Chinese EV Makers Challenge European Automakers with Competitive Pricing

Key Takeaway

• Chinese EV makers like Nio, Xpeng, and BYD are aggressively entering the European market with competitively priced models.
• The European Commission's investigation into Chinese EV subsidies could lead to increased tariffs, complicating trade dynamics.
• European automakers are strategizing to counter the competition, with projections showing Chinese brands could capture 20% of Europe's EV market by 2027.

Chinese EVs Enter European Market

Chinese electric vehicle (EV) manufacturers are making significant inroads into the European market, presenting a formidable challenge to local automakers. Nio recently opened a showroom in Amsterdam, while Xpeng launched its G9 and G6 sports utility vehicles in France. Xpeng also showcased a car at the VivaTech conference in Paris, alongside BYD, which displayed one of its vehicles. BYD, which surpassed Tesla as the largest global EV maker last year, plans to introduce its Seagull hatchback to Europe next year. The Seagull, priced under $10,000 in China, is expected to sell for under €20,000 ($21,500) in Europe, even after accounting for tariffs and modifications to meet European standards. This price point is significantly lower than similar models from European manufacturers like Stellantis NV and Renault SA.

Martin Sander, head of Ford Motor Co.’s European EV business, expressed concern: “We are looking very closely at this model and others coming from Chinese EV makers. Of course, we are nervous when new competition is coming to the market.” BYD's European Managing Director Michael Shu announced plans to introduce a higher-end €25,000 EV before the Seagull and is also planning to establish two plants in the region to mitigate the impact of potential European Union tariffs.

Trade Tensions and Tariffs

The competitive landscape is further complicated by growing trade tensions between China and Europe. The European Commission is conducting an investigation into subsidies given to Chinese EV makers, which could result in increased tariffs on Chinese imports. The U.S. has already imposed 100% tariffs on Chinese EV imports. French Finance Minister Bruno Le Maire commented on potential EU tariffs, stating his goal is to “protect our industry and to ensure that on the international stage, there is a level playing field.”

Elon Musk, CEO of Tesla, expressed his opposition to tariffs on Chinese electric vehicles. “Neither Tesla nor I asked for these tariffs,” Musk said during a question-and-answer session at the VivaTech conference. “In fact, I was surprised when they were announced,” he added, referencing the U.S.’s 100% import tax. Earlier this year, Musk had warned that Chinese EV players would “demolish” competitors abroad in the absence of trade barriers.

Volkswagen AG's Chief Financial Officer Arno Antlitz also weighed in, stating that higher import tariffs for Chinese-made EVs in the European Union will offer only a short respite. “We have to use the next two to three years to become even more competitive on the cost side,” Antlitz said in a post on LinkedIn. He warned that the EU’s plan for additional barriers risks painful retaliatory actions from China, which has signaled it could impose duties as high as 25% on imported cars with large engines.

European Automakers' Response

European automakers are exploring various strategies to counter the influx of Chinese EVs. Renault is seeking partners to reduce costs on a small-car platform, while Stellantis plans to start sales in September of cars produced through its joint venture with China’s Zhejiang Leapmotor Technologies Ltd. Stellantis CEO Carlos Tavares emphasized the need for swift action, stating, “We have no intention to let this price band open for our Chinese competitors. We don’t think that protectionism will give us a long-term way out of this competition.”

The overall share of Chinese brands in Europe’s electric market was around 7% last year, with projections from Transport & Environment suggesting it could reach 11% this year and 20% by 2027. Julia Poliscanova, senior director for vehicles and e-mobility supply chains at Transport & Environment, argued against using tariffs to shield local manufacturers, stating, “Tariffs should not be used to shield our lead manufacturers from meaningful competition. What matters on top of climate targets, which are critical, is actually to have local jobs and for decarbonization not to result in de-industrialization.”