Chinese carmakers face challenges from Europe


Zhang Zhongyue


Chinese car companies are facing challenges in Europe. Great Wall Motor Germany AG (GWMD) has announced that it will close its German office in Munich and plans to terminate all employment contracts on August 31, 2024. This has triggered widespread attention from domestic and foreign media on the strategic adjustment of Chinese car companies in the European market.


The future of Chinese carmakers in Europe is uncertain


Great Wall Motor set up its European headquarters in Munich, Germany, in November 2021 as the core of its entry into the European market. However, in the face of growing challenges and numerous uncertainties in the European electric vehicle market, Great Wall Motor has decided to adjust its European strategy. The head of the public relations department of Great Wall Motor said in a statement that the closure of the German headquarters does not mean that the company is withdrawing from the European market, but in order to adapt to the current market environment and future development needs.


The European Union's anti-subsidy investigation into Chinese electric vehicles and potential punitive tariffs have created deep uncertainty about the future of Great Wall Motor and other Chinese car companies in the European market. Great Wall Motor emphasized in the statement that the company will continue to be committed to the European market sales business and after-sales service, these work will be handled by local dealers. The company will also sell cars in existing European markets, including Germany and the United Kingdom, and will be remotely supervised and managed by its China operations.


In order to better serve customers in the European region, Great Wall Motor plans to relocate its European parts warehouse from Nuremberg, Germany, to Amsterdam, the Netherlands, and will double the size of the warehouse. This move will ensure that Great Wall Motor can continue to provide efficient and convenient parts supply services to European customers.


Great Wall Motor's strategic adjustment in Europe may be just a microcosm of Chinese auto companies entering the European market, and if the tariff stick is finally brandished, more Chinese auto companies have to take risk-averse measures.


On October 4, 2023, the European Commission announced that it decided to launch an anti-subsidy investigation into electric vehicles imported from China. On October 25, the European Commission announced that BYD, SAIC Motor and Geely Automobile were the first three Chinese car companies to be investigated through sampling. It mainly covers pure electric passenger cars with nine seats or less manufactured in China, and covers the period from October 1, 2022 to September 30, 2023. The anti-subsidy investigation is focused on two aspects: first, whether companies that produce electric cars in China and export them to the EU receive subsidies from the Chinese government; The second is whether the import of subsidised electric vehicles originating in China into the EU is likely to harm the economic health of producers producing electric vehicles in the EU.


The investigation can take up to 13 months, and the Commission can impose provisional antitrust duties nine months after the start of the investigation. On June 12, the European Commission issued a notice saying that if a solution could not be reached with China, the plan to impose temporary countervailing duties on electric vehicles imported from China would be implemented from July 4. The commission said it would impose countervailing duties of 17.4 per cent, 20 per cent and 38.1 per cent on BYD, Geely Auto and SAIC, the three companies sampled. An average 21 percent countervailing duty on electric vehicle manufacturers that participated in the survey but were not sampled; Electric car makers that fail to cooperate with the investigation will be subject to a 38.1% countervailing duty.



Europe needs Chinese carmakers


The Geneva International Motor Show (GIMS), which has a history of nearly 120 years, has announced that it will cease to be held in 2025 and has no plans to hold it in the next few years.


"Uncertainty in the automotive industry and the decline in attractiveness compared to other major European shows are the main reasons for the cancellation," the Geneva International Motor Show's organizing committee said. However, organisers said the closure of the Geneva motor show would not affect their event in Doha, Qatar. In November 2025, the Doha Motor Show will continue and, following its debut in 2023, is expected to attract more international participants.


It is understood that the Geneva Motor Show, a prestigious auto exhibition event, is held in neutral Switzerland. Although Switzerland itself has no car manufacturers, but its unique geographical location, located in Germany, France and Italy and other auto manufacturing powers, which makes the Geneva Auto show has become an international stage for car manufacturers from all countries to showcase their products.


At its peak, the Geneva Motor Show attracts more than 120 exhibitors, including many luxury car brands such as Porsche, Jaguar, Ferrari and Lamborghini. These brands showcase their latest technological achievements, unique design concepts and beautiful automotive products, making the Geneva Motor Show the focus of attention for car lovers.


As the influence of the Geneva Auto Show continues to rise, it gradually ranks with the Munich Auto Show, the North American Auto Show, the Tokyo Auto Show, and the Paris Auto Show, and is known as one of the five major auto shows in the world. This not only highlights the Geneva Motor Show's position in the international automotive community, but also reflects the important role of Switzerland as a neutral country in promoting international exchanges and cooperation.


The end of the Geneva Motor show sent a clear signal that the European auto industry and market are showing sluggish growth, and the Chinese show is in sharp contrast. Taking the Beijing Auto Show held this year as an example, the exhibition area of 220,000 square meters, more than 1,500 exhibitors, 278 new energy models, 117 global debut models, 163 press conferences, this set of figures is enough to illustrate the vitality of Chinese auto companies.


Just imagine, if Europe is willing to accept Chinese auto companies in the local market for fair competition, the Geneva auto Show may be transformed.



