Chinese carmakers are finding success in the European automotive market via a surge in EV sales and their home country’s dominance in battery manufacturing.
Boyden's perspectives on the news and trends that are transforming industries
Much has changed since China’s initial attempts to sell cars to Europeans. The country elevated its profile in the automotive industry when it surpassed America as the world’s biggest car market in 2009. In more recent years, Chinese carmakers have redoubled their efforts to produce higher-quality cars, particularly electric vehicles. China is now the top producer of EVs by volume. It also dominates battery manufacturing: Chinese companies comprise 56% of the global market. The top supplier, Contemporary Amperex Technology Limited (CATL), grew its market share from 32% in 2021 to 34% in 2022.
The European EV market is growing rapidly, and more growth is expected as Europe works to develop its charging infrastructure and new laws hastening the transition to emobility take effect. “Transport represents almost a quarter of Europe’s greenhouse gas emissions, so boosting emobility is very crucial if we wish to achieve climate goals”, said Miapetra Kumpula-Natri, a Finnish member of the European Parliament. Chinese carmakers are eager to oblige. They had a major presence at the Paris Motor Show in mid-October, where renewable energy transition topped the agenda. Great Wall Motor (GWM) and Build Your Dream (BYD) exhibited compact EV models designed for Europeans.
The Chinese government has taken decisive measures to strengthen the industry. Both startups and established car companies benefit from generous subsidies, which supply them with cheap capital and have cultivated a vast domestic market for electric vehicles. BYD already sells more cars worldwide than Tesla. Imports have been limited by subsidies that require foreign carmakers to set up manufacturing in China, which in turn bolsters local supply chains. Foreign battery makers are banned altogether.
Chinese carmakers are wisely tapping into an underserved budget EV market, offering drivers more affordable options. They have the advantage of scale, which helps keep their costs down. Schmidt Automotive Research reports that nearly one in 20 EVs sold in Western Europe in the first eight months of 2022 was a Chinese brand. “Around half of those sales, some 22,000 cars in 14 countries, were budget EVs from MG”, a division of state-owned giant SAIC Motor, according to The Economist.
Chinese automotive firms are also building on the reputation of established European brands. Geely acquired Swedish car company Volvo in 2010. In 2018, Zhejiang Geely Holding Group bought a 10% stake in Daimler, owner of Mercedes-Benz. Geely also owns nearly 8% of British firm Aston Martin, and is reportedly considering upping its stake. The company has become an expert in making cars to European standards; its premium Polestar brand is almost as popular as SAIC’s budget MGs in Europe.
Chinese automakers are earning the trust of European consumers in other ways as well. The U5 SUV from Aiways, an electric vehicle company founded in 2017, was a finalist for the 2022 European Car of the Year (COTY), the world’s most prestigious new car award. The U5 was Aiways’ first car made for the European market, where it is now expanding. BYD struck a deal with German car rental firm Sixt to supply 100,000 EVs by 2028, which will create more familiarity amongst consumers on the continent.
Analyst Matthias Schmidt of Schmidt Automotive Research says it will be harder for Chinese carmakers to compete in the premium segment. Yet, as they continue riding the wave of emobility in Europe, executives are confident. “With electrification, I’m convinced that Chinese car manufacturers have quite a big advantage because battery development, battery know-how, and knowledge sits in China like in no other region on the planet,” says Thiemo Jahnke, Brand & Marketing Director at WEY Europe.
