8:32 am, February 24, 2023
The influx of new Chinese brands into the European market could drive down the prices of both BEV and ICE vehicles, new research has suggested.
Cox Automotive has been studying the potential impact of the new wave of brands coming from China and the results would point to major changes for both dealers and OEMs.
It comes as the likes of BYD, GWM Ora and Chery are all preparing for an assault on the established Western brands. You can read more about that here.
According to professional services giant Grant Thornton, Chinese manufacturers were at the forefront of the BEV market throughout 2022.
The Chinese new electric vehicle market increased by 110 per cent, while the broader passenger car market grew by 14 per cent.
BYD was the strongest-performing Chinese OEM, selling 1.62m BEV and hybrids – a year-on-year increase of 132 per cent.
With that level of growth, it is little wonder that the big European brands are beginning to sit up and take notice.
Earlier this year, Stellantis boss Carlos Tavares said firms were facing a ‘terrible fight’ amidst the influx of new Chinese outfits.
It is unclear whether the EU will react to the situation by imposing further tariffs on imported vehicles to protect domestic OEMS.
Grant Thornton’s research, conducted for Cox Automotive’s quarterly AutoFocus insight update, found that the resulting competition could drive new car prices down across the board, as the established outfits fight to retain market share.
However, the report also said it may take time for Chinese brands to gain a stronghold in Europe due to the lack of brand recognition.
Philip Nothard, insight and strategy director at Cox Automotive, said: ‘Chinese brands are pricing aggressively in their home market and clearly show more willingness to compete on price than the European and American incumbent OEMs such as BMW, Stellantis, Mercedes Benz, Ford, and Tesla.
‘Currently, retail prices for Chinese brands are not significantly lower than European and American OEMs.
‘However, they are substantially better equipped with full infotainment and ADAS systems. In contrast, the European and American OEMs are falling short in providing this as standard equipment for their vehicles.’
(Phillip Nothard, Cox Automotive)
Owen Edwards, head of downstream automotive at Grant Thornton UK LLP, added: ‘During 2022, fewer than 2,000 Jeep vehicles (ICE vehicles) were sold in China, with only one Jeep sold in May 2022.
‘This suggests Chinese brands are taking the pricing war not only to BEVs but also to ICE vehicles.
‘With China’s advanced battery technology, sourcing of raw materials and more advanced BEV supply chain, Chinese OEMs can manufacture BEVs at €10,000 cheaper than European automakers, representing a significant cost advantage.
‘At present, OEMs’ profitability has remained robust in the face of supply chain disruptions as vehicle shortages meant retail prices for vehicles have remained high, allowing OEMs’ margins in 2021 and early 2022 to hold up well.
‘However, the rise in raw material prices and further disruptions in the supply chain caused by gas shortages in Europe have meant the profits of many OEMs have started to suffer.’
‘Another potential headwind for UK OEMs to counter’
The new Chinese brands are already making their presence felt in the UK with several planning to ramp up operations throughout this year.
Last month, BYD appointed its first franchise dealer partners in this country, ahead of a launch in Q1.
Nothard says the incoming outfits are likely to add another potential headwind for UK firm’s to worry about in 2023.
He added: ‘The growing influence of Chinese brands adds another potential headwind for UK OEMs to counter in 2023. It’s also likely that the supply and demand for vehicles could be affected by any trade disruption caused by intensifying protectionism and sanctions.
‘In addition, the UK’s Department of Transport is consulting on its Zero Emissions Vehicle policy.
‘This could mandate automotive manufacturers to register a certain number of zero-emission cars and vans in the UK by 2024, in preparation for a 2030 ban on new pure petrol and diesel vehicles.’
The subject of EV disruptors – including those from China – will be covered by Auto Trader at the upcoming Car Dealer Live conference.
You can read more about that here. Cox Automotive will also be speaking at the event.
Car Dealer Live – the future of the car dealer – exclusive conference features talks from leading car dealers, Google and Auto Trader among much more. Find out the full event details and book tickets.
