued that “sites are being closed, production halted, people let go…Europe needs a business case urgently.”

Here’s the problem, however. All the major European governments, including the UK of course, are still fanatically committed to net zero, and that stops them from responding properly.

Take cars for example. Normally, the EU or Britain would likely launch an “anti-dumping” action against cheap imports of Chinese EVs, and impose tariffs to allow our manufacturers to compete.

But how can we do that when we have banned the sale of petrol cars from 2035, and we are committed to phasing them out as fast as we can?

Likewise, we could put restrictions and tariffs on Chinese solar panels, which now dominate that particular market. But how can we do that when we have legally mandated targets to increase the share of alternative energies?

The price tag is already fearfully high, and we have miserably failed to build up the capacity to make our own equipment at competitive prices. If given a choice between net zero and economic success, our politicians are disturbingly clear which takes precedence.

It’s the same story throughout the economy. We have allowed energy prices to soar, planned to close down our own offshore oil fields, and held back the growth in fracking even as it has delivered economic booms in North America.

We have ignored the fact that these choices are putting companies out of business – and are allowing Chinese rivals with far lower power costs to trample all over European businesses.

The harsh truth is that China has weaponised net zero, and turned it into a way of seizing industrial leadership. America is responding, admittedly perhaps too late, and with too much state control. But Europe has been left floundering, and it is about to get wiped out.

The Continent has made a complete mess of the transition to net zero, naively assuming that it would create jobs, and that its rivals were only interested in saving the planet, and not in securing an edge for their own industries.

It is perfectly possible to combine the two objectives, but it won’t be done simply through “deadlines and regulations”, or with naive rhetoric about “green jobs”.

Both the UK and the EU need a complete reset, working out what industries need to be protected, how to keep costs competitive and, where necessary, figuring out how to cut carbon emissions over a realistic timetable.

It is not yet too late to do that – but by the time Renault has closed down, and even the French are driving around in Chinese-made BYDs, it will be.

Broaden your horizons with award-winning British journalism. Try The Telegraph free for 3 months with unlimited access to our award-winning website, exclusive app, money-saving offers and more.