When it comes to Chinese electric vehicle manufacturers vying for market share, the competition is fierce.
At the International Motor Show in Munich, Germany, a man is seen polishing an Atto 3 car from the Chinese car manufacturer BYD on September 4, 2023. This electric vehicle has been gaining popularity among Europeans, reflecting the growing interest in sustainable transportation options. The image credit goes to Christof Stache/AFP via Getty Images.
When Sjoerd Janssen was in the market for a new car in Denmark, he prioritized purchasing an electric vehicle due to environmental concerns and attractive government incentives for switching from traditional gas-powered cars. As an IT manager needing a daily commute vehicle that could also accommodate family road trips, Janssen explored various options, including test-driving a Tesla, considering a Nissan, and almost opting for a Volvo. Surprisingly, he ultimately chose the Atto 3, a compact SUV from the Chinese automaker BYD, mainly due to its competitive pricing compared to other brands.
Janssen recalls that BYD’s offer was approximately 20% lower than Volvo’s, coupled with additional perks like complimentary charging for two years. Despite the unfamiliarity of Chinese automakers like BYD, Nio, and Geely among most Europeans until recently, China’s strong manufacturing background and expertise in battery production for electric vehicles have positioned these companies as formidable players in the global automotive industry. With substantial investments, subsidies, and tax incentives, China is propelling its auto companies, including electric car manufacturers, to the forefront of the market.
After thorough consideration, Sjoerd Janssen settled on the Atto 3 from BYD, marking a shift towards embracing unconventional choices in the electric vehicle market. The rapid success of Chinese EV manufacturers has surprised many observers, as these companies have swiftly gained dominance in their home market and are now setting their sights on international expansion to compete with established foreign rivals. Scott Kennedy, a senior adviser specializing in Chinese business and economics, notes the significant transformation of China’s auto industry driven by advancements in electrification, positioning Chinese electric carmakers to compete on a global scale.
Chinese Electric Carmakers Compete with Innovation
Chinese electric carmakers are surpassing many people’s expectations by undercutting foreign competitors in the local market. Their emphasis on affordable vehicles has given them a significant edge.
However, the success of Chinese automakers is not solely attributed to pricing strategies. Analysts point out that Chinese consumers have a keen eye for quality, prompting automakers to enhance their technological capabilities and prioritize innovative designs.
According to Mark Wakefield from the global consulting firm Alixpartners, “Chinese customers have a strong preference for stylish and technologically advanced vehicles. This goes beyond basic features like smartphone integration; it includes advanced technologies such as assisted driving. The adoption rate of these advanced features is notably higher in China compared to the United States.”
Chinese electric car manufacturers are in fierce competition, with companies like BYD, backed by Warren Buffet, transitioning from a battery producer to a major player in the automotive industry by the early 2000s. Surpassing Tesla, BYD now leads the global electric vehicle market, showcasing China’s determination for worldwide dominance. Nio, another key player, aims to extend its presence to 25 countries and regions in the coming years, mirroring the international aspirations of companies like Geely. The image depicts an employee at a Nio factory in Hefei, Anhui province, illustrating the grand ambitions shared by Chinese automakers.
Focusing on the European Market
Misconceptions about Chinese electric carmakers
Chinese electric carmakers, including BYD and Nio, have made significant strides in the European market by offering competitive pricing, often undercutting their competitors by up to 25%. This pricing strategy mirrors their success in the domestic market.
In Denmark, for example, the BYD Atto 3, a model favored by customers like Janssen, is priced at 38,000 euros, while Tesla’s Model Y starts at 49,000 euros even after recent price reductions by Elon Musk’s company.
Despite the Model Y’s superior size and performance compared to the Atto 3, the affordability factor has played a pivotal role in attracting customers like Janssen to opt for Chinese electric carmakers.
Chinese Electric Carmakers Compete: Overcoming Quality Perceptions
On the inauguration day of the 20th Guangzhou International Automobile Exhibition in Guangzhou, China’s southern Guangdong province on December 30, 2022, attendees admired a Geely Panda Mini.
STR/AFP via Getty Images
Visitors observe a Geely Panda Mini at the commencement of the 20th Guangzhou International Automobile Exhibition in Guangzhou, Guangdong province, China, on December 30, 2022.
Recent developments indicate that Chinese electric vehicle manufacturers are addressing their primary challenge: the perception of subpar quality.
While Chinese electric vehicles may not yet match the standards of established brands, current models from China have significantly enhanced, as noted by Wakefield.
“These vehicles are highly sophisticated. While they may not reach the quality benchmarks set by American and European counterparts, the progress made is substantial, rendering the disparity almost negligible,” he explains.
Growing Concerns in Europe
European car industry leaders have expressed growing concerns about the increasing presence of Chinese electric carmakers in the market.
