European Automakers Challenged by Chinese EVs at Munich Auto Show

Industry analysts and executives said at Munich’s IAA Mobility Show that European automakers must demonstrate their ability to compete with new Asian players in the electric age on everything from product and financial strategy to controlling the supply chain.

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The number of Chinese companies at the event has more than doubled, and about 41% of the exhibitors are from Asia, including producers of EVs and batteries like BYD, CATL, and XPeng. Renault’s engineering director, Gilles Le Borgne while talking to reporters said:

“Europe needs to stop being naive from a macroeconomic point of view in the face of China. It must be a battle. They (Chinese EV makers) are clearly very competitive in the electric car value chain. I think they are a generation ahead of us. We need to catch up very quickly.”

Chinese brands are now responsible for 8% of new EVs sold in Europe so far this year, up from 4% in 2021 and 6% last year, as revealed by automotive consultancy Inovev. According to Fabian Brandt of another consultancy firm Oliver Wyman:

“What used to be a performance for the German car industry to demonstrate its extremely strong position is now a meeting of equals between progressive players from around the world, especially China. The arrival of Chinese EV makers has raised concerns they will undercut local automakers and come to dominate EV sales.”

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Mercedes-Benz CEO Ola Kallenius described the road to electromobility as a marathon in which the company is currently only at kilometer eight or nine when compared to Chinese electric carmakers. On the other hand, BMW CEO Oliver Zipse said in reference to the rapid penetration of Chinese EV makers into Europe.

“Chinese brands pose an “imminent risk” to Europe’s mass-market automakers. The base car market segment will either vanish or will not be done by European manufacturers.”

Auto industry analyst Ferdinand Dudenhoeffer said the Chinese are “world champions” at making batteries, which can make up 40% of an EV’s cost. German politicians must ensure that Chinese battery manufacturers are “not driven out of the country with stupid decoupling strategies,” according to Dudenhoeffer, who added that their establishment in Germany is helping to lower EV costs.

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Xpeng said that it will enter the German and French markets starting in 2024 with the G9 and G6 SUVs and P7 large sedan. Xpeng’s visibility soared after VW recently announced it would work with the company to develop electric models for the Chinese market.

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BYD showed off its new electric offerings for the European market, including the Seal U compact sport utility vehicle and the Seal sedan. The latter will start from 44,900 euros ($48,470) in Germany, putting it in direct competition with Tesla’s Model 3 and several of VW’s cars. Other notable Chinese cars at the show included Dongfeng Forthing U-Tour V9, Avatr 12, and Leapmotor C10.

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However, according to Xpeng President Brian Gu, while European carmakers currently lag behind China, they have made a “huge commitment” to EVs with partnerships and large investments in technology. Gu said:

“I would never discount the large (carmakers) trying really hard to come back and focus on this important transition.”

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