{"id":37334,"date":"2023-07-18T13:23:52","date_gmt":"2023-07-18T17:23:52","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/technology-price-aid-chinas-evs-in-europe-eu-missteps-too\/"},"modified":"2023-07-18T13:23:54","modified_gmt":"2023-07-18T17:23:54","slug":"technology-price-aid-chinas-evs-in-europe-eu-missteps-too","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=37334","title":{"rendered":"Technology, Price Aid China\u2019s EVs In Europe; EU Missteps Too"},"content":{"rendered":"
\n

China\u2019s electric automakers will do well in Europe, not only because of superior and cheaper products, but because the European Union\u2019s blundering approach to net zero CO2 regulation has exposed its own domestic industry to an existential threat.<\/p>\n

The EU has decreed there shall be no new internal combustion engine (ICE) sedans or SUVs sold after 2035, and that includes hybrids and plug-in hybrids. Between now and 2035 more battery electric vehicles (BEV) will be needed as tightening rules attack ICE profitability. Because European automakers\u2019 BEVs lag China\u2019s, this presents an easy open goal to the newcomers.<\/p>\n

Britain has brought forward its ICE ban to 2030, and political rumblings here seek to dilute the rules or push them back. Similar noises-off are being heard across Europe. Some hope the ICE ban can be mitigated, saying there is still much scope for combustion engines to contribute to cutting overall CO2 emissions. EU CO2 rules mean valuable ICE engineering is being forcibly dumped in favor of a technology that can\u2019t yet fill the gap. For instance, long-distance fast-cruising in electric cars can\u2019t get close to ICE capability. Technology may progress to match this one day. But it\u2019s not even close currently.<\/p>\n

And then there is the elephant in the room. What happens if China invades Taiwan? More of this later.<\/p>\n

The EU\u2019s anti-carbon dioxide (CO2) rules make it possible for the likes of Audi, BMW, Mercedes and Porsche to make money selling electric behemoths with huge batteries and premium prices but make it impossible to sell cheaper electric vehicles and make a profit. In the middle section of the market between \u20ac30,000 and \u20ac50,000 ($33,700 and $56,200 and still out of reach of average wage earners), European manufacturers are struggling to sell the likes of VW ID.3s, Skoda Enyaqs, Nissan Ariyas and Renault Megane Es profitably. This is where the early attack from China has concentrated with SAIC\u2019s cheaper MG brand and most recently the BYD ATTO 3. Geely is already in Europe with its Polestar and Lynck & Co brands. Xpeng and Nio are early candidates too.<\/p>\n

<\/fbs-ad><\/p>\n

As 2035 gets closer, expect the Chinese advantage in the yet-to-be-established mass market to be overwhelming, with products like the BYD Seagull, priced at $11,400 after tax in the home market, and the Wuling Bingo.<\/p>\n

Auto industry leaders like Stellantis CEO Carlos Tavares and Renault Chairman Jean-Dominque Senard have protested. Tavares has accused the EU of rolling out the red carpet to the Chinese and what he called their \u201ccompetitive advantage.\u201d Earlier this month Renault\u2019s Senard talked about a \u201cChinese storm\u201d represented by its imports. Senard said the Chinese advantage resulted from years of investment that would cost billions of euros for Europeans to replicate.<\/p>\n

A new report from investment banker Morgan Stanley entitled \u201cAt First, A Trickle\u2026..How China\u2019s EVs Will Reshape Autos\u201d said global manufacturers had been slow to match China\u2019s electric car strategy. Tesla
\n TSLA
\n <\/fbs-ticker> dominated the premium sector, but its lack of affordable vehicles remains a challenge to global adoption.<\/p>\n

The report said after initial missteps with poorly designed and shoddy vehicles, Chinese BEVs today surpass rival foreign models on affordability, quality and the technology-driven user experience.<\/p>\n

\u201cGlobal brands could lose 8-10% of market share as they are challenged by cheaper EV exports on one side and falling ICE mix on the other. Moreover, their margins are at risk,\u201d the report said.<\/p>\n

\u201cMass-market brands in Europe will be particularly vulnerable to an influx of China-made EVs,\u201d according to the report.<\/p>\n

Europe is hugely vulnerable, the U.S., market less so, in part because of the Biden Administration\u2019s new rules insisting on local battery domicile.<\/p>\n

