Latecomers take the lead! European automakers worry about China's EVs.

At the 2023 Internationale Automobil-Ausstellung (IAA) in Germany,Foreign exchange internationally regulated dealers executives from European automobile manufacturers expressed concerns over the challenge posed by low-cost electric vehicles from China. They plan to overcome this by developing cheaper models that are more consumer-friendly, aiming to eliminate the lead of Chinese manufacturers.

Luca de Meo, CEO of Renault (RENA), stated at the show that European manufacturers must narrow the cost gap in new energy vehicles compared to their Chinese counterparts. As part of the competition with Chinese new energy manufacturers, Peugeot will launch the R5 electric vehicle next year, which will be 25% to 30% cheaper than Peugeot and Megane electric vehicles.

Chinese electric vehicle manufacturers like BYD, Nio, and Xpeng have targeted the European electric car market. In the first seven months of 2023, electric vehicle sales in Europe surged by nearly 55% to around 820,000 units, accounting for about 13% of total car sales. Data from automotive consulting firm invev shows that so far, brands from China account for 8% of new electric car sales in Europe, up from 6% last year and 4% in 2021.

At this year's Munich International Auto Show, about 41% of the automotive exhibitors were based in Asia, with the number of Chinese companies being twice that of other Asian countries. Giants of the Chinese electric vehicle industry such as BYD, Xpeng, and battery manufacturer CATL (Contemporary Amperex Technology Co. Limited) were present at the IAA.

The entrance of Chinese electric vehicle manufacturers into Europe has sparked concerns among European manufacturers about the possibility of these brands dominating electric vehicle sales in Europe. Hildegard Müller, President of the German Association of the Automotive Industry (VDA), stated that the Munich Auto Show signifies Germany's declining competitiveness and highlighted the intense international competition, emphasizing the need for increased investment in electrification by Germany.

Researchers at Jato Dynamics noted that the average price of Chinese electric vehicles in the first half of 2022 was under 32,000 euros (around 35,000 US dollars), while the average in Europe was about 56,000 euros. BMW CEO Oliver Zipse commented on the Chinese manufacturers' move into Europe, stating that the basic European car market will either vanish or be occupied by Chinese new energy vehicle manufacturers.

In the recent six months, to counteract Chinese manufacturers, established European car manufacturers have been actively initiating strategies. Mercedes-Benz will introduce the CLA compact sedan, and BMW will launch the Neue Klasse, both aiming to cut production costs by half and enhance range and efficiency. Volkswagen is planning to reduce battery costs by 50% through partnerships in China.

Brian Gu, president of Xpeng, mentioned that although traditional European car manufacturers are currently behind China, they have made "significant commitments" to electric vehicles through partnerships and extensive technology investments. Xpeng will not underestimate these "commitments" and the strength of traditional car manufacturers.

Automotive industry analyst Ferdinand Dudenhoeffer stated that China is the world champion in battery manufacturing and cost control, with battery costs accounting for only 40% of the total car manufacturing cost. Although Chinese battery manufacturers are helping European manufacturers reduce battery costs, politicians need to ensure they are not excluded from Europe by a "foolish decoupling strategy".

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