Nick Carey and Giulio Piovaccari
LONDON (Reuters) – European carmakers have gradually conquered China since the 1980s, achieving millions in sales with little local competition.
Now they will have to defend their European homeland from the onslaught of menacing Chinese electric vehicles.
Chinese electric vehicle giants BYD (SZ:), Chery and Great Wall Motor (GWM) are preparing a series of new product launches (about 20 over the next five years) and spending heavily on sales and marketing in their most important export market, according to Reuters. . interviews with 18 Chinese automaker executives, consultants and industry experts familiar with the Chinese automakers’ European strategy.
After years of wresting market share from foreign rivals in its home market, the world’s largest, China’s increasingly powerful electric vehicle industry is poised to take on Europe.
Chinese electric vehicle makers have been scouting European car buyers for years, hiring industry veterans and selecting distributors with extensive local knowledge as they lay the groundwork to take on Tesla (NASDAQ:) and legacy automakers, sources said. BYD and Chery have already announced plans to produce cars in Europe.
Chinese automakers are now using a range of tactics to penetrate the market, from sponsoring high-profile sporting events to increase awareness of their brands to building dealer networks and beefing up service and repair operations to protect resale value. – a key requirement of fleet buyers, who make up a significant share of the European market.
Sales of Chinese automakers in Europe remain small because their brands are little known to consumers – with the exception of MG, a former British brand owned by SAIC, the state-owned Chinese automaker.
But supplies are growing quickly and could increase with the release of additional models across a wide range of price segments, industry experts say. BYD’s sales in Europe tripled to 15,000 vehicles in 2023, following years of exponential growth in electric vehicle sales in China and other export markets.
BYD has launched six electric models in Europe, and a spokesman said the company is selling them in 20 countries. The company launched its first three models in the UK last year and plans two more this year, BYD UK marketing manager Mark Blundell said.
Great Wall plans to produce one model each in Europe over the next five years, two distributors told Reuters. Chery will launch a total of eight SUV models under two brands, Omodo and Jaecoo, over the next two years, Chery European managing director Jochen Thueting said.
By comparison, Tesla has only two big sellers, the mid-priced Model 3 and Y. Both models are long overdue for a redesign, and their global and European sales have been declining.
Executives from BYD, GWM and Chery told Reuters they are looking to put down deep roots in the European market. Chery spokesman Tueting said the company is focusing on all aspects of the European automotive ecosystem, from branding to financing tools, repairs and resale value for both private and corporate customers.
“We do our homework,” Tueting said.
The SAIC executive did not respond to interview requests.
Christina Boo of the Norwegian Electric Vehicle Association, which represents 120,000 electric vehicle owners, met with many Chinese automakers and noted that some have spent years planning their European strategy. Norway is a world leader in the adoption of electric vehicles.
Chinese brands have so far adapted Chinese electric vehicle models for export, but they are already working on models designed from the ground up for European buyers, Bu said. They also don’t face the same pressure as Western competitors to turn a profit quickly because they are heavily backed by the Chinese government, she said.
“Some of these players have spent a lot of money on this even though they haven’t sold much yet,” Boo said.
PRICE ADVANTAGES
China’s auto industry, a mix of public and private companies, has significant cost advantages over foreign competitors, partly due to government subsidies and the country’s dominance in processing minerals for batteries.
In China, the explosion of electric vehicle brands has sparked a price war, with automakers led by BYD selling a slew of EVs priced between $10,000 and $30,000. These minimum prices have alarmed automakers and their political allies in the United States and Europe. In May, US President Joe Biden quadrupled tariffs on Chinese electric vehicles to 100%. The European Union is currently investigating China’s subsidies and may soon raise tariffs on its cars.
But European auto executives said at a Reuters event in May that higher tariffs would do little to protect them from Chinese electric vehicles unless the European industry acts quickly to match their price and cost.
“The window is closing,” said Volkswagen (ETR:.DE) board member Thomas Schmall. “We have two or three years.”
So far, Chinese automakers have not significantly disrupted foreign competitors. Instead, they maximize export profits by charging double or more the price in China for the same cars. Their European prices are only slightly lower than comparable models from Western automakers, but Chinese cars often come with standard equipment such as heated and cooled seats, 360-degree cameras, and digital instrument panels that often cost more than competitors’. vehicles.
