In-depth | the epidemic to curb the pace of Chinese car companies entering the EUROPEAN Union How long is the last window period?

At Frankfurt Central Station in September 2019, an Aiways U5 that traveled for 53 days and covered more than 15,000 kilometers from Xi'an was placed at the entrance of the station hall. Although it did not appear at the Frankfurt Motor Show held at the same time, the Aichi U5 still attracted the attention of many pedestrians in the station. To this day, a Chinese living in the Netherlands told the first financial reporter that the streets of Amsterdam can still see the figure of Aichi U5 from time to time.

"AIWAYS and SAIC are the first two companies in China to start laying out new energy electric vehicles in Europe, and the sales performance of AIWAYS in Europe may be far better than that in China." Zhou Peng, a person familiar with the overseas undertakings of Chinese car companies, told reporters that in the era of fuel vehicles, Chinese car companies have no advantages over European car companies in terms of technology, cost control, emissions, etc., and it is very difficult to enter the EU. New energy vehicles are the only choice for Chinese car companies and an opportunity to overtake in curves.

Around 2020, European countries began to vigorously promote new energy vehicles, such as free charging, parking, exemption from purchase tax, tolls and car purchase subsidies of thousands of euros, so that the European new energy vehicle market expanded rapidly. According to the European Association of Automobile Manufacturers (ACEA), the number of new energy vehicles (including EVs and PHEV) registered in the European Union and the European Free Trade Association in 2019 was 558,000 units; this figure reached 1,365,900 units in 2020; and further climbed to 2.2634 million units by 2021.

The expansion of the European new energy vehicle market has accelerated the pace of Chinese car brands entering Europe. After SAIC and Aichi, Brands such as Xiaopeng, Weilai and Hongqi are competing to start their journey in the European auto market; this year, Chinese brands including Weipai, Lantu, Nezha and other Chinese brands are preparing to rush to Europe to meet with the forerunners.

China's automotive industry generally believes that the rapid growth of the European new energy vehicle market and the relatively slow transformation of European car companies have given Chinese car companies a historic window period to enter the European market. However, the sudden outbreak of the epidemic has curbed the pace of Chinese car companies entering the European Union, and may lose the last window opportunity.

"The signs of slowing down have appeared, and I have a lot of contact with people from different car companies' overseas businesses, and everyone's life is not good." Some brands have not shipped vehicles to Europe for more than 20 days, and the large-scale impact will be felt in July. At that point, our traditional advantages in the EU will become less obvious or disappear, with no factories and other shortcomings magnified. Zhou Peng said.

A gentle drizzle under the thunder

According to data from the China Association of Automobile Manufacturers, in 2021, the mainland exported 2.015 million vehicles, an increase of 1 times year-on-year, accounting for 7.7% of total automobile sales, an increase of 3.7 percentage points over the previous year. Among them, new energy vehicles exported 310,000 units, an increase of 3 times year-on-year.

Of the 310,000 new energy vehicle exports, Tesla accounts for more than half. In 2021, Tesla exported a total of 163,000 vehicles, accounting for about 55% of the overall export of the domestic new energy market. The Model 3 and Model Y produced by Tesla's Shanghai Gigafactory shined in the European market, and the Model 3 became the number one car sales in Europe in some months.

In contrast, some Chinese car companies that have entered Europe with great fanfare have not made much waves in the local area. According to the statistics of EU-EVs, in the new energy vehicle market in 14 countries including the United Kingdom, Germany, France and Norway in 2021, MG sales reached 18,525 units, with a market share of 1.7%, which is the best selling performance of all Chinese brands. In second place is the Chase brand, also owned by SAIC, with sales of 1282 vehicles in 2021 and BYD sales of 1247 vehicles, ranking third. This is also the only 3 Chinese brands in the above 14-country markets that have annual sales of new energy vehicles exceeding 1,000.

In Norway, where Chinese car companies are densely deployed, MG's sales reached 2732 units in 2021, ranking 14th among all car companies in the Market share of new energy vehicles in Norway, and BYD obtained a market share of 1% with sales of 1244 vehicles, and Chase achieved a market share of 0.8% with sales of 1008 vehicles. It is worth mentioning that since 2022, Hongqi has shown a sudden trend in the Norwegian car market, as of April 24, Hongqi's sales in Norway reached 687 vehicles, replacing MG as the "handle" of Chinese brands in the Norwegian new energy vehicle market.

