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Thursday, December 08, 2022

Popular electric vehicles in China caught the attention of European automakers

Popular electric vehicles in China caught the attention of European automakers

FRANKFURT – The MG name used to be synonymous with energetic but finicky sports cars from Britain. Currently, the iconic octagonal badge serves another automotive ambition: China’s drive to become a major player in the global automotive market.

SAIC Motor, one of China’s largest automakers, acquired the MG brand in 2007 and is introducing it to its line of electric SUVs sold in Germany and other European markets. MG is an example of how Chinese automakers are using the shift to electric vehicles to challenge American, European and Japanese automakers that have long dominated the industry.

Chinese automakers are coming to the market with the rise in popularity of electric vehicles, which account for nearly 10 percent of new car sales in Western Europe, and consumers are determined to buy them, saving money during the pandemic. At the same time, car manufacturers are cutting production due to a shortage of microprocessors.

MG already has 350 dealers in 16 European countries and continues to expand. Two other Chinese automakers, Nio and BYD, are moving into Europe through Norway, the world’s most electrified large-car market.

Nio, headquartered in Shanghai, opened an office in Oslo at the end of September, the company’s first sales office outside of China. BYD, headquartered in Shenzhen, delivered an electric SUV called the Tang to its first Norwegian buyer in August.

Great Wall Motor, another Chinese manufacturer, has announced plans to start selling a battery-powered compact and hybrid SUV in Europe next year.

Polestar, based in Sweden but owned by China’s Geely Holding, has been selling Chinese-made battery-powered models in Europe and the United States since 2020. Many Tesla vehicles on European roads were imported from the company’s Shanghai factory. (This will change when the company finishes building a plant near Berlin.)

Foreign automakers like Volkswagen, Mercedes-Benz or General Motors sell millions of vehicles in China, so they cannot complain when Chinese automakers invade their territory. Although China is the largest automotive market in the world, its brands only account for a small portion of the international market. Even buyers in China prefer foreign brands, although local carmakers are growing rapidly and have captured over 40 percent of the domestic market.

However, the emergence of Chinese-made cars in Europe is another ominous sign for established carmakers already struggling to switch from internal combustion engines to batteries. Chinese automakers are also looking at the United States, although their influence has been minimal so far. Slovakia supplies more vehicles to the US market than China.

Chinese carmakers have learned to trade from the European companies they face now. The Chinese government has long required foreign automakers to work through joint ventures with local companies and share know-how.

SAIC, owner of MG, has been a Volkswagen partner in China since 1984. MG is now moving to Volkswagen center. MG is touting its ZS compact electric SUV with a starting price of € 30,420, or around $ 35,400. If you include government incentives for electric vehicles, the car can be bought for about 24,000 euros. That’s € 4,000 less than the cheapest version of the Volkswagen ID.4 compact electric SUV.

“Sous Chef is opening his own restaurant,” said Matthias Schmidt, a Berlin-based analyst who monitors the European electric vehicle market.

MG said in a statement that its partnership with Volkswagen remains a “win-win strategic partnership.”

Europe is a notoriously difficult market for foreign car manufacturers. Just ask Ford Motor, which has only 4 percent of the European Union market, or Toyota, which has just over 6 percent, despite its weight in the rest of the world.

Earlier attempts by Chinese automakers to break through to Europe have failed. In 2013, the new Chinese brand Qoros announced plans to establish a network of dealerships in Europe, but only opened one.

This time it could be better. Sales of electric vehicles, a technology made by the Chinese, have doubled since 2020 in Europe, despite a downturn in the overall market. Schmidt said about 9 percent of new cars sold in Western Europe prior to August, or 644,000 vehicles, were battery-powered. Taking into account plug-in hybrids, the share of electric vehicles was 18 percent.

Demand for affordable electric vehicles has exceeded supply, said Julian Emrich, a dealer in Bietigheim-Bissingen, Germany, north of Stuttgart. “A lot of people were interested, but there were no products, at least products with a normal price,” said Mr Emrich.

When an MG representative sent him an e-mail asking if he wanted to become a dealer, Mr. Emrich said: “This is exactly what I was waiting for.” Unlike most traditional automakers, MG did not require it to buy cars in advance. MG supplies cars and dealers receive a commission for their sale.

It is unclear whether fastidious European buyers will buy the Chinese car. When an MG spokesman approached Rumpel & Stark, a Ford dealership in Unterpleichfeld in northern Bavaria, about the sale of the Chinese brand, CEO Bastian Stark was skeptical. He demanded that the representative hand over the keys to the MG in which he arrived.

The mechanics of Rumpel and Stark were carefully worked out by MG. Their verdict: thumbs up. “They said this car is good,” said Mr Stark, noting that MG is equipped with parts from renowned suppliers such as Bosch, Valeo and Continental, all of which have large factories in China.

Rumpel & Stark agreed to add MG to their showroom and sold three hybrids before even putting up the sign. Buyers were attracted by the price and relatively short delivery times. “I didn’t do marketing at all,” said Mr. Stark.

The European market is experiencing a shortage of vehicles due to the global shortage of semiconductors. The wait time for the MG hybrid is just four weeks and three months for the all-electric model, “which is pretty much normal at the moment when compared to other brands,” said Mr Stark.

Many European brands have been waiting a lot longer, especially low-cost models. Automakers like Renault are allocating scarce chips to higher-end cars that generate more profit.

While the market may be ripe for Chinese electric vehicles, the political moment may not be as ideal. Many European leaders share their American counterparts’ concerns about China’s trade practices, accusing Beijing of subsidizing companies to give them an unfair advantage in international competition.

The Chinese government has invested heavily in electric vehicle technology, helping to build an extensive supplier network to feed manufacturers.

Following national elections in September, German political leaders are in talks to form a government that is likely to include the Green Party, which favors a tougher line against China than outgoing Chancellor Angela Merkel. MG may be particularly vulnerable to concerns about the confusion of government and corporate interests because its parent company, SAIC, is government-owned.

European automakers are wary of Chinese competitors. “We take every new player very seriously,” said Martin Daum, board member of car and truck manufacturer Daimler, in an interview. “On the other hand, we are never afraid of competition.”

The German Auto Industry Association responded to questions about Chinese automakers, saying countries must abide by World Trade Organization rules that prohibit government subsidies designed to give companies a competitive edge.

“It is important to maintain open markets and a level playing field,” the association said.

MG said it “follows market mechanisms and complies with relevant laws and regulations.”

Chinese automakers position themselves as international brands and play down their origins. MG retains some British affiliation by building cars in London. Nio’s global design center is based in Munich, while Polestar is based in Gothenburg, Sweden, near Volvo Cars, which is also owned by Geely.

Thomas Ingenlath, a German who is the CEO of Polestar, said that all car companies have tried to sell their products overseas and that what Chinese companies are doing is not unusual.

“This is absolutely normal,” said Mr Ingenlath at the Munich International Motor Show in September. “Automotive brands, wherever they are, are doing export business.”

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