2023-10-19 08:04:02
The rapid growth of the Chinese automotive market has long represented a major opportunity for European vehicle and OEM manufacturers as the country sought foreign investors. The situation has changed and now it is China that poses a threat to European producers, who are struggling to gain competitiveness in the face of adversity.
This is highlighted by the recent report from the European credit rating agency. Scope Ratings on competition between European and Chinese manufacturers. An analysis regarding the level of production and economic costs that shows a panorama of fierce competition.
According to Georges Dieng, director of corporate ratings at Scope Ratings, “the Chinese market, once an ‘El Dorado’, is becoming an increasingly paved terrain for European manufacturers, who now find that competitors from that country have become a huge threat to their sales in their own markets. “The cost and complexity of facing this double challenge are increasing.”
According to the figures his agency is considering, China represents a considerable volume of sales (between 30% and 40%), profits (between 25% and 30%) and a source of dividends for German original equipment manufacturers. But the change in cycle means that European manufacturers have to rethink their strategy in China. «From price and segment positioning to technological content, where vehicles with internal combustion engines are no longer the main engine, but rather electric vehicles are what drive market growth, mainly in the lowest price segments » says Dieng.
Car sales over the world total
China vehicle exports
car sales
on the world total
Exports
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However, manufacturers in Europe face a challenge as great as that of China, although less immediate, due to cost competitiveness. “Taking into account the tightening of European environmental regulations, it will be necessary to drastically reduce the production costs of European electric vehicles, guarantee the supply of essential raw materials and intensify cost-saving initiatives to compete with Chinese imports,” he says. The report.
In Europe, Chinese automotive brands are orienting their offering towards the premium segments that German brands still dominate. “We think they will struggle to break through due to a lack of brand recognition,” but tightening emissions standards “are killing the combustion engine segment in Europe, so Chinese brands could easily fill this gap.” profitably, thanks to its lower costs,” says Scope Ratings.
Europe is a particularly attractive market for Chinese manufacturers. Trade barriers are modest, even as the EU investigates China’s subsidies for electric vehicles. Its sales momentum is strong (67% in 2019-22). According to JATO Dynamicselectric vehicle penetration will increase to 23% in 2022, up from 3.6% in 2019.
European passenger car sales share of Chinese brands is small but rising rapidly, up to 2.7% in the first seven months of 2023 from 0.9% in fiscal 2021, according to Schmidt Automotive Research .
The increase in share is most impressive in the hybrid vehicle segment, at 8.2% in the first seven months of 2023, compared to 3.9% in 2021, driven mainly “by an unmatched price and greater quality ».
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