No big wave: And where is the Chinese electric car tsunami now?

Not a big wave
And where is the Chinese electric car tsunami now?

By Diana Dittmer

Listen to article

This audio version was artificially generated. More info | Send feedback

At the IAA in the fall, panic spread among German car manufacturers: a flood of electric cars from China was on the horizon. So far, however, there is no sign of this. But the level could rise as early as next year.

When the car manufacturers gathered at the IAA in Munich at the beginning of September for the industry meeting, there seemed to be only one topic: the industry’s fear of a real Chinese car tsunami. E-car manufacturers from the Middle Kingdom were clearly in the spotlight for the first time. BYD, SAIC or Nio and their electric vehicles were suddenly seen as competitive and technologically equal to domestic brands. German manufacturers, on the other hand, seemed like snobbers in the transformation from combustion engines to electric mobility. Dozens of electric car manufacturers from China, which are still springing up like mushrooms there, seemed to be preparing to quickly conquer the European market.

But it looks like this panic was premature. Contrary to expectations, the attack on the hunting grounds of the European car giants is still a long time coming. So far, there is no sign or sight of a triumphant Chinese victory. Nio boasts of having successfully brought five vehicle models onto the German market. But the sales figures are modest. The Federal Motor Transport Authority registered just 1,174 new registrations from January to October 2023. The market share of less than 0.1 percent is actually one of the weakest values ​​among the Chinese competitors. BYD had at least 3,084 registered new cars and Polestar had 5,742, which is still homeopathic in comparison. The share of Chinese brands in the German car market as a whole is only an economical two percent.

Nio not only represents the new self-confidence of Chinese car manufacturers. The company also exemplifies their startup problems. “The Chinese car manufacturers have made a big announcement about their European launch, but so far they haven’t been able to deliver much. Together, the big players from China BYD, Great Wall Motor and Nio sold around 8,000 vehicles in Germany in the first ten months of this year,” says Gregor Sebastian, senior analyst at the US research institute Rhodium Group, The immense trade surplus in the EU’s auto sector with China has “rapidly melted away”. However, a large part of these exports go to Western car brands, especially Tesla. “90 percent of Chinese electric car exports to Europe are Western companies, some of which, like MG, are now owned by China.” The former British brand was bought by SAIC years ago.

Possible EU sanctions, predatory battle, missing ships

The fanfare and drum roll have now fallen silent and the sweat of fear in the strongholds in Wolfsburg, Stuttgart and Munich has dried up for the time being. There are many reasons why the Chinese are having a harder time than expected. On the one hand, there are the problems in our own market, which is highly competitive. Not all electric car manufacturers in China will survive in the shark tank of e-mobility. “There is a rat tail of companies in China that are struggling to even achieve sustainable size,” says Sebastian.

In addition, investments in the new technology are high. Different batteries also play a role in the coasting speed. Nio, for example, uses removable batteries in its electric cars. So far there are only seven of these swap charging stations in Germany. Nio has therefore had a factory in Hungary to build these systems since this year. In one to two years, Nio could “put the rubber on the road,” says Sebastian.

But selling expensive electric cars is not a sure-fire success. Surprisingly, cars from China can’t necessarily score points in the West when it comes to price. Because Nio, BYD and Great Wall Motor have now adjusted to the prices of western providers. “They wanted to get rid of the image of low prices and poor quality and raised the prices considerably. But that is also a deterrent because you are ultimately buying an unknown brand,” says Rhodium analyst Sebastian.

In addition, no one can say which Chinese manufacturers will still exist in the medium or long term. There will definitely be a consolidation of the Chinese auto industry. Where can you find spare parts in the future? A used car from a brand that no longer exists is difficult to sell. “Buyers need a certain level of security that this brand will still exist in three years,” says Frank Schwope, car expert and lecturer at the FHM Hannover, in an interview with “Brand loyalty is therefore high in Germany and Europe,” agrees Sebastian. When in doubt, car buyers tended to stick with a VW model. In view of the growing competition from China, Schwope at least sees good opportunities for the Chinese providers BYD, MG and Geely. “I think you’re pretty safe here.”

From the experts’ point of view, the fact that the Chinese currently lack the ships to transport the cars to Europe is also acting as a brake. These are now being built on a large scale, but there is a backlog of orders. It is important for China to catch up because the conquest will soon extend to Brazil and Southeast Asia.

The EU’s investigation into subsidies for Chinese electric cars could also prove to be a breakwater. A decision is expected in the next ten months. Market access for Chinese brands may then be made even more difficult by high anti-dumping duties.

After the dry spell, will the flood come?

Even if things go well, experts expect a start-up time of one to two years when rolling out Chinese models in the West. What matters now for companies is “whether they have the capital to bridge a dry spell of months or perhaps one to two years,” says Rhodium analyst Sebastian. The political and geopolitical situation has the “potential to overturn Chinese plans.”

“The wave will gradually build up from 2024 and 2025,” predicts Schwope. From his point of view, a tsunami was not to be expected anyway. The Chinese manufacturers would have to build up logistics capacities and sales structures and look for trading groups through which the vehicles could be sold. The service would also have to be guaranteed first. “It was also difficult at Tesla at the beginning,” says the car expert.

The next two years could be crucial not only for Chinese manufacturers, but also for German car buyers. The arrival of car manufacturers from the Far East in Europe brings with it the hope that electric vehicles could also become affordable for smaller wallets in this country in the future. Of course, for this to happen, business would have to bubble up in the future instead of just babbling along as it has so far. But the feared flood may not be necessary right away. But a steady flow. As is well known, competition stimulates business.

source site-32