Chinese electric car manufacturers are targeting Europe while competition is increasing

Nio plans to begin delivery of its ET7 electric sedan in 2022.

Evelyn Cheng | CNBC

SHANGHAI – After the last year of growth in the world’s largest auto market, electric car start-ups in China are planning to take over Europe.

It is only in recent years that the Chinese authorities have begun to remove restrictions on the full foreign ownership of local car production. But more than a decade ago, Beijing began to spend the equivalent of billions of dollars on developing its own electric vehicles.

That has helped local players get a head start in producing battery-powered cars, which they now want to sell abroad. Goldman Sachs analysts predict that the new government policy in four years means that electric cars will have a greater share of car sales in Europe and the US, compared to China, although it is the largest market.

US-listed Nio has said it would enter Europe in the second half of this year. And on Monday, co-founder and president Lihong Qin said the company expects to make an official announcement on such an expansion within a month.

He did not name a specific country, but stated that after Europe, Nio still plans to enter the US market.

Amid tensions with the US and attempts to negotiate an investment deal with Europe, China exported 63,500 pure battery-powered electric vehicles in the first eleven months of last year, according to a January report from China’s Chamber of Commerce for imports and export of machines. and electronic products. While Saudi Arabia and Egypt were the top destinations for Chinese cars last year, the report reported significant growth in vehicle exports to the UK, Belgium and Germany.

US-listed Xpeng is already testing the waters in Norway, where the start-up delivered 100 units of its G3 electric SUV in December.

Later this year, Xpeng hopes to see how customers in Northern Europe respond to its P7 electric sedan, said He Xiaopeng, chairman and CEO. He is recruiting new staff and plans to set up a business in the region before looking to Western and Eastern Europe.

Another Chinese electric car start-up, Aiways, said it exported more than 1,000 vehicles to Israel and Europe in the first three months of this year.

“It’s no secret that most Chinese EV startups have global ambitions,” said Tu Le, founder of Beijing-based consulting firm Sino Auto Insights. “That will continue as these companies pursue growth and value and see opportunities due to the lack of viable EV products in the region.”

He said that with enough local research, some Chinese companies could succeed in Europe.

However, any growth in sales of Chinese electric cars to Europe remains a small part of the market.

According to the European Automobile Manufacturers Association, China accounted for less than 2% of EU passenger car imports in 2019 and the € 865 million in value is a 79% growth over the previous year.

In contrast, EU-owned car makers made nearly 6 million passenger cars in China in 2018, accounting for nearly a quarter of China’s total car production, the association said.

Increasing competition within China

The foreign enterprise of the Chinese start-ups comes as the market warms up at home. Nio’s Qin said the entry of technology companies such as Apple and Huawei into the industry is creating fierce competition for the carmaker.

In the field of cars, Tesla is the market leader and is increasing local production. The Model 3 was the best-selling electric car in China last year, according to the China Passenger Car Association.

With the exception of two mini-electric cars, the association said the next best-selling car in the category was the S model from Aion, a new energy brand spun off from the Chinese state-owned GAC. A more expensive model from Nio was in ninth place, while Xpeng did not make the top ten.

“Chinese consumers are increasingly understanding new energy vehicles,” said Qiu Liangping, director of Aion’s planning department, according to a CNBC translation of his comments into Mandarin. In addition to the convenience of charging the battery, he said Chinese buyers are looking for a better driving experience than that of fossil fuel-powered cars and Internet features.

The brand also has its eye on the international market, said Qiu. Before the spin-off, Aion and GAC’s Trumpchi brand already sold cars in Israel, the Middle East and South America.

As the auto industry shifts towards electric power, traditional American and German auto companies are launching their own electric vehicles – many of them the first to enter the Chinese market.

For example, General Motors’ Cadillac brand unveiled its Lyriq electric car at the Shanghai Motor Show, with pre-orders in China starting later this year, the company said.

Ford also used the show to unveil its locally made version of the Mustang Mach-e electric car, as well as a largely China-developed Evos SUV that will only be available in the country.

Volkswagen unveiled a third electric car for China, the ID.6, in Shanghai. The German automaker aims to have at least 70% of its cars sold in Europe electrically by 2030 and at least 50% for cars sold in North America and China.