During a prominent auto exhibition in Munich last year, BMW CEO Oliver Zipse highlighted the rapid rise of Chinese brands, which had doubled in number compared to previous years. Zipse emphasized that these Chinese car manufacturers represent a significant and immediate threat to the European auto sector.
The surge of Chinese electric vehicle (EV) producers has not only caught the attention of industry executives but has also raised red flags for European governments and regulatory bodies.
Last September, the European Commission initiated an inquiry into China’s alleged unfair trade practices, particularly focusing on the substantial subsidies directed towards the Chinese automotive industry.
European officials, including Commission President Ursula von der Leyen, have expressed concerns about the influx of low-priced electric cars in global markets, which are heavily subsidized by the Chinese government.
As part of the investigation, which may span up to 13 months, the European Union is evaluating the possibility of imposing additional tariffs on Chinese EV imports, potentially exceeding the current 10% duty imposed on the vehicle’s value.
In response to the probe, Beijing has criticized the EU’s actions as “blatant protectionist behavior,” indicating tensions between the two economic powerhouses.
European Commission President Ursula von der Leyen addressed the media following discussions with Chinese officials at the China-EU Summit in Beijing on December 7, 2023. A formal investigation into China’s trade strategies has been initiated by the Commission. The image credit for the event goes to Greg Baker/AFP via Getty Images.
The Competition and Reliance on China
Chinese electric carmakers compete in their home market, facing challenges after the removal of subsidies for domestic consumers, impacting automakers’ profits.
Despite this setback, Chinese companies remain resolute in expanding their presence globally.
According to Wakefield, “They have taken the lead, moving beyond the early adopter phase and penetrating the mass market successfully.”
Despite the possibility of increased trade restrictions in Europe, the worldwide automotive sector remains heavily reliant on China for both battery production and the refinement of essential raw materials. Chinese electric carmakers compete significantly in the market, controlling a large portion of the materials used in EV batteries. Any potential imposition of tariffs on Chinese imports may trigger retaliatory measures from Beijing, ultimately resulting in higher costs for electric vehicles globally.
Exploring the Possibility of Chinese Electric Carmakers Competing in the U.S.
Concerns have been raised in the U.S. regarding the reliance on China for batteries and the potential competition posed by Chinese automakers.
Currently, Washington has imposed significant tariffs on Chinese electric vehicles, including a 27.5% levy introduced during the Trump administration on imports of Chinese-manufactured cars, both electric and gas-powered.
Efforts are underway in the U.S. to diminish China’s influence in the electric vehicle supply chain. President Biden’s extensive climate legislation, passed in 2022, mandates that a specific portion of an electric vehicle, including components of its battery, must originate from North America to qualify for a tax incentive.
These measures aim to strengthen the local supply chain for electric vehicles, encompassing everything from raw materials to processing to final production. Further initiatives are being contemplated.
The Biden administration is evaluating the possibility of increasing tariffs on certain Chinese products, including electric vehicles.
U.S. Lawmakers Unite in Targeting China’s Economic Practices
There is a strong consensus among U.S. lawmakers from both political parties regarding the necessity to address China’s economic strategies. Congressman Mike Gallagher from Wisconsin highlighted the widespread impact of the Chinese Communist Party’s economic coercion on companies across the Midwest, affecting thousands of jobs and communities throughout America. Gallagher, who leads a subcommittee focused on trade and competition with China, joined a bipartisan coalition urging the administration to consider implementing additional tariffs and exploring methods to restrict Chinese companies’ exports to the U.S.
Sjoerd Janssen Showcases Chinese Electric Carmakers’ Competition
Sjoerd Janssen exhibits the competition among Chinese electric carmakers with his BYD Atto 3, emphasizing the advancements in the industry.
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The Impact of Chinese Electric Carmakers in the U.S.
Currently, the U.S. market poses significant challenges for Chinese EV manufacturers, deterring their entry.
However, it is anticipated that Chinese automakers will eventually set their sights on the U.S. market, raising concerns.
After purchasing the BYD Atto 3 over six months ago, Janssen and his family from Denmark are thoroughly enjoying their electric vehicle, having covered 10,000 kilometers for various purposes.
Janssen highlights the cost-effectiveness of driving electric, leading to more weekend getaways and daily commutes with the BYD Atto 3.
Regarding the EU’s protectionist stance against Chinese EV manufacturers, Janssen criticizes it as “cheating on your inhabitants.”
He foresees a growing trend of European consumers embracing Chinese electric vehicles, drawn by their quality and affordability.
Expressing his high satisfaction, Janssen remarks, “I am an exceedingly content customer, perhaps overly so.”
When it comes to the competition among Chinese electric car manufacturers, it is a significant aspect to consider.
