The US-Israeli war on Iran will hasten the world’s transition to electrified transport. The late 20th and early 21st centuries have seen energy shock after energy shock, underlining time and again the volatility of oil and gas markets and the vulnerabilities that come with depending on them. Even before the latest crisis, countries across the world were rapidly moving away from combustion engines and towards electric vehicles (EVs).
China’s carmakers are more than ready to meet the demand. The country has consolidated its lead all along the EV supply chain, from raw materials and battery production to manufacturing and exports. In 2025, 70% of EVs produced globally came from China. It also controls 85% of global battery production capacity, and refines between 70% and 90% of raw materials for batteries such as lithium, cobalt and graphite.
This poses quite a challenge to Europe’s industrial base and reinforces the continent’s dependency on Chinese technology and supply chains. Herein lies the quandary Europeans face as they pursue the energy transition: how to ensure their domestic industries remain globally competitive while developing supply chains that are not too vulnerable to decisions made in Beijing. The EU has adopted a “de-risking” approach to this clean-tech dilemma. In 2024, for example, the bloc imposed import tariffs on Chinese EVs. It has also introduced subsidies for production of cars within Europe and support for raw materials sourced outside China.
But, as the EU tightens its regulatory and trade posture, China seems to be adapting its strategy to match. Beijing is increasing its EV-related investments and partnerships in third regions, capturing market shares in developing countries and potentially bypassing European and US trade barriers. Countries in the Middle East and in North Africa tick both these boxes for Beijing: they offer proximity to Europe and could also become useful entry points into other African markets. Moreover, governments in the region often welcome Chinese investment as it could help them develop their industrial bases and advance their green agendas.
This policy brief argues this evolving dynamic has wide implications for the efficacy of Europe’s de-risking agenda and the continued global competitiveness of its automotive industries. The brief also argues that such developments could contribute to the erosion of Europe’s geoeconomic influence in its neighbourhood by helping shift the alignment of countries in the region towards China. This would run contrary the goals of the EU’s new “Pact for the Mediterranean”, which aims to revamp European influence in and cooperation with its southern neighbours—including by supporting their green transitions. The challenge for Europe is therefore not only to prevent tariff circumvention and shore up its domestic car manufacturers, but also to align its trade, industrial and neighbourhood policies more coherently.
The recommendations that close the brief explain how European policymakers should do this. It will not be easy for them to balance between prioritising industrial competition with China in the Middle East and North Africa and supporting the region’s economic development and green transitions. But they must. Europeans should work with Middle Eastern and North African partners as part of a broader EV and clean-tech ecosystem and not treat the region solely as a site of competitive leakage. This would help them reconcile de-risking with their commitments to the energy transition, economic development and geopolitical stability in the southern neighbourhood. It would also mean the Middle East and North Africa becomes part of the solution to the continued competitiveness of European carmakers, rather than yet another (uneven) Sino-European battleground.
China’s EV strategy goes global
China’s rise in the global automotive industry is the result of deliberate and sustained industrial policy, as well as the domestic impact of that strategy on Chinese carmakers. This began more than a decade ago, when China’s leaders set out their ambition for the country to catch up with and then overtake established automotive powers like Germany. Their decision to focus on what they call “new energy vehicles” (NEVs), which include EVs, plug-in hybrids and fuel-cell electric vehicles, was never solely about decarbonisation. It was also part of China’s efforts to become a global automotive leader.
About the Authors:
Jonathan Fulton is a visiting fellow at the European Council on Foreign Relations.
Camille Lons is a policy fellow and deputy head of the Paris office at the European Council on Foreign Relations, where she works on geoeconomics and relations between China and the Gulf countries.
Byford Tsang is a senior policy fellow with the Asia programme at the European Council on Foreign Relations.