The EU meets China: foreign production exposure and electric vehicles

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Abstract:

Building on Hrubý and Šaroch (2025), where we documented foreign production exposure (an exposure to foreign intermediate goods and services) in the Czech and Hungarian automotive industry, this paper extends the analysis to all EU member states and applies the Wolsky-Lindner value chain disaggregation method as implemented by Diaz Rincon et al. (2026) to separate electric from ‘conventional’ internal combustion engine vehicle production within the broadly defined automotive industry in the input-output tables. Using the Baldwin et al. (2022) look-through framework, which applies Leontief inverse decompositions of OECD inter-country input-output tables to distinguish face-value, look-through, and hidden exposure, we disentangle country-specific determinants of foreign production dependence across EU automotive industries. Our results confirm that input-output measures systematically conceal exposure differences within the industry: electric vehicle production is found to be substantially more dependent on Chinese intermediate inputs than conventional internal combustion engine manufacturing, a divergence invisible in standard industry-level accounts. Robustness checks using chain-linked volume tables (at constant prices) confirm the findings.

References:

Baldwin, R., Freeman, R., & Theodorakopoulos, A. (2022). Horses for courses: Measuring foreign supply chain exposure (No. w30525). National Bureau of Economic Research.

Diaz Rincon, A., Genty, A., Ruiz-Garcia, J. C., Vergote, W. (2026). Transition to Electric Vehicles – Competitiveness vs Technological Challenge for the EU Automative Industry. European Commission, JRC145139.

Hrubý, M., & Šaroch, S. (2025). Revisiting foreign input exposure in the auto industry: Czechia meets China. International Journal of Automotive Technology and Management, 25(2), 167-185.

Lindner, S., Legault, J., & Guan, D. (2012). Disaggregating input–output models with incomplete information. Economic Systems Research, 24(4), 329-347.

Wolsky, A. M. (1984). Disaggregating input-output models. The Review of Economics and Statistics, 283-291.