Chinese makers of electric vehicles have made a strong showing at the IAA Mobility auto show in Munich, Germany. Around 50 companies, including well-known brand BYD and up-and-coming company Xpeng, have attended the event, marking the largest-ever Chinese delegation at any global car expo. Even before the show began, Renault CEO Luca de Meo praised the rapid progress made by Chinese EV makers, stating that they are a generation ahead of their Western counterparts. Chinese electric cars, known for being cheaper, are gaining traction in Europe, Australia, and Southeast Asia, causing concern among competitors about the potential dominance of Chinese brands in the global EV market.
China has become the world’s largest auto exporter, surpassing Japan in the first quarter of this year. The strong demand for EVs from Russia and the growing global appetite for these vehicles contributed to China’s success. Chinese car exports to Europe, especially, have seen significant growth, with nearly 350,000 EVs exported to nine European countries in the first half of 2023, surpassing the total exports for 2022. European Union imports of Chinese cars have also quadrupled in the last five years. According to UBS, Chinese carmakers could potentially double their market share from 17% to 33% by 2030, while European firms could face the biggest loss of market share.
Chinese EV makers are seen as “new global champions” by auto analysts. Overcapacity, a slowdown in the Chinese automotive market, and intense competition have driven Chinese carmakers to explore overseas markets. The European market, in particular, is seen as lucrative due to the high demand for EVs and fewer protectionist measures than in other regions. European manufacturers pay a 10% import duty for Chinese vehicles, in contrast to the 27.5% required by the United States. Additionally, Europe’s decision to ban the sale of new internal combustion engine cars by 2035 makes it an attractive market for Chinese EVs.
Most Chinese automakers have plans to focus on major European and North American markets in the next few years, with a particular emphasis on EVs. BYD, China’s largest EV manufacturer, aims to double the number of dealer partners in Europe and increase overall overseas sales. Xpeng, on the other hand, announced its entry into the German market in 2024 and plans to expand its sales and service centers in Europe. European mass-market carmakers, like BMW, have expressed concerns about profitability and the competitive threat posed by Chinese automakers, especially as the EU ban on conventional vehicles approaches in 2035.
Chinese EVs have a cost advantage compared to their European and US counterparts. Research firm Jato Dynamics revealed that Chinese autos are about 30% cheaper. This affordability, as well as the high quality across different price segments, has contributed to the success of Chinese EVs. Consumer perceptions of Chinese manufacturers making lower quality cars are changing, as evidenced by record sales of MG in the UK. In China, widespread demand, strong government incentives, and rapid technological advancements have made EVs the norm. However, European and US EV manufacturers face challenges in producing vehicles at a similar pace due to limited government support and mature markets.
China’s dominance of the EV battery supply chain is a major factor in the lower cost of Chinese EVs. Chinese manufacturers control 60% of the global EV battery market and also oversee the production of battery materials. This competitive advantage in lithium-ion battery cell production, coupled with lower labor costs, enables Chinese carmakers to have an edge in terms of EV production costs. However, geopolitical tensions between China, the US, and Europe could complicate Chinese EV firms’ global push. The desire to reduce dependency on China and lower production costs may result in barriers to Chinese imports, potentially impacting its current acceleration in the auto export race.