[ad_1]
My blog title is not meant to suggest that there is something about Chinese cars that you need to be prepared for in terms of driving experience or ownership.
In contrast, the quality and general competitiveness of cars coming from major Chinese manufacturers now appear to be on a par with European volume brands.
Many people don’t realize that their BMW, Polestar or Tesla comes from a Chinese factory.
My point is that after more than a decade of anticipating an onslaught from Chinese manufacturers, there is now good reason to assume that the next two to three years will see a massive push by domestic Chinese brands into the European market.
The reasons relate to how the domestic market in China has developed and the product offerings that are becoming an increasingly large part of China’s brand portfolio.
Over the past decade, Chinese brands such as Chery, Great Wall, JAC and others have exported extensively, but the product they had at that time was an ICE powertrain and the quality was inadequate for a mature market.
But they made a lot of headway in the Middle East and Africa, Oceania and South America, all markets where they held 7%-8% market share last year.
However, the Chinese government introduced policies in 2009 to encourage the development and sales of what they call new energy vehicles (NEVs), partly to address pollution problems in major cities, but also as an industry jump strategy to allow Chinese manufacturers to thrive. competitive advantage over their slower moving western competition.
China’s domestic market has also grown strongly over most of the last decade and NEV incentives are offered for domestic registrations, so there is little reason for manufacturers to take on the additional investment and risk required to export when they can find closer customers. House.
We then had the pandemic, imposed on China with a zero Covid policy, which reduced demand but also limited supply. While the market has recovered there is no expectation that the market will return to the double digit growth seen in the past so manufacturers are now looking to export as a way to support their growth.
This can be seen from the relatively stable export volume of under one million units per year from 2011 to 2020 with an annual growth of only 2% compared to a doubling of volume in 2021 and a further growth of 51% in 2022 bringing the total to 3.2 million units. export.
Most of these are ICE products for non-European markets, but the highest growth rates are on BEVs from Polestar, Tesla, and also from domestic Chinese brands such as BYD and MG (SAIC).
Given that they now have competitive BEVs, not only in performance but also emerging in terms of product cost, the only logical market for them to focus on is Europe where electrification rates are far greater than in America, Africa or elsewhere. parts of Asia, and domestic manufacturers only have limited offerings at the more affordable end of the market.
China dominates the battery supply chain with a global market share of between 65% and 100% in all critical battery components. This is a driver of their cost competitiveness, but also ensures a more reliable supply than manufacturers in Europe who depend on the same Chinese sources.
To date, the presence of Chinese brands such as BYD, Great Wall, Nio and XPeng in Europe has remained relatively small in volume and was initially focused on only a few markets, most notably Norway for BEVs.
The exception was MG which, after they switched to a purely export model approach, ramped up very quickly to reach just over 1% market share in Europe last year, ahead of brands like Land Rover.
Independent importer and major dealer groups are keen to get involved and several have signed up either as distributors or as one of a few dealer partners including Emil Frey, Hedin, Louwman and Pendragon.
If we see these brands moving forward at the same pace we’ve seen in the last two years, then that could mean over 300,000 additional BEVs imported into Europe each year from Chinese brands in a few years, representing around 2% market share. combined.
The implications are significant. Such a share is higher than some of the older brands have and will represent around 20% of the total BEV market forecast for 2024, mainly focusing on the lower and mid-range segments.
As established manufacturers struggle to meet their fleet emission targets, they will be forced into price wars or more self-registration, both of which will hurt residual value.
I don’t believe that protectionism is a useful lever in the long term when it comes to protecting the industry, so don’t advocate it as an approach, even though surely others will.
From a European perspective, what needs to happen is that established manufacturers must be prepared to defend their positions from the start rather than lose their footing and be forced to try to win back customers after they have been lost. Let’s hope for a good, clean fight!
Some of the data used in compiling this blog belongs to Bernstein
Steve Young is managing director of ICDP
[ad_2]
Source link
