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EVs made by China’s Geely Automobile Holdings in Jiangsu province bound for Europe are seen in this file photo from August 2023. Photo: Bloomberg
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Green energy war: dominant Chinese exporters of EVs, batteries and solar panels face trade barriers, Natixis says

  • China’s dominance will be challenged by industrial policies and tariffs globally, not only in the West, Natixis analysts say in report
  • Outlook is less rosy, given signs of a domestic market slowdown and rising trade barriers overseas, Chief Economist Alicia Garcia-Herrero tells the Post
Business of climate change
Eric Ng
Eric Ng
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China’s global dominance in the production of three key energy transition products – electric vehicles (EVs), batteries and solar panels – will face more challenges this year from industry overcapacity, price wars and trade barriers, French bank Natixis said.

Export growth of these “new three” sectors, a term coined a year ago by Chinese state media to describe the three rising stars of mainland Chinese exports, will run into constraints after the country saw the value of EV exports nearly quadruple to around US$38 billion last year from two years ago, analysts at the French bank said.

Meanwhile, solar panel exports rose by around 40 per cent to US$42 billion and battery exports more than doubled to US$66 billion over the same time frame. Together, they account for 4.5 per cent of China’s total exports currently.

“China’s dominance will be challenged by industrial policies and tariffs globally, which do not only come from the West but also other countries, such as India and Turkey,” the Natixis analysts said in a report.

“The world will face a question of balancing cost-effective green transition goods from China and supply-chain security.”

By establishing first mover advantage through aggressive capacity expansion supported by subsidies, tax incentives and build out of full supply chain capabilities, China has dominated the production of various manufactured goods needed for the green energy transition, they added.

EV battery packs at a factory in Nanjing. Last year, China accounted for 62 per cent of battery production globally. Photo: Getty Images

Last year, it accounted for 53 per cent of global EV production, 62 per cent of battery output and 94 per cent of solar panel manufacturing, mostly fuelled by rapid growth in domestic sales, the analysts said.

This year, the outlook is less rosy, given signs of a domestic market slowdown and rising trade barriers overseas, Alicia Garcia-Herrero, Natixis’ Asia-Pacific chief economist, told the Post.

“Can China keep absorbing what the world is not importing in 2024? Maybe not,” she said. “Can European imports grow faster? No, because the issue now is that in many cases, governments are starting to impose some constraints.”

Chinese EV battery giant CATL expects 2023 profit surge as it sees off rivals

The European Commission a year ago proposed the “Net Zero Industry Act” legislation to achieve a region-wide self-sufficiency ratio of at least 40 per cent in the manufacturing capacity for net-zero technologies by 2030. A provisional agreement was reached last month, pending formal adoption.

Last September, the commission also launched anti-subsidy investigations into imports of Chinese EVs, which China condemned as “sheer protectionism”. Chinese makers could capture 15 per cent of Europe’s EV market next year, up from less than 10 per cent in 2022, a KPMG report forecast last June.

In the batteries sector, US policies and incentives promoting onshoring of production and policies driven in the name of supply security in other markets mean “it may not be easy for Chinese firms to grow their exports at a certain tipping point”, said Natixis senior economist Gary Ng.

Solar photovoltaic modules that will be exported are seen at a factory in Lianyungang. Photo: AFP

“Increasingly we will see South Korean manufacturers set up factories in the US and other places to produce,” he said.

In the solar sector, despite a price war that saw panel prices plunge by half over the past 12 months, top Chinese producers are still ramping up production capacity for panels with higher energy conversion efficiency to gain a competitive edge, said Natixis economist Mu Haoxin.
Industry body European Solar Manufacturing Council said in January that unless “robust emergency measures” are taken before the EU’s Net Zero Industry Act comes into force, “there will be no industry to count on by 2030” to reach the legislation’s goal amid “ultra-low” product prices and high inventories.

China’s clean energy sectors were the biggest growth drivers of its economy in 2023: CREA

In the US, Washington might impose new steep import duties as soon as June on Chinese exporters that circumvented anti-dumping duties by moving downstream operations from China to Southeast Asia, Mu said.

The China Photovoltaic Industry Association last Wednesday forecast domestic solar farm installation to ease to 190 to 220 gigawatts (GW) this year, after jumping 148 per cent to 217GW last year, mainland media outlet Jiemian reported, citing association chairman Wang Bohua.

Chinese panels and parts exports jumped by 38 to 94 per cent in volume last year, but the total value of exports fell 5.4 per cent to US$48.5 billion, according to the association.

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