Europe To China: Want Subsidies? Hand Over Your Technology

China's joint venture program is being applied in reverse as the EU demands cutting-edge battery tech.

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Kevin Williams

By: Kevin Williams

Nov 19, 2024 at 1:30pm ET

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The EU is expected to allow Chinese access to European subsidies in exchange for transferring technology and IP to European companies.
This is expected to be confirmed before new EU grants for battery manufacturing become available in December.

It’s no secret that China wasn’t too happy with the EU’s tariffs against imported EVs. Earlier this year, EU member states voted to enact a fairly severe tiered tariff based on investigations that assert that China unfairly subsidizes its EV industry. The tariff added up to 35.3% to imported Chinese EVs, not counting the 10% already added to imported vehicles. Months of negotiations only reduced that number by a measly 0.1%, but the EU and China never stopped negotiating. Now, it looks like a new resolution may be on the table. Reporting from the Financial Times shows that a stunning breakthrough in talks between the two entities could be coming soon. The EU is expected to compel Chinese businesses to transfer technology and intellectual property to European businesses in exchange for access to European subsidies.

According to the report, this is due to be rolled out ahead of a new EU grant scheme of more than €1 billion meant for companies to invest and develop a European EV battery supply chain. If Chinese companies want part of those grants, they may need to turn over IP and invest in European factory locations. This is still unconfirmed by the EU or China, but the report insists that depending on how successful the theoretical program is for battery production, the EU could implement this in other spaces where it thinks it needs to fortify its industries against China.

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This is poetic in a sense. Years ago, China enacted a joint venture program where foreign automakers had to enter a 50-50 relationship with a local Chinese company in order to access the Chinese market. The plan was for local Chinese companies to “learn” from established ones, although some critics have insisted that the joint venture scheme was merely a way to transfer intellectual property from the West into China. Whatever the case, China officially ended the joint venture requirement in 2022. Also, Tesla famously entered China under special circumstances, not creating a joint venture with any local Chinese company.

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This arrangement is a lot more complicated than it seems at first glance. On one level, it’s an admission that the EU recognizes it is significantly behind and cannot compete or make its climate goals without China’s help. But, it’s not clear if this will ease tensions between the EU and China; Beijing has told its homegrown brands that it should be more careful with investing in Europe or sharing advanced technology. If this comes to fruition, will China go for it? And if they do, will it even result in cheaper EVs for Europeans?

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We’ll just have to wait and see. The incoming Trump administration has been adamant that it wants to be even harsher on China, but of the same token, Trump himself said he wasn’t against Chinese EV or supply chain manufacturing being created in the United States. Perhaps a similar arrangement is on the horizon for the United States.

Contact the author: kevin.williams@insideevs.com

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