Trump has blown up European carmakers’ bet on China
Trump has made the Europeans look hopelessly naive – Carolyn Kaster/AP
Nissan is planning to partner with Chery, Stellantis is teaming up with Leapmotor, and of course, Britain’s MG, a brand with a century of heritage behind it, has long since been folded into SAIC.
As they struggle with both the transition to electric vehicles (EVs) and a full-on Chinese assault on their industry, Europe’s carmakers have placed a big bet on partnering with China. To borrow a phrase from the production lines, however, a spanner has just been thrown into the works.
Donald Trump, the US president, has banned Sweden’s Polestar from selling its cars in the United States because it is Chinese-owned. The big bet on China is about to dramatically unravel. If Europe’s auto industry doesn’t reverse very quickly, it will face extinction.
The US should have been a natural market for Polestar. The Swedish company’s sleek, well-designed electric vehicles are upmarket, competitively priced and sell to much the same niche that once made its original partner, Volvo, such a success. American drivers could be persuaded that they looked classy on the front drive.
The trouble is, the company is now owned by Geely, one of the biggest of the new breed of Chinese car manufacturers. The Trump administration this week decided that this violated restrictions on cars with Chinese software that connects to the outside world. US officials argue that sensitive data may be collected on individuals without their knowledge and transmitted to a hostile power.
Whether China will collect information on senior military officials driving into the Pentagon in their shiny new Polestar, we can’t really tell. It might just be a clever way of banning its cars from the US market. In the end, however, it does not make much difference. From next year, its cars will not be allowed into the US.
If it were just one company, Europe could shrug it off. And yet, the bloc’s automotive leaders have done a whole series of deals with Chinese manufacturers. Nissan’s world-leading Sunderland plant, the core of what remains of Britain’s once mighty car industry, will test making vehicles for China’s Chery from next year. Over time, it could well end up as the assembly line for its European sales.
Stellantis, the parent company for Fiat and Peugeot, has agreed to partner with China’s Leapmotor and CATL, making Leapmotor vehicles at its plant in Spain. MG has been revived under the ownership of SAIC, while Volvo is owned by Geely.
Likewise, BMW has partnerships in China, and they could be extended to Europe eventually, and so has Mercedes. One by one, Europe’s manufacturers are joining up with their Chinese rivals.
It is not hard to understand why. China has built a formidable car industry in record time. It is the world’s largest market by volume, accounting for one in four of every car sold in the world. By betting big on EVs, it has turned into a world leader in that technology, and not just a low-cost manufacturer.
Its emerging giants, led by the likes of BYD and Geely, are consolidating their grip on the domestic market, have started to sew up much of the developing world, and are starting to make significant progress in Europe. The Jaecoo 7 is already Britain’s third best-selling car in 2026 so far, even though no one had heard of it a couple of years ago. Chinese brands have already taken 9pc of Europe’s car sales and more than 15pc of EVs.
With the self-destructive drive of Europe’s political leaders to prioritise net zero over domestic industrial strength and resilience, the car industry has gambled that teaming up with China is the only realistic way of securing its survival.
The trouble is, there is now a real risk that they will all end up blocked from the American market. That matters. After all, it is the biggest economy in the world, and one that has traditionally been the most lucrative for the upmarket brands that Europe specialises in. Lots of Americans want a Merc, a Beamer or even a Jag for its cachet. If that market gets closed off, it is hard to see how they will survive.
Trump and the officials driving his trade policy have called this one right. In their desperation to find a way out of the mess they find themselves in, the Europeans have been hopelessly naive.
A generation ago, it was possible to forge genuine partnerships with the Japanese manufacturers when they were the rising power in the industry. The likes of Nissan, Toyota and Honda were committed to building European units, and Britain, as one of the first to welcome them, was probably the biggest beneficiary of that.
China is different. Its state-directed auto giants will gut the European industry, steal its technology, and hijack the heritage in its major brands. They are intent on dominating the global industry, and all that will be left for China’s European “partners” will be a few low-value assembly jobs.
The Americans have decided not to let their carmakers be destroyed by China. That is the gutsy choice. It is hard to remain a serious economic power if you don’t manufacture cars. Nothing else generates as much wealth or as many skilled jobs.
Europe, including the UK, will now have to make a choice. Either it sticks with its new Chinese partners and gets slowly hollowed out. Or else, it dramatically reverses course and works with American manufacturers instead, rebuilding its own domestic capacity and imposing the same kind of tough restrictions on China that Trump has placed on its market.
It should be obvious to just about everyone that Europe should partner with the US – but the leaders of the Continent’s car giants have made so many catastrophic decisions over the last decade that you would hardly want to bet on it.
