Entry point: Norway
The entry market for many Chinese brands is Norway, where January sales of full-electric cars reached a record 84 percent market share.
It remains a small market but the benefits of buying electric combined with Norwegian consumers’ openness to new brands make it a natural springboard into the rest of Europe, especially for premium-angled brands.
For example, the Hongqi e-HS9, a 5200-mm electric SUV with a starting price of roughly 61,500 euros, was Norway’s No. 16-seller car in January, beating the Kia Niro and Volkswagen ID3.
Chinese brands that make their European debut in Norway are already starting to look further afield.
This year Xpeng will expand into Sweden, the Netherlands and Denmark, while premium electric brand Nio will push into Sweden, Denmark, the Netherlands and Germany with its ET7 sedan following its entry last year into Norway with the ES8 SUV.
Germany is the biggest test for any brand in Europe, said Hui Zhang, managing director of Nio’s Germany operation.
“It’s the biggest car market in Europe, it’s the strongest for premium brands, and German customers are well educated and highly demanding,” he said.
Nio, along with China’s other so-called “smart” EV brands such as Xpeng have borrowed from the playbook of Tesla and put technology and software at the heart of its brand proposals.
The ET7, the company’s flagship sedan EV, for example will eventually become one of the first electric vehicles to use solid-state batteries, the company has promised.
Described as a “supercomputer” by its creator, the ET7 will have a battery size of up to 150 kilowatt hours for a quoted range in China of up 1,000 km (620 miles). The ET7 sedan also comes with a roof-mounted lidar to help give an undisclosed level of future autonomy.
Also going big on tech is the Hongqi e-HS9, which comes with three 16.2-inch screens for its so-called Zhilian infotainment system.
The new Xpeng P7 sedan, the company’s second car after the G3 SUV, comes with Xpilot “advanced driver assistance” with automatic parking. A so-called “Wing Edition” boasts dramatic scissor-opening front doors.
‘Cautious’ European customers
Despite the eye-catching specifications, brands such as Nio and Xpeng could have a hard time persuading customers to switch in markets outside of Norway.
China’s pure EV sales bloomed in 2021 to 2.7 million, up 173 percent on the year before. Much of that was because Chinese consumers are very open to new brands, especially those with a home-grown, tech-first angle, said David Twohig, who previously worked for Renault and was chief technical officer of short-lived Chinese EV startup Byton. This trend is unlikely to extend to Europe, he predicted.
“The Western European customer is a lot more cautious. That reluctance will stay for quite a long time,” he said.
Forget about the old stories of poor quality, however.
“The image of Chinese cars being a bit cheap and not so safe, that’s finished,” he said. “The industry has caught up with the West in terms of quality.”
The supplier base is sophisticated, the test facilities are “as good as any facility in the U.S. and Europe” and software engineers are on par with those coming out of top U.S. universities.
“From the technical point, they are ready. The much tougher question is: Is the customer ready?”
‘Barbell price scenario’
The soundest approach is to avoid the middle market, argues Michael Dunne, former automotive executive in Asia and CEO of Zozogo consulting.
Instead, he said, Chinese automakers should target the “barbell price scenario” going either high-end or low-end.”
Low-end isn’t that cheap when it comes to electric vehicles, but MG is currently leading the Chinese brands in Europe with a strategy of offering some of the best value-for-money EVs based on range.
The SAIC-owned brand, which started life in the UK, made the best-selling Chinese EV in Europe last year with the ZS small SUV at 17,375 sold, beating the Polestar 2 in second place with 16,496, according to figures supplied by Dataforce (see table, below).