Chinese electric vehicle (EV) makers’ go-global strategy has hit speed bumps after Beijing warned them against investing in certain markets and a battery maker’s failed plan to build $4 billion in Germany provided a bitter lesson .
Companies are realizing that cost advantages and knowledge of core technologies are not enough to guarantee the success of billion-dollar investments in countries where consumers are not yet familiar with Chinese EV brands.
Inadequate understanding of the legal landscape and a lack of charging infrastructure in overseas markets could also be stumbling blocks to growth outside mainland China, industry officials and analysts said.
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“Chinese automakers have started developing electric cars early and are now in a leading position,” said Sam Wu, CEO of Ford Motor China, at the Hongqiao Forum in Shanghai last week. “But they are still looking for a path into the global marketplace so that consumers around the world can access their best products at the lowest prices.”
Punitive tariffs imposed by the US and European Union on Chinese EVs have made it difficult for companies to boost sales in major auto markets. So building local factories to bypass trade barriers has been a primary tactic for Chinese companies, including BYD, the world’s largest EV maker, and state-owned Chery Automobile.
Chery and Dongfeng Motor are reportedly in talks with the Italian government about building factories in the European country.
A sign for MG, a brand of Chinese state-owned carmaker SAIC, is displayed in a showroom in Santander, Spain on June 13, 2024. Photo: Reuters alt=A sign for MG, a brand of Chinese state-owned carmaker SAIC, is displayed in a showroom in Santander, Spain, on June 13, 2024. Photo: Reuters>
But last month, China’s Ministry of Commerce required mainland automakers to refrain from major investments in EU countries that supported additional tariffs of up to 35 percent on Chinese-made electric vehicles, according to Reuters.
“In addition to the geopolitical risks, the business risks are also enormous for Chinese companies as they rush to build factories and supply chains in the EU,” said David Zhang, general secretary of the International Intelligent Vehicle Engineering Association. “Marketing and branding are also important. You need local consumers to understand your brand and products before you can sell the vehicles to them.”
The EU voted last month to impose an additional tariff of 17 to 35.3 percent on Chinese electric vehicles following an anti-subsidy investigation that began in September 2023.
Italy is one of ten EU members that supported the action.
According to David Xu Daquan, Chinese president of Bosch, the world’s largest automaker, Chinese EV assemblers and suppliers are at the global forefront of the auto industry’s supply chain as they have capitalized on core technologies for batteries, self-driving and in-car entertainment. parts supplier.
China has more than three-quarters of the world’s battery production capacity. And according to Beijing-based Insight and Info Consulting, mainland companies account for more than two-thirds of the market in all categories of components needed to assemble electric vehicles.
Pure electric cars made in China cost 35 percent less than cars assembled in other markets, Stephen Dyer, co-leader of Greater China and head of the Asia automotive practice at global consultancy AlixPartners, said in July.
“Haste decisions aimed at overcoming tariffs and taking advantage of local production facilities to increase overseas sales could lead to big flops,” said Qian Kang, owner of auto parts companies in Zhejiang province. “The Chinese auto industry is now learning a hard lesson from the failure of Svolt Energy in Germany.”
A photo taken on May 5, 2024 shows the construction of a factory of Chinese battery manufacturer CATL near Hungary’s second-largest city, Debrecen. Photo: AFP alt=A photo taken on May 5, 2024 shows the construction of a factory of Chinese battery manufacturer CATL near Hungary’s second-largest city, Debrecen. Photo: AFP>
Svolt, China’s seventh-largest EV battery maker, said last month it had halted construction of two factories in Germany – after an initial investment of 30 billion yuan (US$4.16 billion) – after realizing that operations would never would be successful due to insufficient orders and high costs.
According to the China Passenger Car Association, China is the largest EV market in the world, with sales of pure electric and plug-in hybrid cars accounting for 65 percent of the global total in the first half of 2024.
The country also has a rapidly growing charging network, and battery-powered vehicles with smart digital features such as voice control are popular with motorists. But the pace of electrification outside China is lagging far behind, which is likely to thwart any strategy that relies on blistering sales growth, said Phate Zhang, founder of Shanghai-based EV data provider CnEVPost. By the end of 2023, the continent had one public charging station for every seven electric vehicles, compared to thirteen in the EU.
Despite the challenges and despite the government’s recent warning, Beijing remains committed to helping the country’s EV manufacturers flourish abroad.
“Chinese automakers will actively integrate themselves into the global auto industry,” Chinese Vice Minister of Commerce Ling Ji told the Hongqiao Forum last week. “We can better respond to the increasing demand from global customers for intelligent and green vehicles.”
