Are Chinese manufacturers flooding Europe with electric cars?

This example events Some journalists did not want to miss it: On February 26, the big white cargo ship “Explorer NO. 1″ at the end of its first journey from China to Europe finally in Bremerhaven – shortly after thousands of BYD electric cars rolled out. The Chinese company recently replaced Tesla as the world’s largest electric car manufacturer. The company’s first fleet of The freighter can transport more than 5,000 vehicles, and seven more freighters are under construction.

The message in the picture is clear: BYD and other Chinese companies are starting to supply Europe with cheap electric cars. Should European producers be afraid when customers can expect new products and increased competition?

China is considered the world’s leading market for electric vehicles

China has become the world’s largest automotive powerhouse in the past decade, not least through the transition to electric mobility. In 2023, the Middle Kingdom was the world’s largest automobile producer with nearly 26 million passenger cars and 4 million commercial vehicles and recently replaced Japan as the world’s largest automobile exporter. China is now considered the world’s leading market for electricity.

Apparently twice as many cars are now being built in the Middle Kingdom as can be sold domestically. This threatens to create a discount war not only in China itself, but also in Europe. In Brussels, Commission President Ursula von der Leyen recently warned of a flood of cheap and subsidized electric cars “Made in China”. To protect domestic producers from competition, high tariffs have long been discussed.

For Chinese manufacturers, going to Europe, the home of Volkswagen, Renault, Fiat and many others, is not only a statement of competition established from the old world of the car, but also the next logical step. They basically target the mass market and the lower and middle class segments. But even the upper class, which until now has been the domain of German payment service providers, is safe from new competitors.

The Chinese were not competitive for a long time in the era of combustion engines and therefore concentrated on electricity – successfully. They currently enjoy competitive advantages when it comes to electric vehicles. These include the size of the Chinese market, which brings relative cost advantages through economies of scale, as well as the availability of key materials such as raw materials, batteries and semiconductors. Some providers are now said to be considering plants in Europe.

However, for this to be meaningful, sales figures must increase. So far, the current market entry has not shown very strongly in sales. According to market watcher Jato, there were about 320,000 new registrations of around 30 Chinese brands available in Europe (EU plus EFTA states and UK) last year. Although this corresponds to an increase of almost 80 percent compared to the previous year, the market share was still manageable at 2.6 percent. American electric car pioneer Tesla alone gained 2.8 percent, placing it 16th in the European sales rankings of various manufacturers.

In Germany, Europe’s biggest car market, the Chinese tire footprint was narrower. According to the Federal Motor Transport Authority (KBA), they sold around 38,000 vehicles. This corresponded to a market share of 1.3 percent. The MG Roewe brand alone had a share of 0.7 percent with around 21,000 cars sold. This was followed by Polestar, Great Wall Motor and BYD. Existing sales trends have not changed in the first quarter of this year. China’s market share decreased to 0.9 percent, which was probably also due to the overall decline in electric vehicle sales trends.

The sales figures for manufacturers from the Middle Kingdom are particularly interesting as the best-selling brands are those that are not immediately recognizable as Chinese to customers, namely MG Roewe and Polestar. MG is a British cult brand of the last century that did not survive its subsequent decline. Nowadays there is Chinese technology under the organization, as the brand is owned by the Shanghai Automobile Industry Corporation (SAIC), one of the largest Chinese car companies, to which the Roewe brand belongs. In Germany, MG Roewe sold more cars in 2023 than Asian imports such as Honda and Mitsubishi.

The same applies to Polestar, a relatively young brand backed by Sweden’s Volvo Cars, which in turn is owned by Chinese carmaker Geely. However, the name sounds more Western to customers, which is why many may not suspect Chinese technology under the hood. With about 6,300 units, Polestar sold more cars in Germany last year than Alfa Romeo, Subaru, Lexus and Jaguar.

Sales figures for “New Kids on the Block” from China are still low, but market penetration is still in the early stages. More and more customers are now preparing to buy a Chinese car. According to a survey by the management organization Horvath-Partners, almost 40 percent of respondents in Europe could consider buying a Chinese brand in the fall, which was a good ten percent increase compared to the spring survey. In Germany, however, the willingness to buy fell from 35 percent to 27 percent. According to Horvath, the reason is “public discussion about electricity costs and payments” for electric vehicles as well as “political factors”.

An important factor for success in Europe may be the quality and safety of the new models, as these can only be partially compensated for by very low prices. But while products from Chinese manufacturers were laughed at by European and American competitors a few years ago, today they talk about new competitors with respect and great respect. Most observers currently see the Chinese as at least on par when it comes to electronics and even have a clear advantage when it comes to car infotainment.

BYD, Nio and Polestar rely on mid-range showrooms

Deep brand development and loyalty, dealer and sales network as well as workshop services will now also be important for European market penetration. New providers often work with small but very medium-sized showrooms in big cities. In Frankfurt, for example, Nio and Polestar have small but public showrooms in the city center between Hauptwache and Eschenheimer Tor, and BYD is very close to Opernplatz and Fressgass. They are the basis of Tesla. Elon Musk’s company also often works with large showrooms, while the related workshops are located on the outskirts of cities due to low rent.

However, new competitors work with different marketing methods. For example, Polestar and Great Wall Motor also use large independent car dealership groups, such as Emil Frey Germany, to bring these cars to women and men. Customers are used to this system called the car dealer because it has proven itself for decades. Whether this will remain a future sales model is questionable given the availability of online sales platforms with vehicle-specific configuration options. At the moment, however, it helps to enter the market – and if necessary, models are advertised with significant discounts to attract customers to new products.

Electric vehicle manufacturer Xpeng from Guangzhou with a German branch in Munich relies only on regular sales through an authorized dealer system. Marketing expertise is in retail, company representatives recently told “FAZ”. Currently there are 12 dealers with 24 locations under contract, and by 2026 there should be 60 dealers with 120 locations.

It will be interesting to see how popular Chinese manufacturers fare with commercial customers, who currently account for nearly 70 percent of new car registrations. Half of this is related to the normal shipping business, the rest is distributed among retailers, rental companies and graphic and logo manufacturers play an important role, especially in parts of the shipping business. Tesla has managed to build a popular and sought-after brand. That must also be the goal of Chinese service providers. If their logos were tainted compared to those of Audi, BMW or Mercedes, this would slow down sales in a key market area.

Experts at the credit insurance company Allianz Trade do not expect a new wave of consolidation in Europe due to Chinese producers entering the market. But you see three other possible options for efficiency gains. This includes the relocation of small suppliers from the European market, the development of new horizontal and vertical industrial partnerships to pool resources in capital-intensive areas, especially in battery production, and further consolidation of production for a limited number of platforms and. industries for one high standards.

At present, however, there are still a number of reservations about Chinese brands. These include doubts about quality, lack of respect, a very limited workshop network, question marks about the supply of spare parts and, finally, data protection concerns for Chinese companies. Digitally connected vehicles are huge cleaners of consumer data that most consumers don’t want to fall into the wrong hands.

The market share of Chinese products in Europe is currently still low. But it is likely to increase significantly in the coming years, as it happened when Japanese and Korean manufacturers entered the market. The spread of electric vehicles is likely to make a significant contribution to this. However, established European manufacturers will also be bringing more and more electric models to showrooms in the coming years. This increases competition between service providers and redistributes the market. Customers can expect this.

You can contact Frankfurt business correspondent Michael Rasch on the forums X, Linkedin and Xing results.