EU "intercepts" Chinese electric vehicles? Tesla or "lying gun", SAIC, BYD to build factories in Europe
Cai Lian News Agency, October 1 (Editor Xuanlin) China's rapid overseas electric vehicles seem to have encountered "stumbling blocks", European Commission President von der Leyen recently said in the European Parliament that he will launch a countervailing duty investigation into electric vehicles imported from China to assess whether punitive tariffs are needed. She claimed that Chinese electric vehicles distorted the European market at low prices through high government subsidies. According to automotive consultancy Inovev, 8% of electric vehicles sold in Europe this year are made by Chinese brands, and the European Commission expects this figure to reach 15% by 2025.
For Chinese car companies, Europe can be described as a fertile ground for the export market, compared with the high tariff of 27.5% in the United States, the EU imposes tariffs on imported cars of only 10%. At the Munich 2023 International Motor Show, which was held from September 4 to 10, which was known as the "wind vane" of the automotive industry, vehicle companies such as BYD, SAIC MG, Leap Auto, Avita Technology, power battery companies such as CATL and Sunwoda Power, and intelligent technology companies such as Horizon, Black Sesame, SenseTime, and Qingzhou Intelligent Navigation took the stage with a "group-style" lineup, attracting a lot of international attention.
▌Tesla bears the brunt of SAIC and BYD to build factories in Europe Chinese car companies may accelerate their overseas expansion
Although the EU survey was launched on China's electric vehicle exports, not all of China's electric vehicle exports are Chinese-owned. China's electric vehicle manufacturers exporting to the EU are mainly divided into three categories: Chinese automakers with European background, China's own new energy vehicle companies, and foreign-funded automakers such as Tesla and BMW. Export automakers of Chinese brands such as BYD, Great Wall Motor, NIO, etc. may be the main targets of the EU countervailing duty investigation, but Guosheng Securities research report data on September 18 shows that the combined market share of BYD, Great Wall and NIO in Europe is only 1.1%, and the impact of countervailing duty investigations is very small.
Brands with European backgrounds such as SAIC MG, Geely Lynk & Co, and Dongfeng Yijiete and foreign-funded automakers produced in China and exported to Europe are the main sales force of Chinese automakers in Europe. According to Soochow Securities Research Report, the total number of electric vehicles exported by China to Europe in 2022 will be about 330,000 units, except for Tesla, which has nearly 200,000 units, SAIC MG 72,000 units, Dongfeng Yijiete 48,000 units, and Geely Lynk & Co nearly 20,000 units, and the export volume of other car companies is small. Geely Lynk & Co, Dongfeng Yijie, and Geely Smart can produce in the local factories of European partners, which analysts believe means that Tesla is likely to be the most "injured" in the countervailing duty investigation. According to 36Kr Finance public number on September 22, "The EU blocks China's electric vehicles, Tesla and German cars lie down? According to market sources, Tesla has intended to transfer production capacity exported to Europe to U.S. factories, or to avoid the impact of countervailing duty investigations.
Regarding countervailing duty investigations, there are also huge divisions within the EU. German Federal Transport Minister Wiessing has made clear his opposition in recent days, warning that the German economy will be damaged as a result. German automakers have also publicly disagreed with the EU's attempt to impose punitive tariffs. China is the largest overseas market for German automobiles, sales data shows that in 2022, the total sales of the three major German automobile groups Volkswagen, Mercedes-Benz and BMW in China will be 4.71 million units, and the Chinese sales of the three companies will account for 38.3%, 37% and 33% respectively, and German imports of Chinese automobiles and parts in the first half of 2023 will increase by 75% year-on-year. Once the EU is countered by China, it will inevitably affect the development of German car companies in the Chinese market.
In contrast to Germany, before last year's Paris Motor Show, French President Emmanuel Macron told French media that Europe needed a strong policy to promote reindustrialization. He said, "The current data is cruel, more than 80% of electric vehicles are imported. Macron mentioned that he has set his goal of achieving 100% Made in France in the French electric vehicle industry. The chief technology officer of Renault, a representative of French cars, has publicly stated that Renault cannot afford to fight a "price war" with Tesla and Chinese competing car companies. According to the UBS report, about 70% of Renault's sales come from Europe, but its market share in Europe is only 10%, making it "one of the most risky companies in the European market." In China, French cars are already marginalized, with a negligible market share of less than 0.5% in China.
