China and the EU battle over EVs – here’s what it means for fleets
Can Europe and its car manufacturers fight back against the rise of Chinese brands? And how should fleets deal with the rivalry between both?
In the late 1990s, Europe was the largest producer of solar panels. Then Chinese competitors – helped by generous government incentives – stole Europe’s lunch. The European Commission (EC) wants to prevent the same thing happening in the electric vehicle (EV) industry.
That’s why the EC announced a series of potential measures while it opens an investigation into Chinese EV policy. All that has sparked some confusion, notably among European fleets: are Chinese EVs a viable fleet option or not?
Let’s start by putting things in context. Chinese brands are far from dominating the European EV market. They are, however, expanding rapidly enough to cause concern among European automakers, also about battery supply chains, says Jon Lawes, Managing Director at MHC Mobility Europe.
“The EU is eager to re-level the playing field, and an investigation into cheaper, state-subsidised Chinese EV brands on the Continent clearly reflects this unease”, Mr Lawes says. “Incoming rule-of-origin tariffs also show the desire among European policymakers to strengthen local battery supply chains, in turn reducing dependence on China.”
Yet things are not black and white. Despite widespread apprehension of Chinese dominance in the EV sector, German suppliers – notably Bosch and ZF Friedrichshafen – have been eager to deepen their partnerships with Chinese OEMs. And inversely, those Chinese automakers are determined to continue their push into Europe, even in the face of potential countermeasures by the EU.
Europe needs Chinese EVs
For the record: EU sales by Chinese EV manufacturers surged 55% in the first seven months of 2023, reaching around 820,000 units, or about 13% of all car sales.
Current tensions won’t determine the long-term relationship between Europe and China on EVs, says Mr Lawes, because Chinese EVs will be critical to electrify European mobility – and especially corporate mobility.
“There is a huge demand from fleets to transition to EVs, and ultimately, the global auto sector will deliver zero-emission vehicles where there is demand. China will likely remain a significant player in the clean energy and green technology sectors for the foreseeable future. However, the EU and European companies are investing in these areas thanks to policies like the Net Zero Industry Act. Ultimately, policymakers must recognise that it is vital that corporate fleets are able to access supplies of zero-emission vehicles to fulfil their transition goals.”
Success via subsidies
One key driver for Chinese EV success in Europe are the generous Chinese state subsidies for local manufacturers, which significantly reduce manufacturing and shipping costs.
In 2023 alone, the Chinese government subsidized its domestic EV industry to the tune of billions of yuan. Some highlights:
- CATL, one of the world-leading EV battery producers, received 2.8 billion yuan (€372 million) in subsidies in the first half of 2023.
- The list of Top 10 subsidy recipients includes four other EV-related companies: SAIC Motor (owners of MG Motor), BYD, EVE Energy (lithium battery manufacturers), and Chongqing Changan Automobile (CCA). The latter received 856 million yuan (€112 million) in subsidies in 2023.
The result? A growing divergence in average EV price: up in Europe, down in China. According to JATO Dynamics, the average European EV cost just under €49,000 in 2015, and nearly €56,000 in 2022. In China, the average EV price went from nearly €67,000 in 2015 to just under €32,000 in 2022.
In the crucial small EV segment, Chinese manufacturers now have a €10,000 edge over their European competitors.
Need to do more
Whatever their differences, car manufacturers in both China and Europe, and automotive suppliers in Germany and elsewhere all depend on delicate balances of trade for the provenance of their raw materials and the sale of their finished products. None want policymakers to upset those balances, says Mr Lawes.
The EU’s investigation is likely to last over a year, causing uncertainties along the way that will threaten the confidence of corporate fleet managers in their ability to develop long-term planning for the EV transition, according to Mr Lawes.
And according to Şaban Tekedereli, Procurement and Category Manager Fleet Europe at Securitas, Chinese brands offer some particular advantages but must work much harder, especially in after-sales services. As Mr Tekedereli sees it, the main differences between European and Chinese brands, from the perspective of a fleet manager, are:
|Almost all have long experience in sales, after-sales and network processes.|
|The level and certainty of residual values for European vehicles is higher.|
|European fleets buy Chinese brands only in small, low-budget segments and don’t dare to spend more, forcing leasing companies to absorb the risks.|
|A good deal in EV-dominated countries, as European OEMs can’t offer a good balance between price and range.|
|Can deliver EVs quicker (only from stock, not self-configured) than Europeans.|
|Have more European design and good in-vehicle technologies, with battery performance usually similar or better than the Europeans.|
|However, the interior of Chinese vehicles does not yet reflect European driver’s needs regarding dashboards, infotainment, comfort, etc.|
There are several reasons to pick a (low-cost) Chinese EV for your fleet, but Chinese EV makers still need to prove they can do more than make a good product. They also need to cover the other parts of the fleet business, says Tekedereli.
After-sales is vital
The EU has been highly critical of Huawei regarding the privacy aspects of its 5G connection infrastructure. Yet that negative attitude is not typical for all large-scale Sino-European interactions. Many large leasing companies are already working with Chinese automotive brands, says Tekedereli.
Nevertheless, privacy is a hot topic concerning Chinese companies and European and US brands, including Tesla. According to Tekedereli, there are two crucial points Chinese brands need to consider for ultimate success in the European market:
“Fleets of operational vehicles focus on TCO, safety, good network coverage and quality. The urgent need for good BEVs in this area reduces the pressure to select only European BEVs. Japanese and Korean brands still focus mainly on private customers. If Chinese brands act quickly and with a clear fleet strategy, the fleet industry will reward this with more orders.”
On top of this, improving the after-sales services is vital. Taking advantage of the next-generation battery technology of CATL, China can overtake European manufacturers before 2030, says Tekedereli.
The first in-article photo shows Jon Lawes, Managing Director at MHC Mobility, and the second Procurement and Category Manager, Fleet Europe, at Securitas.
The main image shows BYD Atto 3 at the Brussels Motor Show, courtesy of Shutterstock, 2249614091.