Chinese Electric Car Makers Conquer Europe Facing Cost And Consumer Challenges

tendata blogTrade Trends News

ten data blog22-08-2023

· Chinese electric car makers are gaining market share in Europe, targeting more targets.

· Chinese brands unlikely to sell as cheaply as they do at home.

· Import costs and low brand recognition pose challenges.


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Chinese electric vehicle (EV) makers, which have overtaken foreign competitors to rank No. 1 in domestic sales, are making inroads into Europe and face a new set of challenges.


Stereotypes about Chinese manufacturing, import costs and an underdeveloped EV market are just some of the problems that Chinese brands like BYD (002594.SZ), Azera (9866.HK) and SAIC Motor (600104.SS) must overcome. Thriving in Europe.


They're already off to a good start.


Eight percent of new electric cars sold in Europe so far this year were made by Chinese brands, up from 6 percent last year and 4 percent in 2021, according to auto consultancy Inovev.


And there's more coming. A study by Allianz shows that at least 11 new Chinese-built mass-market electric cars will be launched in Europe by 2025.


Western automakers are worried, with Carlos Tavares, chief executive of Peugeot-Fiat maker Stellantis (STLAM.MI), warning last month of an "invasion" of Europe by cheap Chinese electric cars.


But they're also fighting back with a raft of electric cars of their own, and plan to slash manufacturing costs and prices, so the Chinese newcomers will have to stay on top of the competition.


At a news conference in Beijing last week, Chen Shihua, vice president of the China Association of Automobile Manufacturers (CAAM), warned that its members may be spreading themselves too thin in their expansion plans.


"It's not so smooth for our automakers to go out," Shi Hua said, adding that "we should be aware of the risks ...... Currently companies may overstretch themselves and dabble in every region without a clear focus. "



Extra costs

As part of the IAA automotive trade show in Germany, the Chinese electric car makers' World New Energy Vehicle Conference will be held in Munich this September, marking the first time it has been held abroad, and it signals their ambitions.


Their trump card is price. researchers at Jato Dynamics say the average price of an electric car in China in the first half of 2022 will be less than 32,000 euros ($35,000), compared with an average of about 56,000 euros in Europe.


But it may be difficult for Chinese brands to sell cars in Europe as cheaply as they do at home.


Spiros Fotinos, European chief executive of Zeekr, the Chinese brand owned by Geely (GEELY.UL), said logistics, sales taxes, import duties and meeting European certification requirements all add to the cost.


MG, Europe's best-selling Chinese-made brand, says its biggest challenge is shipping cars from China to European distribution points through saturated ports with long delivery times.


European preferences, such as large batteries to power long-distance trips, may also add to costs, said Alexander Klose, head of overseas operations at Chinese electric car startup AIC.



Consumer trust

While some Chinese brands, such as MG, enjoy a strong reputation in Europe, others such as Xiaopeng (HKEx: 9868) and Azera need to build trust.


Surveys show that most potential EV buyers in Europe don't recognize Chinese brands. Those that do are hesitant to buy a Chinese car - reminiscent of the decades-long efforts by Japanese and South Korean automakers to earn trust and adapt to European tastes.


Only 14% of the 1,629 German consumers surveyed by YouGov in 2022 were aware of BYD, the world's second-largest electric car maker after Tesla (TSLA.O). A total of 17 percent had heard of the premium brand Azera, 10 percent knew about Geely's Link and 8 percent knew about Xiaopeng.


According to the survey, 95 percent of consumers are aware of Tesla, and 10 percent of them would consider buying one as their next car. But only 1 percent or fewer of those who know about the Chinese brand would consider buying one.


AIC said it decided not to publicize its Chinese heritage because it was concerned that consumers would be hesitant to buy products made in China.


Several Chinese automakers have earned five-star safety ratings under European safety standards, far exceeding legal requirements, in an attempt to assuage customer concerns.


Zeekr's Fotinos said it will look to win over consumers through test drives and showrooms in which European consumers can assess the quality of its electric cars first-hand.


"When they were exposed to the product ...... the quality and specifications were much higher compared to what they were used to from similar European products. It surprises them," Fortinos said.


China's third-largest seller of electric cars, state-owned Chinese automaker Guangzhou Automobile Group, has opened a design bureau in Milan to get a feel for consumer preferences before making sales.


"The only way to get rid of (stereotypes) is to embrace the competition," said AIC's Klose.



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Other Trade Data References to electric cars:

1. EU Demand for Electric Cars Outstrips Diesel

2. China-Led Electric Car Boom in Thailand Threatens Japan's Grip on Key Market

3. How to Find Ideal Auto Imports from Japan?

4. From Germany: Exploring Ideal Auto Imports

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