New car-making forces go overseas: is Europe the next main battlefield?
China’s auto exports are expected to exceed 2.4 million in 2022. Among them, new energy vehicles are an important growth point. In July 2022, China’s export volume of new energy vehicles was 54,000 units, a year-on-year increase of 37.6% and a month-on-month increase of 89.9%, showing a rapid growth momentum.
According to statistics from the General Administration of Customs, in the first half of 2022, the Western European market accounted for 34% of the export of new energy passenger vehicles. Belgium was the country that imported the largest number of new energy vehicles from China in the first half of the year.
A person in the auto industry told DoNews (ID: ilovedonews) that when decarbonization has become a global consensus, the subsidy policies and emission regulations of European governments have caused the penetration rate of new energy vehicles to increase geometrically, and Europe has quickly become a The strategic commanding point for Chinese new energy vehicle manufacturers to deploy overseas markets.
Taking new energy vehicles as a breakthrough, the situation of Chinese cars going overseas has undergone tremendous changes.
Chinese new energy vehicles anchor the European market
The wave of Chinese new energy vehicle manufacturers going overseas is sweeping. NIO, AIWAYS, LANTU, WM Motor, and Xpeng Motors have already entered the European market and have achieved some success. In fact, it is not only the new forces that make cars, but the new energy product lines of traditional automakers such as SAIC, FAW, and Geely have also entered the European market one after another.
On August 1, BYD announced to cooperate with Hedin Mobility, one of the largest dealers in Europe, to provide new energy vehicles for the Swedish and German markets, which will be delivered in October this year; (Emil Frey) Group reached a strategic cooperation on the import and distribution of Wei brand and ORA in the European market. It is reported that under the impetus of this strategic cooperation, Great Wall Motors has accelerated the process of expanding the European market. As the first to enter the German market, Wei Mocha PHEV and Ora Haomao will be officially delivered in the fourth quarter of this year.
Fu Bingfeng, executive vice president and secretary general of the China Automobile Association, said: “The global economy is recovering, and auto consumption is also recovering; the advantages Chinese auto brands have achieved in the transformation of new energy vehicles; Europe and the United States have stepped up efforts to promote new energy vehicles. These factors have become a new driving force for the growth of my country’s auto exports.”
One of the important reasons why the European market is an important export destination for China’s new energy vehicles is that the carbon emission policies of European countries are becoming stricter.
In June 2022, the European Parliament adopted a report in Strasbourg, which advocates stopping the sale of new gasoline-powered vehicles in the EU from 2035, which also includes hybrid vehicles.
It is reported that this report also includes many requirements related to the automobile industry, including that in 2030, the carbon dioxide emissions of automobiles in the EU will be reduced by 55% compared with 2021, and by 2035, it will be reduced by 100%, and the era of new energy vehicles will be fully entered. Meanwhile, more than 1 million charging stations will be built in Europe by 2025 and 3.5 million by 2030. In addition, a charging station must be installed every 60 kilometers of the highway, and a hydrogen refueling station must be configured every 150 kilometers.
Also in June, the British government announced that it would eliminate the £1,500 subsidy for new buyers of plug-in hybrid vehicles, and the British government also said that the focus of the subsidy will then shift to new plug-in electric taxis, motorcycles, pickups, Trucks and wheelchair accessible vehicles, etc.
According to the various initiatives of the European Union and the United Kingdom, it can be seen that European countries are very determined to fully turn to electrification.
It is worth mentioning that among European countries, Norway has the strictest attitude towards carbon emission regulations, and even directly stopped the sales of fuel vehicles, and requires that new cars sold in China before 2025 must be new energy vehicles. According to data from the Norwegian Road Federation, the country will sell 176,276 new vehicles in 2021, of which more than 65% are pure electric vehicles.
In order to continue to stimulate the popularization of new energy vehicles, Norway has also implemented a series of strong subsidy policies, such as reducing tariffs and value-added tax for consumers who purchase new energy vehicles, which can save 80,000-100,000 yuan compared with fuel vehicles of the same level. In addition, new energy vehicles can save at least 50% of tolls, and enjoy preferential rights of way.
Shenwan Hongyuan Securities pointed out in the research report that in the context of some countries and car companies’ public ban on the sale of gasoline vehicles, the suspension of the sale of gasoline vehicles in Europe is a matter of course. At the same time, whether in the short term or in the medium and long term, the EU’s efforts to reduce carbon emissions will only increase, which will provide a long-term foundation and guarantee for the promotion of electric vehicles in Europe. According to forecasts, the compound growth rate of electric vehicles in Europe is expected to exceed 15% in the next 14 years.
