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China’s Electric Car Assault On Europe Will Accelerate In 2023, Then Hit Top Gear
Neil WintonDec. 8 2022
Byd Han on display during the "Mondial de l'Automobile" in Paris. (Photo by Chesnot/Getty Images)
GETTY IMAGES
Chinese electric car makers are coming to Europe in gangbuster mode, aiming to win sales from volume manufacturers like Volkswagen and Stellantis. But before BMW, Mercedes and Audi get too complacent, the onslaught will soon be aiming upmarket at them too, according to a report.
The report, from Fitch Solutions Country Risk & Industry Research, reckons it will be more difficult to tackle the premium market. After all, if you can afford a Porsche, Audi, BMW or a Mercedes, you aren’t likely to be impressed by nameplates like Aiways, BYD, NIO or Xpeng.
Fitch Solutions said the Chinese manufacturers’ share of Europe’s battery-electric market could rise to 15% in 2025 from about 5% this year. Europe’s big carmakers, hamstrung by EU CO2 rules which favor big, expensive high-profit margin electric cars, seem unable to respond to this mid-price challenge, and even less inclined to contemplate the rise of the cheap electric utility runabout.
It’s hard to believe that this EU policy, which will hollow out the auto industry and cause massive job losses, can go unchallenged.
Currently, it’s the €30,000 ($31,500) plus volume market that is most vulnerable and the lead insurgent SAIC’s MG brand has already notched up impressive sales based on high-standard equipment levels and prices roughly 25% below the competition.
The elephant in the room is how will Europeans react to being offered Chinese vehicles?
Earlier attempts from China with internal combustion engine (ICE) powered sedans and SUVs stumbled at the first hurdle of quality. But lessons have been learned. Hyundai and its sibling Kia didn’t make that mistake when they set out to conquer Europe about 20 years ago and used impressive guarantees to bolster initial doubts. Korean brands have now met or often exceeded consumer demands for quality and style.
NIO ET7, its first electric sedan. (Photo credit should read CFOTO/Future Publishing via Getty ... [+]
FUTURE PUBLISHING VIA GETTY IMAGES
European reaction to Chinese vehicles though isn’t going to be just about quality and price; it’s political. South Korea wasn’t a strategic threat to American influence in the Pacific, nor did it covet an open society like Taiwan. There were no human rights controversies like the Uyghurs and other Turkic Muslims in Xinjiang, or nightly TV coverage of mass demonstrations against coronavirus lockdowns.
According to a Reuters Breaking Views column on investment in China, this is a serious concern for investors.
“Using the sanctions currently imposed against Russia as a blue-print, companies and investors are working out scenarios that envisage China facing similar penalties, one senior Western executive told (us). Yet the negative impact of a Chinese blockade would be so massive that no contingency plan would really work,” Breaking Views said.
The brutal scale of disruption is probably the biggest guarantee tranquillity will be maintained.
And the Chinese challenge in Europe is already underway. According to French automotive consultants Inovev, Chinese, mainly electric car sales will rise to 150,000 in 2022 from 80,000 in 2021. Most of this came from Geely of China controlled-Volvo Cars’ Polestar subsidiary and SAIC’s MG. Geely also has an upmarket pretender brand called Zeekr.
“Expect the introduction of new brands previously unknown in Europe 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,” said Inovev in a report.
Many of these brands will try and gauge the European welcome by starting in oil-rich Norway, where electric cars dominate.
The report from Fitch Solutions said Chinese manufacturers, after selling electric cars successfully in their home market, will accelerate their plans to expand internationally during 2023, particularly in Europe. In 2022, Chinese battery electric vehicle (BEV) sales will gain about a 5% market share in Europe.
Fitch Solutions automobiles analyst Santiago Ariue said Chinese BEV market share could rise to between 7 and 8% in 2023, and 12 to 15% in 2025.
According to the report, Europe is the second largest BEV market globally, after China, and is set to experience exponential EV adoption growth in the coming decade mainly because of stringent EU carbon dioxide emission (CO2) targets, including a ban on new ICE car sales by 2035, and various purchase incentives, scrappage schemes and tax breaks.
“Secondly, there are various nations, particularly in Western Europe, which are attractive markets for Chinese EV brands due to their large scale, high incomes, and well-developed EV charging network infrastructures. Thirdly, many European carmakers are currently targeting the premium high-margin EV segment, leaving a gap in the EV mass market that could be filled with low-cost Chinese-manufactured EVs,” according to the report.
Europe imposes a 10% tariff on Chinese car imports, but vehicles going the other way pay between 15 and 25%. If Chinese imports do in fact accelerate, the EU will demand changes. Meanwhile, the U.S. charges 25% on China’s auto imports. Tesla, BMW and Renault’s Dacia subsidiary import electric cars to Europe, made in China. VW will start soon.
New models aimed at Europe include BYD’s Atto 3, Han and Tang. NIO is offering its ET7, EL7, and ET5. These models, except the cheaper Atto 3, are aimed at the premium sector, and might not find sales easy.
“We note that for Chinese-made EV cars to be successful in their expansion to new European markets, some barriers will need to be overcome in relation to the relative lack of brand recognition away from 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 said. Brands aiming at sales in the bigger market where MG has operated include Great Wall Motors Ora with its Funky Cat model.
Fitch Solutions analyst Ariue said this barrier might be weakened if economic conditions deteriorate.
“The weak macroeconomic outlook for the region will make cheaper Chinese EV brands more attractive to European consumers. That said, it will be easier to gauge the real potential for Chinese EV brands in the region after they have been present in the new markets for one to 2 years,” Ariue said.
Meanwhile, as more Europeans are priced out of their ICE cars because EU CO2 legislation makes even bottom-of-the-range new cars unaffordable until they are finally disappeared, consumers will be looking for cheap and cheerful independent transport. Anything to avoid the bus, train, tube or crowds of people.
As European automakers’ economics are unable to compete with volume Chinese competition now, just wait until they produce their ace card, the €10,000 after tax ($10,550) utility runabout – 100 miles range, 65 mph top speed, 2 plus 2 children capacity. For these cars to become ubiquitous, manufacturers have to understand the electric car revolution means a drastic change in transportation. Electric cars are happiest in an urban or rural mode and fail miserably over high-speed long-distance driving.
China’s Electric Car Assault On Europe Will Accelerate In 2023, Then Hit Top Gear
Chinese electric car makers aim to win volume sales from the likes of VW and Stellantis. But before BMW, Mercedes and Audi get too complacent, the onslaught will soon be aiming upmarket at them too, according to a report. China's share of Europe’s BEV market could rise to 15% in 2025 from about 5%.
www.forbes.com