"Don't look at the total number of Hongqi is not more than 700 units, but Hongqi's E-HS9 in the Norwegian market costs about 700,000 NORWEGIAN KRONK, almost 70,000 euros, which is not cheap, and Tesla Model X is a level." Zhou Peng told reporters that European users are generally more pragmatic, and price is an important factor to consider when buying a car. Norway's mainstream market still falls at the level of Model 3 and Model Y, and it can get good sales results at high prices, and Hongqi has captured the pain points of Norwegian users who like big cars.

In terms of new car companies, in 2021, Xiaopeng Automobile sold a total of 486 new energy vehicles in Europe, compared with 200 in Weilai; Aichi, which drove cars from Xi'an to Frankfurt with great fanfare, sold 563 vehicles.

Judging from the sales data in 2021, there is still a big gap between the new car-making forces that are making rapid progress in China and the traditional car companies represented by SAIC and BYD. Taking WEILAI and BYD, which entered Europe in the same period, as an example, the WEIO ES8 began to deliver to users at the end of September, with a cumulative delivery volume of 200 vehicles in the same year; BYD Tang EV began to be delivered on August 12, and by December 21, the delivery volume reached 1,000 vehicles.

Zhou Peng told reporters that the delivery volume will be affected by several factors, transportation is one of the aspects, the current shipping cycle is about 45 days, follow-up also need about 1 month to carry out inland transportation, preparation, loading and other links. European logistics are not as efficient as domestic ones, and European truck drivers need mandatory breaks every 6 hours. Our domestic express delivery, Jiangsu, Zhejiang, Shanghai and Baotou postal areas, are almost all delivered every other day. Express delivery in European countries (within the province) may require 2 to 3 days of logistics.

The direct operation model is not satisfied

Almost all of the new force car companies copy the domestic direct operation or direct operation + franchise (agent) channel model, while most traditional car companies will still choose to cooperate with dealer groups.

Zhu Jie, head of the overseas business department of a car company, believes that although the current domestic market, the direct operation model is considered to be able to better manage prices and increase the contact point with users, but in the actual situation in Europe, cooperation with dealers can spread the channel faster and avoid many pits of self-built systems; and the direct operation model will consume more resources, it is difficult to roll out in a short period of time, and the model will be unsatisfactory.

Taking Xiaopeng Motors as an example, after entering Norway, on February 11 this year, Xiaopeng Motors' first direct-operated experience store in Europe was officially opened in Stockholm, Sweden, and then reached strategic cooperation agreements with two leading European car dealer groups, Emil Frey NV Group in the Netherlands and Bilia Group in Sweden. Xiaopeng Automobile basically copied the domestic direct operation + franchise agency model in Europe.

"Roughly calculating an account, Xiaopeng laid out a flagship store in Sweden, rolled out its own sales system, recruited 50 employees, needed 1.5 million euros to open a store, operating costs of 1.5 million euros, plus labor costs is 8 million euros a year. If a car can achieve a profit of 4,000 euros, then Xiaopeng will have to sell 2,000 cars in Sweden to cover the expenditure. Zhu Jie believes that at present, the new force car companies in Europe can hardly support the self-built channels, the traditional model of choosing agents, the profitability of dealers will be reflected in the price, in the current small volume, reducing operating costs, and a considerable number of European dealers, have a history of nearly a hundred years, have a strong local recognition, which also helps to promote sales.

While most of the new forces adopt the direct operation model in China, they have adopted a complex evaluation system to enhance the enthusiasm of employees with a higher incentive and elimination mechanism. A number of new car-making forces directly operated store sales have told reporters that they are almost all year round, either in the store to promote products to users, or call to visit potential customers, increase the amount of clues.

"This kind of 'high-pressure management' cannot be done in Europe, how to eliminate people? In China, you can sign a 1-year contract, which is almost impossible in Europe, even if you sign a 1-year contract, it is not so simple to open people. For example, if an employee often takes sick leave, it is difficult to dismiss, and he needs to be paid 70% to 80% of his salary. Zhu Jie said.

In addition, the new system of new power car companies playing around in China and even becoming a benchmark is not necessarily suitable for Europe.

