Automotive News Europe — 2024-06-07
Automotive Industry
Automakers including Hyundai, VW Group and Renault say they will play to their strengths to defend market share, but they also call for a level playing field as the EU prepares to rule on new tariffs.
Leading European automakers say they are growing increasingly anxious about the threat from low-cost Chinese electric vehicles but are optimistic they can defend their market share.
Sales of Chinese-made vehicles – full-electric and internal-combustion based – have surged in recent years, not only from China-based automakers such as MG and BYD but also imports from Tesla, Dacia and BMW, among others.
There were about 300,000 full-electric Chinese-made cars sold in Europe in 2023, compared with 150,000 in 2021, according to a recent study by Rhodium Group.
The European Commission is expected to release results of an investigation into Beijing’s support for the domestic EV industry, with the potential for tariffs to rise to about 30% from the current 10%, according to news reports.
The head of the European Commission, Ursula von der Leyen, in 2023 warned of a “flood” of cheap EVs kept artificially low by Chinese state subsidies.
For example, BYD says it will start selling its Seagull compact EV in 2025 in Europe at a price below €20,000 – although it sells the Seagull for about €10,000 in China, meaning it has a lot of margin to sacrifice in a price war. BYD in 2023 overtook Tesla as the biggest global EV maker.
While automakers await the Commission’s decision, they are preparing to match the Chinese in technology, if not price.
Hyundai Europe Chief Marketing Officer Andreas-Christoph Hofmann said the automaker is holding internal discussions about how to cope with increasing Chinese competition and what kind of measures it can take to defend its market position.
“We really should stick to our roots and our assets and our USPs,” Hofmann said at a recent Reuters event on the Future of Automotive in Munich. “To strengthen our strengths could be a good start. The market and customer will decide.”
'The window is closing'
Volkswagen Group, meanwhile, is urging European authorities to install a regulatory framework over the next few years to help ensure the survival of German and other domestic automakers. Otherwise, VW won’t be on an even footing to realistically compete with the Chinese on cost, Thomas Schmall, the VW board member responsible for technology, said at the Reuters event.
“We need a kind of master plan. The window is closing. We have two to three years. If we don’t, it will be really tough to survive as a German industry,” he said.
This intensifying Chinese competition is sharpening the focus on speed as a key differentiating competitive factor. “In the past it was size. Today it is speed,” Schmall added.
Grab your partners
The competition from China and other big changes in the industry such as electrification and digitalization have the potential to radically reshape the European auto sector by the end of the decade, Schmall and others said.
One solution is partnerships. Already, Stellantis has joined up with China’s Leapmotor to sell and potentially build Chinese-developed EVs in Europe.
Schmall said “it takes two to tango” as automakers eye prospective new dance partners. As for the speed of the music, he said, “it will be rock and roll, and for sure there will be fewer dancers on the dance floor.”
Cutting costs, but carefully
European automakers aren’t just battling Chinese competition, they say.
Another hurdle is European regulations, namely “the rules we have to work with in Europe,” which have made cars more expensive over the last two decades, Renault Italy CEO Raffaele Fusilli said at the Reuters event.
To combat this, Renault wants to shave 40% off production costs by 2027 and reduce production time by one-third. At the same time, the aim is also to be profitable in the long term.
“Everyone wants to be sustainable and green, but we have also got to be profitable,” Fusilli said. “Everybody wants to go to heaven but nobody wants to die.”
This means profound change ahead for Renault, including “probably” introducing smaller, more efficient batteries at a reduced price. The automaker doesn’t plan to cut the number of employees or plants but rather is planning for growth, Fusilli said.
Fusilli remains confident that despite the growing inroads from China, “We have time to fill the gap.” European carmakers will succeed, albeit not overnight, he said: “It is going to happen, even if not quickly. And we will win.”