The EU-China Chamber of Commerce issued a statement on September 13 that China's electric vehicles and upstream and downstream industry chain enterprises continue to innovate and accumulate an overall industrial advantage in the fierce Chinese local market, which is not formed by the so-called huge subsidies. Industrial advantages are reflected in price advantages. Some market participants said that the EU's launch of countervailing duty investigations will not affect the rise of China's electric vehicles, and to some extent, countervailing duty investigations may become an accelerator for Chinese car companies to go overseas. Analysts at the Gasch Automotive Research Institute believe that if the EU launches countervailing sanctions, Chinese car companies are bound to accelerate the process of localized factory construction and localized operation in Europe.
At present, a number of automakers have confirmed that they will build vehicle base projects in Europe. SAIC MG sold 150,000 units in the European market from January to August, a year-on-year increase of 1.5 times, and its model MG 4 sold more than 30,000 units in the first half of the year, entering the top ten European pure electric vehicle sales. According to the Securities Daily website, SAIC Motor announced on the afternoon of July 4 that it is currently planning to establish a vehicle plant in Europe. BYD's July sales in the European market increased 1.8 times year-on-year, and the company also said at the 2023 Munich Motor Show that it plans to confirm the location of its first European plant by the end of 2023.
▌ Cost advantage is difficult to shake China's electric car stings the EU China and Europe may go head-to-head in 2025
In recent years, China's exports of new energy vehicles have surged. From 2017 to 2022, China's exports of new energy vehicles increased from 170,000 to 1.12 million, according to the Passenger Association. As of 2022, Continental's exports to the EU accounted for about 47.1% of the value of electric vehicle exports, an increase of 22.1 percentage points compared with 2017. The McKinsey report pointed out that the share of European car companies in the European and Chinese markets has been shrinking since 2019, of which the European market share has decreased by 6%, and the Chinese market share has decreased by 5%. International investment bank UBS expects Western automakers to lose one-fifth of their global market share as China's electric vehicles rise.
The automotive industry has long been Europe's core industry, providing 14.6 million jobs, or about 7% of the EU's GDP, and generating an annual trade surplus of 70 billion to 110 billion euros for Europe over the past decade, but it has been slow to move towards electrification and intelligence in recent years. In contrast, China's new energy automobile industry is in a period of accelerated development and maintains a leading edge in technology and cost. From a technical point of view, China occupies 76% of the world's power battery production capacity, occupying an absolute position. The European power battery industry is weak, and the investment per unit capacity is more than twice that of China's power battery companies. In addition, after dismantling the 2022 BYD Seal, UBS found that 75% of the parts of the model are manufactured in-house, and the self-supplied parts rate is twice the global automotive industry average. According to UBS analysis, even if BYD sets up factories in Europe, it still has a 25% cost advantage compared with North American and European car brands.
Benefiting from the cost advantage, the price of China's new energy vehicle enterprises is more competitive. The price of products in the European mass market is concentrated in the range of 20,000-40,000 euros, which is also the main market for most new energy brands in China. Although the price of new energy products exported by Chinese car companies to Europe is about 1 times higher than that of China, there is a price advantage of about 20% compared with the new energy models sold by European car companies. For example, the BYD Dolphin starts at just 29,000 euros (about 226,000 yuan, and its domestic price is 116,800 yuan), and the starting price of SAIC MG4 is 28,400 euros, far lower than the 40,000 euros of rival Volkswagen ID.3. According to a statistic by research institute JATO Dynamics, since 2015, the average price of electric vehicles in Europe has risen from 49,000 euros to 56,000 euros, in the United States from 53,000 euros to 64,000 euros, and in China, from 67,000 euros to 32,000 euros.
According to the article "Europe, "Can't Stop" Chinese Car Companies" on September 20, a number of sources show that in order to cope with the competition of Chinese car companies, Volkswagen, Renault and Stellantis Group three major car companies plan to cut the production cost of electric vehicles and launch more affordable electric models, all priced at about 25,000 euros, concentrated in two or three years. It is expected that around 2025, when the European factories of Chinese car companies are completed, head-to-head confrontation with European companies will officially begin.
(Cai Lian News Agency, Xuanlin)