Establishing synergy across new energy vehicle chain

Wider global collaboration will overshadow US and EU efforts to exert their influence

KARACHI:

Supply chain experts and business leaders from around the world are pleading for upstream and downstream collaboration and synergy across the new energy vehicle (NEV) chain in the backdrop of a trade war where the United States and European Union (EU) intend to impose their hegemony and exert influence over the supply chain.

On the one hand, the US and EU have adopted policies to contain the spread of China's NEVs in their countries with a view to supporting local industries, but on the other hand, they are depriving their own people of better and cheaper NEVs from China. This strategy may seem to be unsustainable in the long run as people always desire to purchase vehicles having low prices with advanced features.

The US and EU intentions have been overshadowed by the consistent growth of China in the global supply chain, especially when it comes tao state-of-the-art NEVs. These days, a new round of scientific and technological revolution, coupled with industrial innovation, is being witnessed, resulting in a deep adjustment in the global economic structure.

Even so, headwinds are also blowing in the face of economic globalisation and its impact is being felt the most by the industrial and supply chains, which need to consolidate and strengthen cooperation.

The second China International Supply Chain Expo (CISCE), held in Beijing from November 26 to 30, carried the title "Connecting the World for a Shared Future". It hosted more than 600 exhibitors from 69 countries and international organisations, of which over 32% came from overseas. As the world's first national-level exhibition focusing on supply chains, it provided an international forum to industry mavens and top echelons while helping promote cooperation in industrial supply chains.

The expo connected upstream, midstream and downstream sectors, brought together large, medium and small enterprises, coordinated industrial and academia research and its practical application, and fostered interaction between Chinese and international businesses.

It focused on four significant functions of promoting trade, fostering investment cooperation, aggregating innovation and encouraging learning and exchange. The fair committed to creating a new window for promoting high levels of openness, a fresh platform supporting the establishment of a new development paradigm as well as a new vehicle for the development of an open world economy.

The exhibition has helped China send a strong message of connectivity, cooperation and opening as it plays a vital role in promoting the global trade and supply chain. Business leaders need this sort of connectivity all over the world.

A host of multinational companies from various countries are enthusiastic about forging win-win cooperation with China in advanced NEV manufacturing to prop up the global supply chain.

Xinhua has reported that China is the world's largest automobile market and exporter. In the first 10 months of 2024, China produced about 9.78 million NEVs and sold 9.75 million units, marking a year-on-year growth of 33% and 33.9%, respectively. What's more, the China Association of Automobile Manufacturers has revealed that NEV exports reached 1.06 million units, up 6.3% year on year.

According to Yin Xiaopeng, Dean of the Research Institute for Global Value Chains at the University of International Business and Economics, new products can promote more hi-tech development and strengthen industrial and supply chains, fostering closer economic integration that benefits both China and the world.

International trade expert and auto sector analyst Aadil Nakhoda said exhibitions help build export networks. Exporter networks are crucial for increasing product diversification as well as market diversification as sellers while building on their brand names can use these to boost their export sales. Trade missions play an important role as well.

China accounts for more than 60% of electric vehicle (EV) sales in the world and 70% of its production. EV exports are valued at more than $40 billion.

China has spent more than $200 billion in developing its EV market. Heavy taxes on EVs may not necessarily deter Chinese exports, if Beijing is able to counter these through subsidies and low-cost production.

The trade war is between China's capacity to continuously lower prices and produce more EVs, and the US and EU efforts to impose high tariffs as well as block access to cheap vehicles.

The political economy widely influences such decisions. Tesla owner Elon Musk, who has supported Trump's campaign for presidency and prevented EV imports from China, is striving to grow his business.

Unfortunately, the nexus of businesses and the government exists to maximise campaign contributions while the implications of a bad policy are not considered. Hence, consumers lose while certain businesses and governments gain.

As research and development (R&D) capabilities increase, innovation can bring new products and capacities to boost export sales. Hi-tech development is sensitive to high fixed costs, the presence of strong copyright and patent laws as well as the ability of universities and research centres to collaborate and increase their output. Unfortunately, this requires the trust and confidence that becomes low in periods of trade war and friction.

"I think China will gain by investing in foreign locations to build a strong supply chain as well as evade tariffs. For instance, Vietnam has a free trade agreement with the EU and it can benefit from selling EVs through Vietnam. Here, an opportunity for Pakistan can also arise if it can take advantage of the unilateral EU trade benefits. However, this requires a deep analysis and study," Nakhoda said.

The writer is a staff correspondent