Another factor that anchors Chinese new energy vehicles in the European market is that due to the impact of the epidemic and lack of cores, the supply level of European automakers has declined to a certain extent, while China’s auto industry chain is relatively complete and its production capacity is stable. It can fill the gap of insufficient supply in the European car market.
According to AutoForecast Solutions, an auto industry data forecasting company, by the end of this year, the cumulative reduction in the global auto market will climb to 3,829,400 units. From a regional perspective, Europe is still the region with the largest cumulative reduction in vehicle production due to core shortages in the world.
The above-mentioned industry sources told DoNews that in the field of fuel vehicles, Chinese car brands are far from European car brands, but in the field of new energy vehicles, Chinese new energy vehicle brands headed by BYD, Xiaopeng Motors, and Weilai are in the European market. Based on and taking root, “In accordance with this trend, the European market will bring new incremental markets to Chinese new energy vehicle manufacturers.”
There are still hidden worries about China’s new energy vehicles going overseas
The European market is expected to bring new growth poles for Chinese new energy vehicle manufacturers, but at the same time, there are also some challenges that cannot be ignored.
Localized operations such as sales channels are one of the challenges faced by Chinese new energy vehicle companies. At present, there are generally three ways for Chinese new energy vehicles to enter the European market: first, to cooperate with car rental companies and hand over the car to the car rental company for operation; second, to cooperate with large local dealers; Service system.
At present, most of the overseas sales of Chinese new energy vehicle manufacturers adopt the first two authorized layouts. Although this sales model is conducive to quickly opening up the market and expanding market share, it lacks the stamina to build brand awareness and influence. The representative ones are AIWAYS, WM Motor and BYD.
In contrast, NIO and Xpeng Motors have entered the European market through the third method. In the first half of this year, Xiaopeng opened four directly-operated stores in Sweden, the Netherlands, Denmark and Norway, and announced that it would increase investment in the international market in the past two years.
Li Bin, chairman and CEO of Weilai, once said that Weilai’s business model in each market is the same, that is, it adopts a model of infrastructure first, direct sales, and user service. “We not only sell cars, we want to build a community that starts with cars.” However, the road to self-employment does not seem to be easy to pass. When entering the Norwegian market, NIO launched a local power exchange service. It had planned to build 20 second-generation power exchange stations by the end of 2022, but only one power exchange station is currently in operation. Qin Lihong, president of NIO Automobile, said in early July, In 2021, the actual difficulty was underestimated, the plan was not completed, and Europe is still in the pilot stage.
In addition, the European market has also set up strict technical barriers, which has become another challenge for Chinese new energy vehicle manufacturers to go overseas.
The WVTA certification standard is completed in accordance with the EU vehicle certification framework. It is one of the most stringent automotive certification systems in the world. Only certified automotive products can be sold in the EU market. According to public information, the EU WVTA involves a total of 43 vehicle testing items, including motor vehicle noise, cruising range, crash safety, and pedestrian protection, all of which are higher than domestic regulations. In addition, to achieve high-volume access, an annual factory review is required to complete all testing items.
“The European market has a high technical threshold, and the cost of technology upgrades and product transformations will cost at least tens of millions. Without sales support, the investment cannot be recovered at all.” Said Chris Zeng, marketing director of SAIC MAXUS’ Irish and British distributor Harris Group.
Finally, China’s new energy vehicle manufacturers are not only facing the pursuit and interception of a group of powerful competitors, but also facing huge losses.
In 2021, the top two models in the European market are Model 3 and Volkswagen ID.3, followed by French cars, American cars, Korean cars and German cars. In contrast, except for BYD’s three-digit sales, the rest are all double-digits. In other words, China’s new energy vehicles are not well-known in the European market, and they are not even comparable to Tesla, Volkswagen, etc. A competency.
According to the data of various financial reports, Li Auto’s total revenue in the second quarter of 2022 will be 8.73 billion yuan, and operating losses will reach 978.5 million yuan; Xiaopeng Motors’ total revenue in the second quarter will be 7.436 billion yuan, with a net loss of 2.709 billion yuan. , Weilai achieved revenue of 9.911 billion yuan in the first quarter of 2022, with a net loss of 1.783 billion yuan, an increase of 295.56% year-on-year.
In the first half of 2022, although the sales of Chinese new energy vehicle manufacturers have improved a lot and have broken through the triple digits, it is still difficult to get rid of the situation of running with them.
In China’s new energy vehicle manufacturers generally facing huge losses, it is still unknown whether they can continue to invest funds in the operation and development of overseas markets and how long it will last. For China’s new energy vehicles to go overseas, the Long March has just taken the first step.