Schmidt Automotive Research has said by 2030, sales of Chinese BEVs in Western Europe will hit 1.2 million or 9% of electric car sales. Green NGO Transport & Environment said this could reach between 9% and 18% by 2025. Last year China\u2019s BEV share was 3.5%. A recent report from Allianz Trade said Chinese-built BEVs could cost European automakers \u20ac7 billion ($7.9 billion) a year in lost profits by 2030 unless the EU takes action to either raise tariffs, boost battery and other technology, or persuade China to build cars in Europe. Allianz Trade is a subsidiary of German insurer Allianz.<\/p>\n

The threat to Europe has led to talk of EU anti-dumping action, but this is complicated by the fact many German manufacturers make huge profits from China, and would be loath to generate retaliatory action.<\/p>\n

Consultants Alix Partners agree Chinese automakers pose an existential threat to incumbents.<\/p>\n

\u201cChinese automotive companies are poised to become the shaping force in the global industry in coming years. While this disruption will not immediately be felt outside of China, and the traditional industry has awakened to the disruption of Tesla\u2019s innovations, traditional industry approaches must radically change to address this next source of disruption and seize opportunity,\u201d AlixPartners said in a report.<\/p>\n

\u201cCompanies need to overhaul this core product development and manufacturing philosophies, including adopting a ruthless prioritization in the trade-offs related to the features that will truly appeal tomorrow\u2019s customers. This example in the global marketplace will become a much larger influence, potentially displacing Tesla Inc as the competitive target in the auto industry,\u201d the report said.<\/p>\n

The Chinese are much better at delivering what new and tech-savvy customers want at a price they can afford, with higher digital engagement in the sales and ownership process, according to AlixPartners.<\/p>\n

Morgan Stanley said in its report European mass market players like Stellantis, Renault and Volkswagen are more at risk than higher price players like BMW, Mercedes and Porsche, although lower-end BMWs and Mercedes are vulnerable to Tesla. BYD has already announced premium territory competitors with the Han, a sporty sedan, and the big, 7-seater SUV Tang.<\/p>\n

\u201cA key mismatch (for mass market makers) may still exist in terms of product offering \u2013 infotainment, range, interiors, ADAS (advanced driver assist systems). Can these mass players produce a profitable BEV that competes with the BYD Atto 3\/Dolphin or the MG 4 on value for money?\u201d Morgan Stanley asked.<\/p>\n

Europeans need to produce an affordable and profitable \u20ac25,000 after tax ($28,000) vehicle. If not Europeans will be severely weakened, which in turn will spur calls for tariff protection, according to the report.<\/p>\n

Stellantis\u2019s Tavares has said he doesn\u2019t want special tariffs on Chinese imports but would prefer more support for Europeans to increase local sourcing and bring down the cost of batteries.<\/p>\n

The report also said the EU could ease the pain for Europeans by diluting the proposed Euro 7 regulations, currently set to tighten aspects of the emissions drive to 2035. The European Parliament is yet to consider these new rules, and a coalition to block it is gathering strength.<\/p>\n

As for the elephant in the room, according to Professor Ferdinand Dudenhoeffer, director of Germany\u2019s Center for Automotive Research, China\u2019s threats to Taiwan are likely to be just sabre-rattling because an invasion would devastate its long-term economic plans.<\/p>\n

\u201cSo what would be the economic and political advantage if (Chinese President) Xi Jinping invaded Taiwan? Destroy everything that the CP of China has built. He destroys the vision of the world technology leader. He destroys the wealth of the people. So why should he do that?\u201d Dudenhoeffer said in an email response.<\/p>\n

The consequences would indeed be horrendous, according to the Financial Times of London\u2019s Gideon Rachman, in an editorial a couple of months ago.<\/p>\n

\u201cIf Xi were to pull the trigger on Taiwan \u2014 and America entered the conflict, as President Joe Biden has promised \u2014 the Chinese leader would have started a third world war, with incalculable consequences for his own country and the wider world. Even if Taiwan rapidly capitulated, or the U.S. stood aside, China\u2019s global image would be transformed forever. Every western company or country that is currently sitting on the fence over China would have to join in a rigorous sanctions regime. The globalized economy would split into pieces \u2014 with huge costs for all concerned,\u201d the FT\u2019s Rachman said.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

China\u2019s electric automakers will do well in Europe, not only because of superior and cheaper products, but because the European Union\u2019s blundering approach to net zero CO2 regulation has exposed its own domestic industry to an existential threat. 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