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China’s EV exports could hit European car market hard
Market news | May 10, 2023
By Christoph Hammerschmidt
Until recently, the Chinese market was a kind of El Dorado for European carmakers – they earned better there than in the domestic European market. With the increasing spread of electric vehicles, the relationship is reversing. If Chinese imports were to capture even a 10% share of the European market, the European automotive sector would lose €24 billion in value added by 2030 – including suppliers even more, according to a recent study.
The European, and especially the German OEMs, are continuously losing market share in China as the world’s largest vehicle market; by the end of 2022 they will have lost their market leadership – mainly because they have been overtaken in electromobility by domestic manufacturers. Chinese manufacturers account for 80 % of newly registered electric vehicles. This now has consequences not only for China but also for the European market, where Chinese manufacturers are already waiting in the wings. What financial consequences do the shrinking market shares have for European manufacturers? A study by the credit insurer Allianz Trade investigates this question. It comes to results that should put European OEMs in a state of alarm.
“Electric vehicles from Chinese manufacturers are becoming increasingly popular in China. They will continue to expand their market share strongly until 2030, at the expense of European carmakers and their local subsidiaries and joint ventures,” says Aurélien Duthoit, industry expert at Allianz Trade. These are bleak prospects for European and especially German carmakers, which exported vehicles worth €24 billion to China in 2022.
Already today, local subsidiaries and joint ventures account for around 85 % of the sales volume of European manufacturers on the Chinese market. But they, too, have been too slow in switching to electric mobility: of the 20 best-selling electric vehicles in China in 2022, only one will be manufactured by a Sino-European joint venture.
German, Japanese automotive suppliers lose ground to Chinese ones
Global BEV market booming – German OEMs limping behind
Automotive innovation: Chinese OEMs catch up
“Chinese-made vehicles are also likely to gain momentum in Europe,” says Duthoit. According to the expert, battery-powered electric vehicles will account for virtually all new car sales in Europe by 2035. This will encourage a partial substitution of European-made vehicles by Chinese-made vehicles – regardless of whether these vehicles are manufactured by a Chinese, American or European company. “Chinese manufacturers are already waiting in the wings in Europe, however. The market share is still small, but it is likely to grow rapidly – analogous to Korean and Japanese manufacturers in the past.”
In order to assess possible financial implications for European carmakers, the study analysed a conceivable scenario of what could happen if Chinese brands captured around 75% of the domestic market by 2030 and cars made in China simultaneously captured around 10% of the European market. Result: European manufacturers would then lose more than € 7 billion in annual net profits – just by losing market share.
Impact to automotive value chain could sum up to over €24 billion
If European imports of Chinese-made cars reach 1.5 million vehicles in 2030 – equivalent to an estimated market share of 10% in 2030 and 13.5% of EU production in 2022 – the impact on the value added of the European economy in 2030 would be € 24.2 billion for the automotive sector, equivalent to 0.15% of the region’s gross domestic product (GDP) in 2022. However, the automotive-dependent economies of Germany (0.36% of GDP at risk), Slovakia (0.4% of GDP) and the Czech Republic (0.41% of GDP) could be even more affected. In this context, the European car market is under far greater competitive pressure than that of the US as the second largest car market.
“Aligning the terms of competition with both China and the US would be an important way to mitigate the impact on the automotive sector and thus the economy,” says Duthoit.
In addition, investments in new battery technologies, a reduction in the dependence on raw materials and imported components for electric drives as well as the expansion of the charging infrastructure could be possible levers to compensate for the negative effects.
www.allianz-trade.com
Market news | May 10, 2023
By Christoph Hammerschmidt
Until recently, the Chinese market was a kind of El Dorado for European carmakers – they earned better there than in the domestic European market. With the increasing spread of electric vehicles, the relationship is reversing. If Chinese imports were to capture even a 10% share of the European market, the European automotive sector would lose €24 billion in value added by 2030 – including suppliers even more, according to a recent study.
The European, and especially the German OEMs, are continuously losing market share in China as the world’s largest vehicle market; by the end of 2022 they will have lost their market leadership – mainly because they have been overtaken in electromobility by domestic manufacturers. Chinese manufacturers account for 80 % of newly registered electric vehicles. This now has consequences not only for China but also for the European market, where Chinese manufacturers are already waiting in the wings. What financial consequences do the shrinking market shares have for European manufacturers? A study by the credit insurer Allianz Trade investigates this question. It comes to results that should put European OEMs in a state of alarm.
“Electric vehicles from Chinese manufacturers are becoming increasingly popular in China. They will continue to expand their market share strongly until 2030, at the expense of European carmakers and their local subsidiaries and joint ventures,” says Aurélien Duthoit, industry expert at Allianz Trade. These are bleak prospects for European and especially German carmakers, which exported vehicles worth €24 billion to China in 2022.
Already today, local subsidiaries and joint ventures account for around 85 % of the sales volume of European manufacturers on the Chinese market. But they, too, have been too slow in switching to electric mobility: of the 20 best-selling electric vehicles in China in 2022, only one will be manufactured by a Sino-European joint venture.
German, Japanese automotive suppliers lose ground to Chinese ones
Global BEV market booming – German OEMs limping behind
Automotive innovation: Chinese OEMs catch up
“Chinese-made vehicles are also likely to gain momentum in Europe,” says Duthoit. According to the expert, battery-powered electric vehicles will account for virtually all new car sales in Europe by 2035. This will encourage a partial substitution of European-made vehicles by Chinese-made vehicles – regardless of whether these vehicles are manufactured by a Chinese, American or European company. “Chinese manufacturers are already waiting in the wings in Europe, however. The market share is still small, but it is likely to grow rapidly – analogous to Korean and Japanese manufacturers in the past.”
In order to assess possible financial implications for European carmakers, the study analysed a conceivable scenario of what could happen if Chinese brands captured around 75% of the domestic market by 2030 and cars made in China simultaneously captured around 10% of the European market. Result: European manufacturers would then lose more than € 7 billion in annual net profits – just by losing market share.
Impact to automotive value chain could sum up to over €24 billion
If European imports of Chinese-made cars reach 1.5 million vehicles in 2030 – equivalent to an estimated market share of 10% in 2030 and 13.5% of EU production in 2022 – the impact on the value added of the European economy in 2030 would be € 24.2 billion for the automotive sector, equivalent to 0.15% of the region’s gross domestic product (GDP) in 2022. However, the automotive-dependent economies of Germany (0.36% of GDP at risk), Slovakia (0.4% of GDP) and the Czech Republic (0.41% of GDP) could be even more affected. In this context, the European car market is under far greater competitive pressure than that of the US as the second largest car market.
“Aligning the terms of competition with both China and the US would be an important way to mitigate the impact on the automotive sector and thus the economy,” says Duthoit.
In addition, investments in new battery technologies, a reduction in the dependence on raw materials and imported components for electric drives as well as the expansion of the charging infrastructure could be possible levers to compensate for the negative effects.
The Chinese challenge for the European automotive industry
China leads the global EV landscape, selling over double the number of battery electric vehicles in 2022 compared to Europe and the US combined.
www.allianz-trade.com
