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This is an op-ed piece by Katharina Osthoff, Senior Policy Advisor at Friedrich Naumann Eurooe Foundation, and Sam Goodman, Senior Policy Director of the China Strategic Risks Institute, the co-Founder and co-Chair of the New Diplomacy Project.
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While the growing influx of competitively priced and well equipped Chinese EVs may appear the superior choice for both consumers and policymakers in Europe, they bring with them substantial economic risks. These risks threaten the domestic automotive industry, which is outmatched by Chinese EV production as well as Europe’s ambitious environmental goals that rely on a substantial shift towards EVs. Yet, the implications extend far beyond economic or ecological concerns. Chinese EVs potentially pose new challenges when it comes to the EU’s commitment to data protection abroad and at home, as well as to upholding security and global human rights standards.
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At the heart of China’s EV production lie deliberate, state-controlled industrial policies: massive state subsidies, overcapacity, and strategic export orientation. This has enabled China’s EV manufacturers to produce high-quality vehicles at near-unbeatable prices, which facilitated companies like BYD, Nio, and Chery to scale-up production rapidly and flood global markets, including in Europe. [...] Today, Beijing holds influential positions across the entire supply chain: from raw material extraction to battery production and final assembly. The EU's commitment to a green transition, which heavily relies on increasing the market share of EVs, exacerbates this issue. This situation highlights a paradox where European liberal free-market democracies are seemingly outperformed by China's state-supported enterprises.
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[European] domestic manufactures are hamstrung by fragmented national policies and underinvestment. This imbalance risks creating a structural dependency on Chinese imports. Unlike past technological shifts, this dependency is not only commercial in nature but also geopolitical. China’s overcapacity is not a market accident but rather the product of deliberate policy choices , aimed at dominating critical technologies and global value chains. The implications for the EU extend far beyond industrial competitiveness. As demonstrated in past cases of economic coercion, most notably against Lithuania, Beijing has shown its willingness to use market access and trade ties as instruments of political pressure. A future in which China controls a large share of the EU’s EV market risks giving Beijing undue influence over European policymaking, including the ability to discourage criticism of its human rights record, military posture, or foreign policy behaviour.
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Driving a Trojan Horse? Data, Security, and Surveillance
Aside from the clear economic risks that Chinese EVs present to Europe’s automotive manufacturing, growing concerns about data privacy, surveillance, and cybersecurity cannot be sidelined. As the former head of MI6 aptly put it, EVs are not just cars but “computers on wheels.” European regulators should take seriously the data security risks this implies. Under the National Intelligence Law and China’s Data Security Law, Chinese EV manufacturers and their suppliers operate under a legal obligation to cooperate with the Ministry of State Security and are prohibited from disclosing this cooperation to foreign governments, raising serious cybersecurity concerns. Chinese Communist Party cells are required to be embedded within the corporate structures of these [EV] firms, making the firewall between commercial operations and the Chinese state increasingly porous. Additionally, many manufacturers rely on software and components from firms such as DeepSeek, which have already been flagged for their data practices.
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Hidden Costs: Labour and Human Rights in the EV Supply Chain
At the same time, the EU cannot afford to ignore the human rights concerns associated with China’s EV supply chain. Beijing has secured a commanding lead in the supply chain for key battery materials with Chinese firms like BYD having established a strong presence in lithium mining and processing operations across Latin America and parts of Africa. [...]
The growing scrutiny has already led to tangible shifts in corporate behaviour. Volkswagen’s recent decision to exit Xinjiang reflects growing pressure on European firms to sever ties with entities linked to systemic human rights abuses. While the company cited economic reasons for the sale, the move underscores the reputational and legal risks European firms face if they remain entangled with controversial actors in the Chinese EV ecosystem. Beyond supply chains, the ethical and legal implications of technology partnerships with Chinese firms demand closer examination. Several leading Chinese tech companies such as Hikvision and others have been implicated in surveillance activities and abuses, particularly in Xinjiang. Partnerships of this nature carry considerable reputational risks in liberal democracies and may expose European firms to secondary sanctions or consumer backlash.
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Such pragmatic policy solutions aimed at restoring the EU’s competitive edge should include:
- The EU should commit to reviewing the EU’s countervailing tariffs on Chinese EVs within the first year of the new EU Commission.
- The EU should review the EU’s current Foreign Direct Investment Regulation to focus on rules regarding joint ventures to look at local ownership requirements, data security requirements, and local content requirements.
- The EU should legally require foreign EV companies from a country where the EU does not have a data standards equivalency agreement to store data on European servers and to commit not to transfer the data overseas under any circumstances.
- The EU should negotiate economic security partnership agreements with value partners such as Japan and the Republic of Korea. One target under these partnerships would be to encourage joint ventures between European automotive producers and world leading Japanese and South Korea battery producers including Samsung, SK Innovation, Panasonic, and LG Energy Solution.
- The EU should investigate forced labour in Xinjiang, add the geographic region of Xinjiang to its forced labour risk database, and introduce guidelines for European businesses regarding the prevalence of forced labour goods in the automotive supply chain.
- European policymakers should expand tax incentives and other measures to encourage European automotive companies to work together to share research, development, and production costs for EVs.
- The European Commission should work with European Member States to coordinate Next Generation EU and Multiannual Financial Framework funds to support the development of the European EV sector, including encouraging matching private sector investment in the EV battery supply chain and EV charging infrastructure. This should serve as the frontrunner to an EU-wide Green Industrial Strategy.
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