Adopted in 2022. The Inflation Reduction Act (IRA) has global implications for the economic rivalry between the US and China. The new legislation involves restricting Chinese automotive access to the U.S. market through subsidies, which could divert Chinese resources to dominate the European market.

For Central Europe, this means a threat to its role as a hub for car manufacturing, especially in the field of electromobility. The hitherto close interests of Germany and Central Europe in automobiles may drift apart, as German automakers oppose restrictions on cars from China. In the EU automotive sector, internal combustion cars have long dominated, and the industry generates a high trade balance. However, Chinese expansion in electromobility and development of its own technology poses a threat to Central Europe, which is the main producer of cars sold in the EU.

The Chinese have focused on developing electric cars and are using subsidies and industrial policies to capture the entire value chain in the industry. Their “Made in China 2025” industrial strategy focuses on gaining a dominant position in the electric car segment. As a result, Chinese manufacturers have captured a significant share of the electric industry supply chain in a short period of time.

We are curious to see what the future of electromobility holds.