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Can EU Green Manufacturers Ever Compete With Low-cost Imports?

Can EU green manufacturers ever compete with low-cost imports?

Can EU green manufacturers ever compete with low-cost imports?

The interior of the Siemens Gamesa wind turbine factory in Cuxhaven, Germany. Credit: Gregor Fischer/Getty Images. Economic security – an idea that encompasses a broad set of interconnected elements including supply chain resilience, research integrity, and industrial competitiveness – has become a defining issue for European policymakers. External threats such as another global pandemic, violence spreading across regions like eastern Europe and the Middle East, an ever more powerful China and the possible return of former US President Donald Trump , are all at the forefront of European policymakers’ minds as they design economic policy. However, the EU is not at the forefront of green manufacturing. China and the US are leading the clean tech race. In 2022, China overtook Germany to become the world’s second-largest car exporter (after Japan), with one-third of Chinese car exports electric vehicles (EVs) . The US, meanwhile, fuelled by the Inflation Reduction Act (IRA) , has rapidly become one of the world’s most competitive locations for clean tech investment. The EU27, whose economy has shrunk, in relative terms, from being slightly larger than that of the US in 2008 to one-third of its size in 2022, risks falling behind. Booming Chinese EV exports mean the EU’s automotive trade surplus is shrinking EU-China automotive quarterly trade balance ($m) Jan 2019 Apr Jul Oct Jan 2020 Apr Jul Oct Jan 2021 Apr Jul Oct Jan 2022 Apr Jul Oct Jan 2023 Apr 0 2,000 4,000 6,000 Chart: Nick Ferris/Energy Monitor Source: General Administration of Customs of the People’s Republic of China GlobalData The European Commission has responded with the Net-Zero Industry Act, whose express aim is to “strengthen the European manufacturing capacity of net-zero technologies and overcome barriers to scaling up the manufacturing capacity in Europe”. The Act is intended to support the EU in meeting a target of manufacturing at least 40% of the strategic net-zero technologies it needs every year by 2030, with measures including the lowering of administrative burdens for net-zero manufacturing projects, skills enhancement programmes, a Net-Zero Europe Platform where countries can discuss and exchange information, and enhanced access to public procurement procedures and auctions. Europe “cannot compete” with China Not everyone is convinced that the EU can or should aim to bring green manufacturing home, however. Speaking to Energy Monitor , Javier Cavada, the CEO of Mitsubishi Power for Europe, the Middle East and Africa, said he does not believe the EU can compete with other countries on cost. “I don’t see Europe being the place that will produce the cheapest version of products like electrolysers and batteries . We cannot compete with the volume and price found in countries like China and South Korea,” he said. 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 0 5 10 15 20% GlobalData Mitsubishi Power is a market leader in the manufacture of technologies such as hydrogen-compatible gas turbines (it has led the world’s largest hydrogen-natural gas fuel-blending project ), carbon capture and storage (CCS), electrolysers and batteries. It is also a leading software provider to manage grid balancing and power interconnection. The company’s European business is focused on sales and distribution, while manufacturing is focused in the Far East. “I have been running factories in China for many years, and I have to say, when you have technologies that need high volume and low wages, the idea that Europe can compete is a joke,” Cavada said. “If you look at clothes brands like Zara and H&M, they all manufacture in Thailand and Vietnam – and it is the same here: to be a competitive manufacturer, you want to choose somewhere that is much better value.” Optimistic: security trumps economics But even if Europe cannot compete on cost, other factors including technological prowess, education and access to financing mean that we should not write off green manufacturing in the EU. While Europe may have lost much of its solar manufacturing base to China in the 2010s, it remains a strong competitor in the wind sector, continuing to meet a large majority of component demand, shows data compiled in a recent report from the German think tank Agora Energiewende. GlobalData For Matthias Buck, Europe Director at Agora Energiewende, there is little chance that wind could go the way of Europe’s solar manufacturing base. For him, the past few years have moved us into a “new political reality”. “Before Covid, there was very little awareness of the risks associated with supply chains, but now we know […]

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Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

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