The trend of "going to sea" is irreversible


Despite the challenges in Europe, the trend of Chinese cars going to sea has become irreversible. Cui Dongshu, secretary-general of the National Passenger Car Market Information Association, wrote that since 2021, with the outbreak of the new coronavirus epidemic in the world, the advantages of China's automobile industry chain with strong resilience have fully emerged, and China's automobile export market has performed brilliantly in the past two years. In April this year, the preliminary sales of Chinese autonomous car companies in some overseas regions reached 184,000 units, an increase of 57% year-on-year and a decrease of 12% month-on-month. From January to April, the total sales volume of autonomous vehicle companies in overseas markets was 720,000, an increase of 57% year-on-year. Autonomous car companies are doing well at retail in overseas markets. An important reason for the export growth of autonomous vehicle companies is the increase in the international cost performance of fuel vehicles and the surge in the export of new energy vehicles, coupled with Russia's contribution of nearly 800,000 units, so the number and average price of China's auto exports are growing strongly.


Due to the experience and lessons of China's home appliances and other industries going to sea, the strategy of automobile going to sea is increasingly clear and perfect, from KD assembly to localized production, overseas mergers and acquisitions, the overseas strategy of automobile companies is outstanding. At present, China's independent brand export has entered a new strategic stage of strengthening the base to build guerrilla areas in rural areas surrounding the city. Independent brands in overseas to build KD assembly as a start, gradually increase the construction of localization industry chain, with vehicle enterprises as the leader, parts and vehicles to go to sea with significant results, SAIC, Geely, the Great Wall and other great success. The export of independent vehicles has basically changed from the buyout mode to the distribution mode. Chery and other independent vehicle brands have built overseas localization business control centers, comprehensively supervised and improved the system capabilities of local sales and service outlets, and independent brands have gained better reputation in the local market.


It is worth noting that Chinese car companies have accumulated some experience in dealing with risks in overseas markets. According to Cui Dongshu, China has more than 2,000 cases of anti-dumping and countervailing duty investigations against foreign countries. From 1994 to 2023, 1,646 of the trade remedy cases initiated by the world against China were anti-dumping, accounting for 707%; Anti-subsidy 212 cases, accounting for 9%; Safeguard measures 392 cases, accounting for 17%; Special safeguard measures 89 cases, accounting for 4%. In 2023, among the trade remedy cases against China initiated globally, 189 were anti-dumping cases, accounting for 82.89%; 26 cases of anti-subsidy, accounting for 11.40%; There were 13 safeguard measures, accounting for 5.70%. In 2023, anti-dumping was one of the trade remedy cases launched by China against the world. In 2023, 63 of the world's trade remedy cases against China were anti-dumping, accounting for 72%; Anti-subsidy 12 cases, accounting for 14%; Safeguard measures 12 cases, accounting for 14%.


Chinese auto companies have a strong sense of risk prevention in foreign trade. In more than 10 years, they have encountered many disasters in Russia, Iran, Algeria, Brazil, etc., which has cultivated rich experience in foreign trade of Chinese auto companies, especially the strategic differences in the entry of Chinese independent brands into the Russian market, reflecting the pragmatic risk prevention of auto companies.


In Cui Dongshu's view, China's automobile exports have created a worldwide miracle, which is a huge achievement that multinational car companies do not understand. The EU's investigation of China's electric vehicles is a reaction to the strong foreign stress of China's autonomous electric vehicles.


Chinese carmakers cannot give up easily


Despite the challenges in the European market, it has to be said that Europe is a very desirable car market.


The EU automobile market has a high development maturity, and the scale of production and sales and the number of vehicles are among the top in the world. Car ownership is large and the average service life is long, which provides stable replacement demand for new car sales. In the new energy vehicle market, Europe is one of the most aggressive markets to encourage new energy vehicles, the acceptance of electric vehicles is high, and the electric vehicle ecosystem is also relatively perfect. The advantages of Chinese car companies in electrification and intelligence will become a key fulcrum to leverage this market.


In terms of consumer preferences, European consumers have high requirements for vehicle quality, performance and design, which provides opportunities for Chinese car companies to showcase their high-end products and technologies. Through the sale of economical fuel vehicles and the introduction of electric vehicles, the proportion of Chinese car companies in the European market has been increasing year by year.


It is reported that NiO has recently made new moves in Europe. On May 27, NIO House was officially opened in Amsterdam, the capital of the Netherlands, which is the eighth NIO House opened by NIO in Europe. Since entering the European market in 2021, NIO has laid out 43 changing stations, 46 charging piles, and accessed more than 500,000 third-party charging piles in Europe. There are 7 NIO centers, 8 NIO Spaces, and 55 NIO service centers.


The opening of NIO House in Amsterdam has fully demonstrated NIO's brand culture in Europe. It is said that this ancient building with a history of more than 130 years has eight floors of space, with a total area of more than 2700 square meters, in addition to providing WEilai owners with rest, reading, social and other experience needs, but also to expand the test drive, office, exhibition, lecture, party and other social space needs.


Li Xianjun, director of the Automotive Development Research Center at Tsinghua University, suggested: "Chinese car companies should actively respond to the restrictive policies in Europe, or they should unswervingly go in, deeply cultivate core technologies, and create cost-effective products. European consumers will not refuse."


China Automotive News, June 14, 2024