Europe’s autos have weak defences against China

LONDON/HONG KONG, Feb 1 (Reuters Breakingviews) – China has been the golden goose for Western automakers like Volkswagen. (VOWG_p.DE) and BMW (BMWG.DE)But more and more it looks like a threat.Chinese groups like electric vehicle leader BYD (002594.SZ), (1211.HK) We are targeting the overseas market. Europe looks particularly vulnerable.

According to forecasts from consultancy Inovev, in 2022 electric vehicles made by Chinese automakers will already have a 9% market share in Europe, almost double the previous year. But the pace is picking up. Besides BYD, MG, owned by state-owned giant SAIC, is considering expansion (600104.SS)electric vehicle specialist Xpeng (9868.HK)Volvo owner Geely detailed plans to expand the Sieg and London electric car brands in Europe in January.

Chinese automakers have many advantages. Western brands have lost market share in China in recent years, offering domestic players economies of scale and efficiencies in areas such as research costs. They benefit from a vast domestic supply his chain, including his CATL, the world’s largest battery manufacturer. (300750.SZ)which gives access to innovative technologies such as battery replacement and lithium iron phosphate batteries.

Some, like Xpeng, aim to market long range and smart entertainment software and compete with Western luxury brands on quality. Low prices are attractive to many consumers. Western car makers are raising the cost of battery-powered vehicles, but the Chinese group is pushing the average price of electric vehicles in China to just €32,000 from 2015 to the first half of 2022, according to consulting firm JATO Dynamics. pulled down. Their high efficiency and the high cost of battery rides in Europe means that the Middle Kingdom Group can export and compete aggressively.On average, a Chinese manufacturer can build an electric car for 10,000 euros the following than its western rivals.

The new competition will exacerbate the looming price war for electric cars that has already begun in the Tesla-led US. (TSLA.O) When ford motor (foreign language)But Europe looks particularly at risk. U.S. automakers benefit from drivers’ love of big cars and government subsidies to domestic production under President Joe Biden’s Inflation Reduction Act. With European manufacturing under threat, the continent may try to deter imports by imposing additional tariffs or increasing subsidies to local players.

But the government itself is in trouble. If Europe wants to phase out internal combustion engine cars by her 2035, it will need a large supply of cheap electric cars. At JATO’s estimate of €56,000, the average European electric car price is still too high for most investors.

Moreover, trade wars are unpredictable. Lower manufacturing costs in China could help Chinese automakers absorb tariffs, but Western groups could suffer reprisals. For example, the country accounted for nearly 40% of his Volkswagen shipments in 2022.Groups like Renault (RENA PA) Or BMW manufactures in the Middle Kingdom and exports abroad.

As a result, Western groups will not only have to contend for smaller places in their home markets, but it could also drive down prices and hurt profitability. 20% of the electric vehicle market in Europe, but the European brand’s share will fall from 66% in 2021 to just 45%. The sector has experienced a good pandemic. Volkswagen, for example, has pushed prices up by about 10% on average over the past three years, he estimates, RBC analysts. The growing threat from China means a barren year has begun.

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contextual news

China will export 3.11 million vehicles in 2022, a year-on-year increase of 54.4%. according to to the China Automobile Manufacturers Association.

Exports of new energy vehicles such as battery electric vehicles increased by 120% compared to 2021.

Editing by George Hay and Oliver Taslick

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