China’s electric car assault on Europe will accelerate in 2023 and then reach full speed

Chinese electric carmakers are coming to Europe in blockbuster mode, aiming to win sales from high-volume manufacturers like Volkswagen and Stellantis. But before BMW, Mercedes and Audi get too complacent, the onslaught will soon be aimed at them too, according to a report.

The report, from Fitch Solutions Country Risk & Industry Research, acknowledges that the premium market will be more difficult to address. After all, if you can afford a Porsche, Audi, BMW, or Mercedes, you’re not likely to be impressed by brands like Aiways, BYD, NIO, or Xpeng.

Fitch Solutions said Chinese manufacturers’ share of the European electric battery market could rise to 15% by 2025 from around 5% this year. Europe’s big carmakers, crippled by EU CO2 rules that favor large, expensive, high-margin electric cars, seem unable to respond to this mid-price challenge, let alone inclined to contemplate the rise of cheap electric vehicles.

It is hard to believe that this EU policy, which will hollow out the auto industry and cause massive job losses, cannot be challenged.

Currently, it is the €30,000+ (USD 31,500) volume market that is most vulnerable and the MG brand of insurgent leader SAIC has already achieved impressive sales based on high-end trim levels and roughly 25% pricing. % below the competition.

The elephant in the room is how will Europeans react when offered Chinese vehicles?

China’s previous attempts at sedans and SUVs with internal combustion engines (ICEs) stumbled at the first quality hurdle. But lessons have been learned. Hyundai and its sibling Kia didn’t make that mistake when they set out to conquer Europe some 20 years ago, using impressive guarantees to bolster initial misgivings. Korean brands have now met or exceeded consumers’ demands for quality and style.

However, the European reaction to Chinese vehicles will not focus only on quality and price; It is political South Korea was not a strategic threat to US influence in the Pacific, nor did it covet an open society like Taiwan. There were no human rights controversies like those of the Uyghurs and other Turkic Muslims in Xinjiang, no nightly TV coverage of mass demonstrations against coronavirus lockdowns.

According to a Reuters Breaking Views column on investing in China, this is a serious concern for investors.

“Using the sanctions currently imposed against Russia as a model, companies and investors are building scenarios that envision China facing similar sanctions, a senior Western (us) executive told us. However, the negative impact of a Chinese lockdown would be so massive that no contingency plan would really work,” Breaking Views said.

The brutal scale of the disturbance is probably the best guarantee that calm will be maintained.

And the Chinese challenge in Europe is already underway. According to French auto consultants Inovev, sales of mainly electric Chinese cars will rise to 150,000 in 2022 from 80,000 in 2021. The bulk came from Volvo Cars’ Polestar subsidiary controlled by China’s Geely and SAIC’s MG. Geely also has a luxury suitor brand called Zeekr.

“The introduction of previously unknown new brands in Europe is expected, such as Aiways, BYD, JAC, NIO, Great Wall, Hongqi, Seres and Xpeng, most of which specialize in electric cars. Some of them were unveiled at the last Paris Motor Show in October 2022,” Inovev said in a report.

Many of these brands will try to gauge the European welcome starting in oil-rich Norway, where electric cars dominate.

The Fitch Solutions report said that Chinese automakers, after successfully selling electric cars in their home market, will accelerate their international expansion plans during 2023, particularly in Europe. By 2022, Chinese battery electric vehicle (BEV) sales will gain a market share of around 5% in Europe.

Fitch Solutions auto analyst Santiago Ariue said China’s BEV market share could grow to 7-8% in 2023, and 12-15% in 2025.

According to the report, Europe is the world’s second-largest BEV market, after China, and will experience exponential growth in EV adoption over the next decade, primarily due to China’s stringent carbon dioxide (CO2) emissions targets. the EU, including a ban on new ICE cars. sales by 2035, and various purchase incentives, scrapping plans, and tax breaks.

“Second, there are several nations, particularly Western Europe, that are attractive markets for Chinese EV brands due to their large scale, high revenue, and well-developed EV charging network infrastructures. Third, many European automakers are currently focusing on the high-margin premium EV segment, leaving a gap in the mass EV market that could be filled by low-cost Chinese-made EVs,” according to the report. report.

Europe imposes a 10% tariff on Chinese car imports, but vehicles going the other way pay between 15 and 25%. If Chinese imports pick up speed, the EU will demand changes. Meanwhile, the US charges 25% on car imports from China. Tesla, BMW and Renault’s Dacia subsidiary import electric cars to Europe, made in China. VW will start soon.

New models destined for Europe include BYD’s Atto 3, Han and Tang. NIO offers its ET7, EL7 and ET5. These models, except for the cheaper Atto 3, are aimed at the premium sector and may not be easy for them to sell.

“We note that for Chinese-made EVs to succeed in expanding into new European markets, some barriers will need to be overcome in relation to the relative lack of brand recognition outside of their home market and the loyalty that many European consumers have towards long-established European brands such as VW, Mercedes-Benz and BMW,” the report says. Brands targeting sales in the larger market where MG has operated include Great Wall Motors Ora with its Funky Cat model.

Ariue, an analyst at Fitch Solutions, said this barrier could weaken if economic conditions deteriorate.

“The region’s weak macroeconomic outlook will make cheaper Chinese EV brands more attractive to European consumers. That being said, it will be easier to gauge the real potential of Chinese EV brands in the region after they have been present in the new markets for a year or two,” Ariue said.

Meanwhile, as more Europeans go without their ICE cars because EU CO2 legislation makes even low-end new cars unaffordable until they finally disappear, consumers will be looking for cheap and cheerful independent transport. Anything to avoid the bus, train, subway or crowds of people.

As the economics of European automakers can’t keep up with the volume of Chinese competition now, just wait until they produce their ace card, the €10,000 after-tax ($10,550) utility vehicle – range of 100 miles, 65mph top speed, sleeps 2 plus 2 kids. For these cars to become ubiquitous, manufacturers need to understand that the electric car revolution means a drastic change in transportation. Electric cars are happiest in an urban or rural mode and fail miserably in high-speed long-distance driving.

This car already exists in China: the Hongguang MINI.

So far, the European industry seems happy to cede a large chunk of the volume market (and the hitherto non-existent small, cheap sector) to China, or perhaps India, on the grounds that there is no profit to be made. Surely the EU will help the Europeans to tackle these markets? Otherwise, all that will be left will be premium sedans and SUVs, and that would mean huge job losses and only around a fifth of current European production.

See also  Xi Jinping's technology policy in the spotlight

Leave a Comment