Although only few of the 1.4 million electric vehicles on German roads are made by Chinese manufacturers, it is often said that they could soon be dominating the market.
How would German and European car manufacturers be affected by massive imports from China?
Compared to February, the number of registrations in March has dropped dramatically. Is the mobility boom already over?
There is a dip in demand right now, but I do not think it will last. Subsidies have been removed, but manufacturers have responded by adjusting prices. In a few months, or a year at the latest, the situation will change significantly.
Isn’t it possible that larger issues, such as the slow deployment of charging infrastructure or high electricity prices, are blocking the path to e-mobility?
Unfortunately, the price of electricity has not developed as we expected. But if you charge your car with your own PV system or have a cheap electricity supply contract, you can get by relatively cheaply on domestic electricity, but you have to calculate a little more carefully. The more you depend on public charging infrastructure, the harder it is to calculate costs. There are still some benefits, such as the suspension of the motor vehicle tax until 2028 or the GHG quota. They can save you between 100 and 200 euros per year. Maintenance costs are also cheaper. And it depends on how you finance it – for example, if you lease your car, there is no residual value risk. It is difficult to generalize and say how much you can expect to save.
Let us say these benefits convince you to buy an electric car, you would have to choose between different manufacturers. Some of them are from German and European car manufacturers, others from China. For example, BYD has replaced Volkswagen as the top-selling manufacturer in China and has sold many more vehicles than Tesla. What can we expect from Chinese manufacturers?
It is safe to say that Chinese manufacturers will permanently dominate the Chinese market. The products are good, and Chinese manufacturers understand their market and know what products to offer. This is not the case for exports, as consumers are reluctant to buy Chinese cars. That is why we do not see many Chinese car brands on our roads. But that too will change. There have been car-exporting nations in the past that have come to Europe without completely overwhelming the European car industry. First it was the Japanese and then, in the early 1990s, the Korean manufacturers. They were able to secure market shares and are now established competitors. It will be similar with China. It will take some time for the Chinese industry to establish itself and for brands to build a good reputation here.
There are currently very few Chinese brands on European roads. But the first big cargo ships are already on their way. Will we be overrun by Chinese manufacturers this year?
Certain brands will definitely see double-digit growth. BYD is one of the largest suppliers with a wide range of products, which they will gradually introduce in Europe. The models BYD will offer in Europe will only be a small part of the product range in China. The manufacturer even went so far as to build its own ships in order to avoid the enormous charter rates for sea transport. This allows them to offer their vehicles at an even lower price. The manufacturer will certainly try to flood the European market. However, it will take some time for people to trust this new brand, so sales will not skyrocket right away.
BYD is already somewhat known for producing battery storage systems. Do you have any projections for how much market share this Chinese manufacturer will have, assuming they get half a million registrations?
Next year, it could be in the single digits, between eight and nine percent. In the long term, it could settle somewhere between 15 and 20 percent. That would be a large share, but it also depends on how the political situation develops.
What is the difference between the Chinese and the German markets, and which Chinese models could be successful in Germany?
In China, it is important that everything is connected and that devices can communicate with each other. Chinese customers value connectivity more than, say, a perfectly balanced chassis or great handling. The vehicles have colorful interiors, giving them a playful and almost conceptual appearance. Many e-cars in China are simple and cheap. They would not do well in our market, simply because they do not fulfill our requirements.
VW has announced its ID2 in Germany, while Tesla introduced its Model 2. It will still be a while before either of them hits the markets. Does China have models that are just waiting to be shipped to us to supply the passenger car market?
A model that is produced in China and already quite successful on the market is the Dacia Spring, jointly produced by Dongfeng and Renault. BYD will export its Dolphin Mini. It is already available in South and Central America, and has recently been confirmed for Europe. The basic version is offered in China for about 10,000 euros, but the level of equipment will certainly be adapted for the European market. Including VAT, customs, expected margins and with the adapted equipment, this vehicle will cost around 20,000 euros.
Margins obviously depend on the sales organization. Tesla, for example, has taken the digital route, while Chinese car manufacturers are taking the direct route and launching a European model from the outset. What are current marketing trends in Germany?
It is still mainly the traditional way through car dealerships. The online-only distribution that Tesla uses may be very attractive, because it cuts out the dealers who also want to make a profit. But this model has not been profitable for other competitors who also rely on an online channel only. MG, owned by the Chinese corporation SAIC, and BYD are now sold at car dealerships that previously sold Ford and BMW. Customers are more immediately engaged when they can have a look at the vehicle at the dealership. This classic distribution channel seems to work better than a distribution network via single-brand dealerships. Flagship stores in established locations are more about brand awareness than sales contracts.
Are there any conflicts when car dealers offer multiple brands?
A customer interested in a BMW X1 or its electric version is unlikely to suddenly choose a BYD. Prestige and branding are incredibly important, especially for expensive segments. If a BMW or Mercedes is too expensive for a customer, they are more likely to choose a BYD or an MG. This is how the different brands at a dealership complement each other.
How quickly can Chinese vehicles be delivered?
That depends on the selection of models. Chinese car manufacturers have very limited range. The choices are usually limited to the paint colors and interior design. The vehicles are all ready-made and regularly shipped to Europe. Usually, the model you want is already on a dealer's lot and can be delivered quickly. If that’s not the case, you will have to wait for the next shipment.
When you look at brands such as MG, Dacia, Volvo or Volkswagen: how “Chinese” are each of their cars?
Batteries are the most expensive component of e-cars, and most are made by world leader CATL in China. CATL and other Chinese cell manufacturers already have factories in Europe. But globalization is making it hard to define how “Chinese” a car is. Some established car manufacturers, such as Volvo with its EX90, Polestar, Lotus Cars, BMW with its iX3, all Smart models or VW with its ID.5 and SEAT with its Cupra spin-off, have production facilities in China and supply the global market from there.
What about German and European car manufacturers – how much do they produce locally and will that be enough to withstand the price wars?
Much of the added value is being brought back to Europe through the establishment of battery production sites, as countries here are realizing that this heavy dependence is starting to become a problem. Raw materials will still need to be imported, but not necessarily from China. Some components, such as electric motors, can also be manufactured here, further reducing the dependence on supply chains.
Innovation is one way to keep value-added chains in Europe. What technological leaps can we expect in the area of e-mobility?
The European – and especially the German – car industry is well positioned in terms of fast charging. The Porsche Taycan, with 300 kW of charging power, is a prime example. For now, it remains a premium product, but the technology will become more affordable over time and will eventually make its way into mid-range cars. When it comes to vehicle-to-grid, there’s a lot of potential in bidirectional charging. We will continue to see a stable growth in battery development, where the established technology is refined. Big leaps in innovation will probably come from outside. The German industry has great opportunities to refine the latest technology. We’re seeing this in cell-to-pack, where the cell is integrated into the battery. In addition to e-cars, driver assistance systems and self-driving cars are another field in which – contrary to popular opinion – the German industry can hold its own.