Japanese automakers used similar tactics when entering Western markets decades ago. LONG-TERM INVESTMENT As exports expand, Chinese automakers are implementing comprehensive strategies to increase their appeal to European customers.
They have improved their safety ratings, strengthened their repair and service and sales operations, increasing resale value, which is especially important for people who lease cars.
Leasing companies charge lower monthly payments for cars with high resale values because they are worth more at the end of the lease term, when buyers can choose to either buy them or return them to the leasing firm.
Chinese electric vehicle makers’ attention to detail reflects what they have learned about European consumers, said Bo Yu, regional manager for Greater China at JATO Dynamics, a British auto industry research firm. “In China, the purchase price is important,” she said. “But for European consumers it’s not just the price, it’s the total cost of ownership, including maintenance, service and residual value.”
Ben Townsend, head of automotive technology at insurance industry-funded safety group Thatcham Research, has been working with Chinese car makers for the past year. Beyond the obvious steps, such as complying with safety regulations and achieving high safety ratings, Chinese exporters are delving into much more complex issues about how to structure warranties and price repairs in Europe, where service labor costs are much higher, Townsend said. higher than in China. “There are hard rules on issues like safety that are clear, and there are soft rules that are not written down,” Townsend said. “The Chinese are very willing to learn soft rules.” Chinese players are taking a comprehensive look at what constitutes long-term success in Europe, said Toby Marshall, managing director of automotive distributor IM Group, which operates the GWM ORA brand in the UK.
IM Group has previously launched a host of new brands in the UK, including South Korea’s Hyundai (OTC:) and Japan’s Subaru (OTC:). “Selling a car is just the tip of the iceberg,” he said. “There is still a lot to understand about how to keep this car on the road for its entire life.” Ensuring easy access to inexpensive spare parts is vital. Marshall noted that UK distributor GWM ORA can provide most parts within 24 hours. MG SAIC said it will open a second European parts center this summer to support growing demand for vehicles. Another important effort is to attract fleet customers, who control an unusually large share of car sales in Europe. For example, Ayvens, Europe’s largest leasing company, already has partnerships with BYD and Geely. Unlike Tesla, which has lowered its resale value by repeatedly lowering retail prices, Chinese automakers are working with companies like Autovista, which conducts extensive vehicle-to-market research to establish optimal residual values for leasing customers. ‘BY WHOM?’ The main task of Chinese automakers is to reach the majority of European consumers who are not even aware of their existence. That gives older car makers more time to fend off the threat of Chinese exports, says Phil Dunn, managing director at strategy consultancy Stax. “But the Chinese learn quickly,” he said, “so it won’t last long.” To expand their brand presence, Chinese automakers are turning to social media, sponsorships of high-profile events and partnerships with reputable dealer networks. One of BYD’s distributors in Italy is Gruppo Autotorino, which has 70 outlets in 24 provinces.
“Our network allows them to quickly reach customers,” said chairman Plinio Vanini. “That was key for BYD.” GWM and Chery partner with existing dealerships that also sell cars from other well-known brands. Chery’s European managing director Jochen Thueting said the carmaker chose common areas for its Omoda cars “so that people will say, ‘While I’m here, I’ll take a look.’ BYD, due to its scale as China’s leading electric vehicle brand, is opening mostly stand-alone dealerships and expanding them rapidly.
Mark Blundell, BYD UK marketing manager, says the carmaker will have 60 UK dealerships by summer, rising to 100 next summer, and is planning enough locations within 18 months for most Britons to get to one of which within a 14 minute drive. Awareness of Chinese cars is growing. According to a study by online car marketplace Carwow in March, 50% of respondents in Germany said they would consider a Chinese-made car, up from 27% in October last year. To promote its brand, wealthy BYD is spending heavily to sponsor the Euro 2024 soccer championship, a slot previously occupied by Volkswagen.
BYD will showcase its electric vehicles at match venues and showcase its brand in live broadcasts. According to the Union of European Football Associations, each match during Euro 2020 attracted more than 100 million spectators. “It will be good for familiarity because people will see ‘BYD, BYD, BYD’ throughout the tournament,” said Blundell, the carmaker’s UK marketing manager. “But we are very humble about it. Even this time next year there will be people asking, “Who?”