Europe's Anti-China EV Law Backfires on Japan—Is Hyundai Motor Laughing?

00:00 Intro

00:17 Up 144%? Created to block China

01:59 Why is Japan in a panic?

02:59 They sold this? China smiles, Japan weeps

05:37 What about South Korea?

This is Paris. Today, we are going to talk about cars. Lately, Japan's automotive industry has fallen into deep concern over the European market. And the reason behind it is none of China.

1. Up 144%? Created to block China

Lately, a delegation from Japan's automotive industry has been making frequent trips to Strasbourg, France, where the European Parliament is located. They have been visiting members of the European Parliament and pleading for favorable treatment for Japanese cars. Why? Because of the Industrial Acceleration Act (IAA) currently being promoted in Europe. What is this act? It is a law designed to protect Europe's automotive sector, especially the electric vehicle market, requiring that over 70% of major auto parts be produced within Europe to qualify for EV subsidies and tax benefits. It mandates "Made in Europe." Why is Europe pushing for this? After creating subsidies and tax benefits to pursue decarbonization and go all-in on EVs, European cars weren't selling well; instead, out of nowhere, car companies from other countries started performing much better. Among them, BYD, the leading Chinese car brand, surged 128% in August compared to the previous year, based on the UK market. Looking at Europe as a whole, it jumped 144%. In terms of the first half of the year, 174,000 units were sold. It sold even more than Tesla. This is the first time this has happened. Since Chinese cars are doing this well, they cannot just stand by and watch, but they cannot recklessly impose import restrictions like U.S. President Donald Trump either. Therefore, they came up with a law requiring more than 70% of parts to be made in Europe. Under this rule, no matter how many Chinese cars are sold, at least European factories will keep running and European jobs will be preserved. Europe aims to push forward with this law until 28.

2. Why is Japan in a panic?

So why is the Japanese automotive industry in a panic? Japan does not have factories in Europe. Most Japanese EVs are manufactured in Japan and shipped over. Toyota is planning to build a factory in the Czech Republic, but it is not expected to be operational until 28. Nissan's situation is ironic. Nissan manufactures the Leaf, a compact electric vehicle, in Europe. However, that factory happens to be located in the UK. Since the UK has left the EU, it cannot receive EU subsidies and tax benefits. Right now, the UK enjoys some advantages over other countries in terms of tariffs and similar areas. However, under the "Made in EU" act currently being pursued, those benefits will be virtually wiped out. Having built a factory in the UK 40 years ago to evade European regulations, they now find themselves unable to reap the benefits. Consequently, concerns are already emerging in the UK over whether Nissan, which accounts for 30,000 jobs, might relocate to the EU region.

3. They sold this? China smiles, Japan weeps

What about Chinese cars, the very target they are trying to block? BYD is building a factory in Hungary. Investing over 6 trillion won, it is establishing a production line with an annual capacity of 300,000 units. Vehicle assembly is reportedly set to begin starting in the fourth quarter of this year. Another facility in Hungary is already operating lines for electric buses and trucks. Another Chinese EV maker, Chery, is remarkable. Chery's European factory is located in Barcelona, Spain. However, this was not newly built. They bought an existing car factory. They bought it in 21, and who was the original owner? None other than Nissan. Had they left it alone, it could have served as a forward base for Japanese EVs, but it simply handed over to a Chinese car factory. And familiar names—Volvo, as you know, is originally a Swedish brand, but its current owner is China's Geely. Thus, Volvo factories in Sweden and Belgium are Chinese-owned company factories. This Volvo is also building a new electric vehicle plant in Slovakia. With this, there are already many Chinese EV factories in Europe. Around 90,000 Chinese electric vehicles made in Europe are expected this year alone. Projections suggest this figure could reach 1 million by 2030. Because Chinese cars have prepared themselves by securing factories ahead of time, concerns have been raised that they might just bring in all Chinese-made parts and merely assemble them in Europe. That is why this law is being enacted to demand that even parts be "Made in Europe." They are even trying to include conditions that when building European factories, foreign companies cannot hold more than 49% of the stake, and technologies and patents must be handed over to European partners. They clearly made the law to catch Chinese electric vehicles, but the collateral damage is hitting Japanese cars instead. Since Japan cannot immediately build factories there, its representatives are visiting the European Parliament, pleading and appealing to lawmakers for special treatment by saying, "Aren't we on your side? Aren't we a reliable partner?" For Japan, which has no factories to even assemble cars in Europe—let alone meet "Made in Europe" requirements—this law is truly terrifying. Japan is running around so desperately for a reason: the EU has left a slight exception clause. It leaves the door slightly open by stating, "We can grant treatment similar to European products to reliable partners." That is why non-EU neighboring countries like the UK and Turkey are vigorously knocking on that door. Now, Japan is trying to step through that door as well.

4. What about South Korea?

Let's pause here and talk about our situation. Hyundai Motor has a plant in the Czech Republic, where it manufactures the Kona Electric. Parts are also produced at the same complex by Hyundai Mobis. Kia has a factory in Slovakia, producing the EV4 and starting production of the EV2 this year. In particular, the EV2 is an affordable, compact electric vehicle that Europe is pushing hardest, meaning it is set to receive the most benefits. However, South Korea still brings in more than half of its EV sales from outside Europe. There is a need to further respond to the European market, but compared to Japan, we are in a much better position. We even have many companies with European manufacturing plants, such as LG Energy Solution for batteries. The Industrial Acceleration Act, created to catch Chinese products, especially electric vehicles, is still more than a year away from actual implementation. Meanwhile, building a car factory typically takes around three years. There are quite a few steps to go through, including site selection, permits, plant construction, and stabilization. Especially in Europe, where administration is slow, achieving stable mass production can take up to five years. Consequently, rather than rushing to build factories right now, Japanese companies are trying to resolve this crisis through preferential exceptions, and we will have to wait and see what the final conclusion turns out to be.

(Reported by Kwon Yeongin, Produced by Shin Hee-suk, Video Reporting by Kim Si-nae, Video Editing by Ahn Jun-hyeok, Design by Lee Su-min, Produced by SBS Digital News)

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