Las Chinese electric car brands They are looking to build factories in Europe to avoid the tariffs imposed by the European Union on electric cars made in China, of up to 47% in some cases. A priori, this would be good news. In addition to job creation, the factories would once again revitalize one of the most important industrial sectors on the continent. However, they could be the Troy Horse for blow up European industry from within.
In less than a year, we have gone from not having any Chinese car factories to having up to three factories on track to produce hundreds of thousands of units soon. And more are yet to come.
From zero to five Chinese factories in less than a year
Barcelona will soon host the Omoda E5, manufactured by China’s Chery Automobile, which has partnered with Spain’s Ebro Motors. Chery and Ebro aim to produce 150,000 cars a year at the Spanish facility by 2029.
In Poland, T03 city cars from Chinese manufacturer Leapmotor are rolling off the assembly line at Stellantis’ plant in Tychy. Meanwhile, BYD has announced plans to build its own factory in Hungary, with another on the horizon in Turkey, and Zeekr is considering production sites owned by its parent Geely, namely Volvo factories.
As for SAIC (MG), it has been negotiating for some time with several governments the opening of its first factory in Europe, among the possible countries in which will establish its factory in Spain.
And more factories are on the way, or so the brands claim. Chery is scouting sites for a second European location.We are determined to move forward with our launch team, with our operation in Europe “in the short, medium and long term,” says Charlie Zhang, President of Chery Europe.
The arrival of Chinese electric car makers poses a risk to European car giants. With factories at overcapacity when it comes to producing electric cars, the arrival of new rivals “Made in Europe“It is a serious threat, which has made rethink your strategy to more than one manufacturer.
Europe needs cheap electric cars to meet the goal of eliminating sales of combustion cars by 2035 (with the exception of e-fuels), but sales growth has been slowed by the withdrawal of public aid in some countries, such as Germany and Sweden. And in many countries on the continent, especially in high-volume markets such as Spain and Italy, sales of electric cars have not yet taken off in a sustained and significant way.
One of the consequences of this low demand is the overcapacity of production when it comes to electric cars from European brands. The Volkswagen Group is considering closing its Brussels factory in view of the very low demand for the Audi e-tron, while its Zwickau factory, which produces exclusively electric vehicles, from the Volkswagen ID.3 to the ID.5, including the Cupra Born and the Audi Q4 etron, is operating with only one or two shifts, depending on the low demand.
Stellantis Group, another major generalist manufacturer, also has an overcapacity problem. However, its strategy is not to close factories or eliminate shifts, but to partner with the enemy. Its stake in Leapmotor allows it to produce Chinese electric cars in Poland. And in the process, it can add new low-cost electric models to its extensive catalogue, which ranges from the Fiat 500 to the Maserati GranTurismo electric car.
Although Chinese EV makers have so far captured less than 10% of market share in Europe, the region is the most lucrative outlet for companies like Nio and Xpeng, which have gone from rapid expansion in their home markets to overcapacity and a price war. And they sell cars for twice as much in Europe as in China.
However, the threat is very real, but not only in the electric car segment. In fact, for mainstream brands, the threat is much more serious when it comes to petrol and hybrid cars. These types of cars, subject to tariffs of only 10%, are actually the best-selling Chinese models in Europe.
In this respect, MG is the undisputed leader. It accounts for more than 72% of sales of Chinese-made models in Europe and with more than 100,000 cars sold in 2023, it has entered the Top 20 in European sales. And it did not do so with its flagship electric model, but with the MG ZS and HS petrol and hybrid models.
In fact, the MG ZS was the best-selling car in Spain for several months. An offensive that is set to increase with the arrival of the MG 3 hybrid, a rival to the SEAT Ibiza, Renault Clio and Toyota Yaris.
MG presents itself as an electric car brand, but it sells mainly models with internal combustion engines. Chery’s strategy is similar. There is a lot of talk about the production of the electric Omoda E5, but sales of the petrol-powered Omoda 5 (C label) have taken off like wildfire thanks to its size-equipment-price ratio.
As for BYD, the brand destined to overtake Tesla in electric car sales, more than 50% of its sales are made up of plug-in hybrid PHEV models and non-electric ones. In June 2024 alone, it sold almost 200,000 PHEV cars globally compared to 145,000 electric ones. The brand has just presented the BYD Seal U DM-i, the first in a series of PHEVs that will complete the electric range.
The threat to European manufacturers, especially mainstream ones, is very real in terms of electric cars, but even more so in terms of hybrid models. And although these are subject to tariffs of just 10%, nothing will prevent the production of petrol, hybrid and PHEV models once the factory is open if there is demand. In the end, Chinese brands will have to enter through the front door and will already be in.
Source: www.motorpasion.com
