Listen to the audio version of this article below
With the rise of the electric car, Chinese automakers have an unusual advantage: they are not constrained by the switch from gasoline vehicles to EVs. And they are very happy to use that advantage to conquer the European market.
Chinese automakers were previously known as cheap copycats of European models and produced poor quality four-wheelers. But that is long gone. Manufacturers have made great progress and are now ready to go beyond the borders of their country with cars that are comparable in quality to their European counterparts.
We often talk about youth products that focus on electric vehicles. Sometimes supported by the government, but taking advantage of the good weather for EVs, they are growing fast in the home country. China has all the raw materials in-house for the production of these types of vehicles, which is a huge advantage.
Take emerging brand BYD for example. It does all the parts in the house, except for the glass and the tires. As a result, they have never suffered from chip shortages or supply problems – something that has prevented many European players from offering limited cars for a long time.
Unfortunately, the gap in the European market that the Chinese are targeting has been created by the European automakers themselves. Matthias Schmidt, an independent automotive analyst, told Financial Times be aware that domestic European players are slowing down the pace of rolling out EVs. They are doing this to sell as many petrol cars as possible, before this becomes very difficult from 2025 due to strict CO2 requirements.
Chinese parties do not bother with this. They never made gasoline cars, so they don’t have to switch to electric cars. They just want to grab as much profit and market share as possible with the plug-in boxes and so they are very focused on international growth.
The government can give us a job
The way to Europe is not yet completely open to the Chinese. Analysts tell the Financial Times that there are two bears on the road. The first is consumer confidence, the second is governments that are not waiting for the invasion of Chinese parties on domestic markets.
The first thing is not seen by many manufacturers as a big problem. At BYD, the main goal is to build that trust, Michael Shu, who is primarily responsible for European distribution at BYD, told the business newspaper.
Chinese car manufacturer SAIC solves the problem in a different way. It has adopted the European MG brand name to provide instant brand awareness and loyalty.
Geely has a similar approach. It bought the British sports car brand Lotus and under that name brings ‘hyper SUV‘ in the market. It also works together with Volvo under the name polestar selling EVs in Europe.
Building trust in the government is the biggest challenge. In addition, the Chinese also have to compete with the domestic car lobby. One that will not be positive and will try to limit Chinese visitors as much as possible.
For example, CEO Carlos Tavares of Stellaantis – the parent company of Peugeot, Citroën, Fiat and Opel – warned that Chinese brands want to sell their cars at a loss in European markets. This will force the auto industry to its knees. He therefore urged the European Union to impose additional import duties on Chinese cars.
Herbert Diess, the former CEO of Volkswagen, did not portray Tesla as a formidable competitor, but pointed the finger at BYD.
Director of lobbying group Julia Poliscanova Transportation and Environment states that, in the same way as China and the United States, Europe should support European electric vehicle manufacturers to face Asian competition in the long term.
Chinese plans for factories in Europe
At this time, Chinese manufacturers still do not have a real base in our continent. About 5 percent of new electric cars sold in the first six months of this year were made by the Chinese, according to the Financial Times. It is expected that this will grow between 15 and 20 percent in the coming years.
And if sales in the EU grow, the Chinese invasion will begin. Several manufacturers are waiting for higher sales to open factories in Europe in response. This allows them to respond directly to the demands of Europeans.
BYD does not allow grass to grow on it and is already in talks with several countries to see where they can build a factory. Great Wall, which makes the electric Mini for BMW in China, is also said to have plans to open a plant in Europe. Nio hopes to break the magic barrier of 200,000 cars sold in Europe next year. If that happens, this brand will also move the factory closer.
On the other hand, European automakers seem unable to gain ground in the Chinese EV market. For example, BMW does not get more than 0.3 percent market share. Mercedes-Benz remains at the same height. Volkswagen is doing better at 3.7 percent.
Europeans see China as a huge growth market and have therefore invested heavily in recent years to gain market share there.
Growing in the Far East was not easy, however, because automakers who wanted to produce in China were simply not allowed to set up their factories there. Factories were not allowed to be fully owned by foreign companies. So a partnership had to be made. Since January 1, 2022, the situation is no longer the same. But many European brands already have partnerships in place.
ALSO READ: ‘Electric cars must be charged during the day to reduce pressure on the electricity grid’ – but if owners want to…