A long read below, with some underlining by me, but imo a current, useful and reasonably balanced assessment of the political temperature in Europe over tariffs on non-EU/Chinese manufactured electric vehicles. Importantly for us, the likely direction the EU will take with a recently re-elected Ursula von der Leyen at the helm (dragging member nations in, Germany included, kicking and screaming if she has to) in response to the flood of cheaper electric vehicles entering the EU from China - in part due to China’s supply & pricing stranglehold on lithium.
The Commission President - no stranger to Vulcan - has made tariffs a top priority and I don’t think she has any choice but to succeed - and that she will indeed ultimately prevail. EU member countries that are presently being wooed by China will, I think, roll in her favor when it comes to the crunch.
To make EV tariffs work, von der Leyen knows that Europe must have its critical battery metals supply chain secure and producing raw materials domestically for its own battery manufacturers, and Vulcan is undoubtedly a key component of this plan imo. The company is already in her line of sight as a result of the Govt relations and lobbying approach Vulcan has carefully executed to date.
The votes of EU member states leading up to the (fast approaching) Oct 30 deadline for EU-wide tariffs to be imposed on Chinese EVs could well be seen as mini catalysts here in the bigger picture of Vulcan as the leading supplier of “local” lithium to European automakers.
In European Union circles, last week will be remembered for European Commission President Ursula von der Leyen's consolidation of her position as the most powerful politician in Brussels. She vanquished her rivals and pitted her new commissioners against each other in a grand reshaping of the bloc's executive functions, blurring the lines of reportage and making clear she was the one who would be calling the shots.
In a deft piece of political chicanery, von der Leyen connived with French President Emmanuel Macron to switch out Thierry Breton - the Parisian commissioner who was her biggest internal critic in her first term - for the less flashy Stephane Sejourne, who will now oversee the bloc's industrial policy. Breton had publicly questioned von der Leyen's leadership and continually placed himself in the limelight. But now - like others who challenged her during her first term - he finds himself in the political wilderness. The message was clear: if you come at the queen, you best not miss.
On China, von der Leyen signalled that the new commission's term will mirror the back half of the last one. She will drive the EU de-risking plans full steam ahead, and economic security percolates through nearly every commissioner's brief.
"Reading the letter of mission to commissioner-designate for trade and economic security Maros Sefcovic, it's clear the Brussels wind is blowing in the same direction on economic foreign policy towards China, but with stronger gusts," said Mathieu Duchatel, a policy analyst at the Institut Montaigne, a French think tank.
The commission is exploring ways to clamp down on Chinese e-commerce companies like Shein and Temu, while products including hydrogen electrolysers and lithium batteries are in regulators' cross hairs as well.
Sefcovic, a staunch von der Leyen loyalist, is seen to be fonder of industrial policy and protectionist measures than his predecessor Valdis Dombrovskis. During the last commission, he was often closer to Breton's dirigiste approach of state-led controls than Dombrovskis' liberalism. But all these plans require following through on von der Leyen's pledge to impose punitive tariffs on Chinese-made electric vehicles. In Brussels, as tensions over its biggest bilateral trade dispute in a decade continue to soar, a failure to win passage for duties of up to 35.3 per cent would cast a shadow over von der Leyen's entire de-risking agenda.
On this front, last week may also have served a reminder of the difference between real versus imagined power. While von der Leyen was plotting in Strasbourg, Beijing was putting the squeeze on important member states and her own officials in an effort to block those EV tariffs. The leaders of Spain and Germany publicly came out against the measures, as China turned the screw with a combination of carrots and sticks.
Commerce Minister Wang Wentao went to Rome, Berlin and Brussels in what insiders framed as an effort to "geopolitically crush" the EU ahead of the US elections in November, potentially pressuring Europe's ability to credibly coordinate with the US on China policy. The commission is under intense pressure from some European capitals to avoid a trade war by cutting a deal with Beijing. Meanwhile, China is trying to convince member states to vote against the duties in a coming vote - an effort gaining momentum, even if it looks unlikely to succeed.
"The main message ... is that it is important to avoid a clash, a trade war," the bloc's new competition commissioner, Teresa Ribera of Spain, told the Financial Times, in language that mirrored that of Spanish prime minister Pedro Sanchez a week earlier.
The duties proposed by the commission are much lower than those Chinese EV makers face in the United States and Canada, where governments plan 100 per cent tariffs, and it is suspected that the European market would still remain lucrative to those firms even with the extra costs incurred. In this light, sources say, Beijing's move is seen as a political power play and an attempt to dilute EU credibility on the global stage. This would be pertinent if former US president Donald Trump wins a return to the White House in November and Brussels offers, for example, to work with him on China to secure his support on Ukraine.
"If we don't pull this off, then the rest of the agenda for China is going to be very, very difficult," Bart Groothuis, a Dutch member of the European Parliament's committees for trade and industry, said. "So EVs are of the utmost importance, and this is not something that Germany and Spain can dictate to the rest of Europe," he added.
In business associations that officially opposed the EV duties, some now see the duties as crucial to ensuring the EU does not become a laughing stock as its industrial decline has already become a punch line. "So much for strategic autonomy," said one association official, noting how quickly Spain and Germany gave up EU unity when China came knocking. "We are showing that when it comes to the crunch, we are actually just chicken."
Talks on Thursday about the EV tariffs between Dombrovskis and Chinese Commerce Minister Wang were seen by Brussels as genuinely constructive, and may keep the wolf from the door for a week or two. The sides agreed to keep negotiating, with the commission opening the door to a deal that would require setting a minimum price on Chinese EV imports.
Even so, this would be a complicated deal to put together. To comply with World Trade Organization rules, it must be made purely at a company level with no hint of government involvement - a tricky request when some of the biggest players are state-owned and when Beijing is publicly advocating for the arrangement. EU bureaucrats privately doubt that a deal is possible, but hope the olive branch to Beijing will buy enough time to put the tariffs in place and establish a position of strength to negotiate from going forward.
The clock is ticking: tariffs must be imposed by October 30, and the key vote of EU capitals will happen well in advance of that. Whether Brussels or Beijing triumphs in this race against time will help determine the success of von der Leyen's China policy in her second five-year term.
VUL Price at posting:
$4.52 Sentiment: Buy Disclosure: Held
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