The European automotive industry is undergoing a sea of change, especially due to consumers transitioning to electric vehicles (EVs). Did you know alternative energy vehicle sales shot up to a whopping 4.4 million units in 2022? Chinese EV manufacturers have strategically evaluated the market by fostering partnerships with local companies, along with pushing brand marketing by emphasizing on environmental sustainability and advanced technology, which aligns with the growing global control for climate change.
How the Chinese entered the scene
China realized the potential of EVs almost 15 years back, and invested exorbitant resources to create a competitive EV ecosystem. That early preparation is the main reason the Chinese are now leading the global EV landscape. As battery operated electric vehicles (BEVs) eventually grow to account for all new car sales in Europe, Europe-made cars are likely to be substituted by Chinese electric vehicles – irrespective of whether they are manufactured by a Chinese, American or European company.
The impact on OEMs
A massive sales offensive from Chinese manufacturers has already begun. In Germany, Europe’s largest market, the sales of Chinese BEV imports went up to almost 30% of the market in the first quarter. That’s up from just under 8% in the same period of 2022. Europe has always been an advocate for quick adoption of net zero CO2 policies, but it hasn’t taken into account the economical damage. Action has to be taken to raise tariffs, boost battery and other technology, or persuade China to build cars in Europe. If ignored, Chinese-built BEVs could cost European automakers an estimated €7 billion a year in lost profits by 2030.
It’s impossible to ignore the importance of the automotive sector when it comes to the European economy as a whole. Thinking ahead, policymakers could map out reciprocal trade terms with China and the US. They can even promote BEV adoption through improved charging infrastructure, by installing charging stations at convenient locations. Allowing Chinese investment in local car assembly could add more value to the region. It will boost self-sufficiency in raw materials that are crucial for manufacturing batteries, while investing in next-generation battery technologies.
Impact on dealerships
China has gained a dominant hold on the raw materials and batteries required for EVs, and are now making a play to ensure their cars are on roads in Europe. Their strategy when expanding into new markets, especially Europe, has been to build showrooms and ink deals with existing dealers everywhere from Paris to the northern reaches of Scandinavia.
The focus right now is clean energy, especially because Europe aims to ban the sale of conventional gasoline cars by 2035. At the same time, Chinese brands are offering low-cost EVs for the masses. European consumers are also more climate conscious, which is why they are looking to purchase vehicles to minimize dependence on fossil fuels at a reasonable price. If OEMs can successfully push for adoption of BEVs, dealerships can pad their bottom line by not just selling cars, but offering after-sales services tailored exclusively for these vehicles, along with charging facilities.
What can we expect in the upcoming years?
If the domestic market shares of Chinese manufacturers go up to 75% by 2030, total sales in China by European carmakers would fall by 39%. Local production would drop from an estimated 4.4 million units to 2.7 million units in 2030. If European imports of Chinese vehicles reach 1.5 million units in 2030, the value added impact on the European economy would stand at €24.2 billion in 2030 for the automotive sector, the equivalent of 0.15% of the region’s 2022 GDP.
The automotive industry is on the brink of a total shake-up, due to a rapidly evolving supplier base, changing customer needs, and tough competition. Chinese electric vehicles in the European electric vehicle market is a classic case of supply and demand, and the offering of affordable cars has made them all the more lucrative to consumers.
