Should Europe brace for an incoming wave of Chinese EV imports?

China is the world’s most populous country, the second largest economy and the largest producer and consumer of battery electric vehicles. With this in mind, it seems somewhat counterintuitive that Chinese-built cars are largely absent from European roads. However, as the demand for affordable EVs increases as the clock ticks on ICE sales, we may start to see more vehicles from the People’s Republic on Europe’s roads.

Why aren’t more Chinese vehicles on European roads?

The situation is influenced by several factors. First, Europe’s car production networks are mature and relatively efficient, despite overcapacity concerns, meaning the continent has never struggled to supply itself with ICE-powered vehicles, thanks to its host to established car giants including Volkswagen and the Peugeot-Citroen-powered vehicles. half of Stellantis. As a result, European OEMs were able to offer small, low-cost vehicles that were built relatively locally, despite the higher labor costs typically associated with manufacturing in Europe.

And while China’s car manufacturing and sales market has developed rapidly over the past two decades, its cars have been in high demand domestically. This put less pressure on the major automakers in China such as SAIC, Geely and BYD to expand their market presence outside of China as there was still huge unmet demand in the country.

One should also keep in mind that a fully assembled vehicle takes up a reasonable amount of cargo space on a vehicle carrier, with the associated shipping costs that have risen rapidly in the wake of the COVID-19 pandemic. As a result, much of the advantage Chinese vehicles enjoy in terms of lower purchase prices compared to Western rivals could quickly be swallowed up by higher import costs and taxes.

Chinese imports to Europe are growing fast

GlobalData’s Light Vehicle Trade Flow Forecast can be used to predict the number of vehicles imported from China to Europe. It paints a clear picture of a dramatically accelerating market as more and more Chinese-built vehicles find their way to European customers.

Chinese imports to Europe hovered just below 30,000 units in 2017, but had more than tripled to 106,000 vehicles by 2020. Imports nearly doubled to just under 200,000 units by 2021, and by 2022 we foresee more than 245,000 vehicles being imported from China to Europe. We expect this figure to reach 400,000 units by 2025 and approach 500,000 vehicles by 2029.

What is driving the increase in Chinese imports?

The vast majority of those vehicles imported from China will be battery-electric models, with the small remainder likely to adopt some form of hybrid electrification. This is because China has identified EVs as an important force for its economy going forward, leading to favorable government sales and manufacturing incentives, supported by the country’s dominance over the global supply chain of Li-ion batteries.

In Europe, the pressure to electrify remains high and more countries are setting targets to ban the sale of light vehicles with ICE. However, this will be frustrated by a growing problem related to vehicle affordability caused by the still high cost of batteries. Simply put, there aren’t enough cheap EVs on sale in Europe right now to meaningfully replace ICE models offered at the most affordable end of the market.

This is a market sector in which Chinese car manufacturers can gain an edge. They have low labor costs compared to European car manufacturers and have access to more favorable battery supply deals with local battery manufacturers than may be available to foreign companies. This means they can make affordable EVs more profitable than their Western rivals and, in a market that is clamoring for cheaper EVs, could give Chinese OEMs a significant advantage over Western players.

One of the first Chinese vehicles to have a meaningful impact on European sales could be the excellently named Great Wall Funky Cat. This quirky looking hatchback is expected to hit the market in Europe and the UK later in 2022 with prices around £30,000 – which can hardly be called quite affordable, but still undercuts the VW ID.3 and roughly matches the Renault Zoe , while aiming to provide a more premium cabin experience than either.

Later on, Chinese OEMs could really take advantage of introducing certain extremely compact and affordable models in Europe. Chief among these is the Wuling Hongguang Mini EV – this tiny two-seat city car has proven to be a resounding sales success in China – and its city-friendly proportions, youthful look and ultra-affordable price tag, hovering between $4,000 and $5,000, should probably help it too. to achieve strong sales in Europe.

This article was first published on GlobalData’s dedicated research platform, the Automotive Intelligence Center

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