A person familiar with European automobile operations told reporters: "Like the domestic live broadcast with goods, it will certainly not be able to play in Europe, and europe will have such a developed e-commerce system in Europe to support it." The business model needs to be adapted to local conditions, and now the European new energy market is very good, and the direct operation and service model are playing well in China, so it is simply copied over, and it will certainly not work. ”

The above-mentioned person told reporters that China and Europe are different in national conditions, Europe's labor costs are much higher than domestic, Europe a sales corresponding to more than thirty customers is a very normal thing, in the after-sales maintenance, Europe's maintenance of man-hours may be as high as 130 euros ~ 140 euros or more, the cost of simple car washing is also as high as 30 euros, Europe is more advocating "DIY", some small hairy diseases and car wash users to solve by themselves. These value-added services may not necessarily be attractive enough to users, and the services are completely borne by the enterprise, and it is difficult to cover labor costs.

2022 is the final window period

"To put it simply, whether it is direct operation or authorized franchise, domestic car companies must be ready to come back to Europe." But the problem now is that there is not much time to stay with a Chinese car company. Zhu Jie said that 2022 will be the last opportunity in the window period.

Earlier, some Chinese car companies entered the European market in the form of small batch exports, did not pass the European WVTA model type certification, and did not build a good after-sales team, and the products were sold after frequent failures, which caused a greater blow to the reputation of themselves and Chinese brands.

In the era of new energy vehicles, intelligence is one of the biggest differentiators of Chinese brand products. However, Zhou Peng told reporters that the labels set up by domestic car companies, especially car companies that are new car manufacturers, are not applicable in Europe. For example, advanced driver assistance systems are difficult to rub against autonomous driving in Europe. Compared with the domestic OTA (remote vehicle upgrade), europe's network system and network environment are completely different from those in China, if there is no local R&D team in Europe, only rely on trade exports to operate, there is no way to establish differentiated advantages.

Zhou Peng believes that the competition of car companies in Europe is the competition of system strength, and products and channels are only part of the system force. "Europeans don't have to buy Volkswagen, Renault, most Europeans demand pragmatism, but this takes time to accumulate." During this time, enterprises must not make mistakes, be humble to the market, understand what consumers want, solve problems quickly, and consider and prepare for consumers at every step. Zhou Peng said.

But there is not much time left for Chinese car companies to enter Europe.

On the one hand, the new energy subsidy policies of European countries are gradually declining, and there is uncertainty about the high growth rate of the new energy vehicle market. Zhu Jie told reporters that the Dutch subsidy of 3350 euros per new energy vehicle will be used up by May this year, and the Subsidy of 6000 euros per new energy vehicle in France will end as planned at the end of this year. Sweden's maximum subsidy of SEK 70,000 per new energy vehicle last year has dropped to SEK 50,000 this year.

"When the government encourages this market, there will naturally be corresponding subsidy policies, but when the market scale is expanded to a certain extent and consumption habits are formed, subsidies will inevitably withdraw." Zhu Jie said.

In addition to subsidies, the first round of electric vehicle layout of European car companies has been completed, which will bring greater challenges to Chinese car companies.

According to the reporter's incomplete statistics, at the beginning of 2020, European local brands launched more than 40 new energy products, reaching more than 80 by 2021, and more than 100 by the end of this year. Zhu Jie believes that as long as the production capacity of European car companies does not produce huge problems, in 2023, it is difficult for Chinese car companies to stimulate consumers by relying on high cost performance and existing cars.

"The recent lack of cores, the shortage of supply chains caused by the tension between Russia and Ukraine has bothered European car companies, whether it is new energy or traditional power, the best-selling cars basically need to be several months or even years to calculate the car lift cycle." At this stage, Chinese car companies can also rely on the advantages of having existing cars to attract European users. Zhou Peng analyzed that if most of the brands in the entire market now do not have existing cars, Chinese brands have existing cars, it is the best opportunity to let the brand quickly run in the market, and then establish a reputation for the later stage.

However, at present, China's auto industry has also been affected by the new crown epidemic, including SAIC, FAW, GAC, Weilai and other car companies have stopped production or partially stopped production, in addition, the logistics caused by the epidemic has also had a negative impact on the import and export of automobiles.

"Tesla doesn't have a car in Europe right now, and the capacity of the Berlin factory is still climbing. Other European car manufacturers have been affected by the relevant industrial chain in Ukraine, and their production capacity has shrunk significantly. If the domestic government cannot quickly resume work and production in April and May, it will be our turn to have no cars to sell in July and August, and the strategic opportunities brought by European car companies without cars to sell will be lost. When their army is pressed, it will be more difficult for Chinese car companies to break through in Europe. Zhou Peng said.