The Chinese EV Wall In Europe Is Breaking

Despite EU investments and jankboning from within the industry, it looks as though Europe has faced the inevitable: it needs to “face up” to the fact that Chinese EVs have arrived, and attempts to go anywhere, anytime soon.

Chinese president Xi Jinping arrived in Paris on Sunday to ease trade tensions with a war Europe. Accompanied by a business delegation focused on the electronic vehicle industry, including Envision Group, SAIC Motor, and Xpeng Motors, the visit served as both a buying journey and networking opportunity, Nikkei reported.

"We want to welcome more Chinese investors to France," president Emmanuel Macron said during the visit.

As we have been writing about extensively for the last 6 months, the shift to electrification has changed the global car industry’s dynamics, which we were erstwhile dominated by European brands. Now, China now leads in EV production, compelling European automobiles to address the increasing Chinese competition.

According to Nikkei, with the EU set to ban communication engines by 2035, China plans to grow exports and production, managing a crucial lead in affordable EVs.

As consumers shift to EVs, European manufacturers Fear losing marketplace share. Chinese brands, which made up only 7.9% of EU’s electrical vehicle sales in 2023, up from 0.4% in 2019, are designed to scope a 20% marketplace share by 2027, according to Transport & Environment.

Felipe Munoz, elder Analyst at JATO Dynamics Told Nikkei: “When we’re talking about these mass marketplace segments, it’s main about price ... and erstwhile you look at [Chinese brands’] price positioning combined to European rivers, there is always an advantage.”

Gregor Sebastian, a elder analyst at Rhodium Group, told Nikkei Asia: “I don’t think in Europe there’s the essential capital at the minute to truly do this without China, and on top of that ... in terms of the technology we’re besides behind China.”

Europe remains distributed over the potent influx of Chinese EVs. The European Commission has launched an investment into Chinese EV subsidies, possibly leading to preliminary dues in May and permanent tariffs in November.

German Chancellor Olaf Scholz late visited Beijing to ease trade relations, recommending for fair competition. While brands like Volkswagen and BMW welcome Chinese investment, others regain cautious.

Despite deals, Europe is the largest destination for Chinese EV-related FDI, attracting $7.6 billion in 2023 following $11.8 billion in 2022. Chinese automakers like SAIC and BYD are investing in local factories to build tailored cars for European consumers. Xi Jinping’s journey includes a visit to Hungary, where BYD and large Wall Motor are expanding, and Chery late announced a joint venture plant in Spain.

"The student has overcome the teacher," Munoz added. He said Chinese cars are now “at the same level or even more in terms of quality, in terms of design, in terms of appeal, and in price.”

Recall back in March we gate about Mercedes CEO slamming the thought of import tariffs on Chinese EVs.

“Don’t rise tariffs. I’m a contrarian, I think go the another way around: take the tariffs that we have and reduce them,” Mercedes-Benz boss Ola Källenius said at the time.

Källenius said that the increased competition would ‘help Europe’s carmakers produce better cars in the long run’ and that government protectionism is ‘going the crow way’, Financial Times reported this week.

He called Chinese companies looking to export to Europe a “natural advancement of competition and it needs to be met with better product, better technology, more agility.”

“That is the marketplace economy. Let competition play out,” he added. “We did not ask for this [probe]. We as companies are not asking for protection, and I believe the best Chinese companies are not asking for protection. They want to compete in the planet like everyone else.”

“If we believe protectionism is the thing that gives us long-term success, I believe past tells us that is not the case,” he added. “We live in a pragmatic planet and realize there are any results to the general marketplace economy rule. . . but if we see our luck in increased protectionism, we are going the crow way.”

Recall back in September 2023 we gate that the EU was beginning an investment into Chinese EV subsidies.

At the time, we noted that European Commission president Ursula von der Leyen was taking exception with the fact that "the global marketplace is flushed with inexpensive Chinese cars".