How China-made EVs are affecting Europe's key segments

Imports from China accounted for one in five of Western Europe's battery-electric vehicle registrations in the first seven months of the year, new data shows, with Tesla leading the way.

The growth of vehicles built in China and sold in the region has come under intense scrutiny. Last month the president of the European Commission, Ursula von der Leyen, announced an investigation into the role of the Chinese government in lowering prices of cars built there and sold here, particularly electric cars.

“Their price is kept artificially low by huge state subsidies,” von der Leyen said. “This is distorting our market.”

Of the 224,254 EVs imported from China and registered in Western Europe, 136,823 were from Western automakers, of which Tesla accounted for 68 percent (93,700 cars), data from Schmidt Automotive Research shows. Western Europe accounts for the vast majority of EV sales in the region.

The U.S. EV maker ships Model 3s from its Shanghai plant to Europe as well as right-hand-drive Model Ys for the U.K. Model Ys for continental Europe are built at Tesla's plant near Berlin.

Tesla as well as European automakers such as Renault and BMW that import cars from China are part of the subsidy probe, according to a report in the Financial Times.

Led by SAIC-owned MG, Chinese brands, including Polestar, accounted for 87,431 sales of full-electric cars, giving them a share of 8.2 percent of the total EV market in Western Europe in the first seven months, the Schmidt data shows.

European automakers have long been concerned that China's efficient supply chain, particularly when it comes to battery materials, could give Chinese brands a huge cost advantage in Europe even with a 10 percent tariff applied.

“The European market is wide open to the Chinese, and we do not know if their strategy is to grab market share at a loss and increase their price later,” Stellantis CEO Carlos Tavares said at the 2022 Paris auto show.

The Chinese are quickly growing share in Europe, rising to 2.8 percent in the first seven months from 2.0 percent in 2020 and 0.1 percent in 2019.

MG, in particular, is gaining ground in key segments.

The MG4 was the No. 9-selling car in the compact segment in the first eight months, with a volume of 43,045, figures from market researcher Dataforce show. The MG4 was the second-best selling full-electric model in the segment after the Volkswagen ID3.

Meanwhile, the MG ZS -- available with both a combustion engine and a full-electric drivetrain -- was the No. 13-selling small SUV in Europe, with registrations of 49,656. It was fourth in the segment among full-electric models.

MG so far has made the biggest impact in the U.K., where it was the No. 11-selling brand after eight months, according to data from the automotive lobby group SMMT.

The U.K. is China's biggest export market in the region with 118,000 shipped in the first seven months, according to figures from the China Association of Automobile Manufacturers (CAAM).

Spain was the second-largest European export market for Chinese cars over the same period with 84,000 units.

The country with the biggest percentage share of Chinese sales between January and July was Sweden, according to Schmidt's data at 5.6 percent.

China's BYD was the biggest selling brand overall in the country in July, although the month is often one of the slowest for car sales in the calendar year, Schmidt Automotive Research boss Matthias Schmidt said.

The U.K. recorded the second largest share of sales from Chinese automakers in the period with 5.0 percent, followed by the Netherlands with 4.6 percent (see table, below).

Outside of MG, the threat of Chinese automakers for traditional players is still small.

MG accounted for 62 percent of all Chinese car sales in the first seven months, with Polestar and DR Automobiles (which rebrands cars made by China's Chery Automobile) both at 11 percent. BYD accounted for just 2.6 percent, the Schmidt data shows.

So far, the cost advantage that allows Chinese domestic brands to sell their electric cars at home for around half that of equivalent models in Europe has not translated to a huge influx of budget models in the region.

All Chinese cars sold in Europe incur significant extra costs to bring them over. A recent report by the investment bank UBS assessed the build cost of the new BYD Seal midsize electric sedan and estimated that the Chinese price of 26,572 euros rose to 35,342 euros once imported.

Cost included shipping at 2,000 euros, 10 percent import tariffs at 3,040 euros, sales distribution at 1,500 euros, and the difference in value-added tax of 2,230 euros.

BYD in Europe has been reluctant to sell on value alone, focusing on the higher-range Seal EV with an 82.2-kilowatt-hour battery. That car sells for the equivalent of 28,800 euros in China, but costs 45,695 pounds (52,800 euros) in the U.K., one of the first European markets for which BYD has announced pricing for the car.

BYD can make the Seal in China for 35 percent lower costs than a VW ID3 made in Germany, UBS concluded after overseeing a teardown of the model.

The bank was not convinced that state help contributed much to that. “It's quite possible … that price competitiveness is to a great extent actual competitiveness rather than the effect of subsidies,” Patrick Hummel, UBS analyst, wrote in a note in reaction to the European move to investigate the effect of subsidies.

Despite the extra costs incurred importing models from China, several European and Japanese automakers are already shipping models from China to Europe.

So far, the list includes the BMW iX3 midsize electric SUV, Dacia Spring small EV, Citroen C5X midsize, Tesla Model 3 and Model Y, Honda e:Ny1 small electric SUV, Honda CR-V midsize SUV, Honda ZR-V compact SUV, Smart #1 and DS 9 midsize car.

Next year VW Group brand Cupra will import the Tavascan midsize electric SUV from China, while BMW's Mini division will bring over the Cooper small EV and the Aceman small SUV. Volvo will import the EX30 small electric SUV, while Smart will ship the #3 to Europe.

Many new Chinese brands, however, are finding the market tough in Europe.

Those recording a sales fall in the first eight months of 2023 include Hongqi, Xpeng, Aiways, Geely's taxi brand LEVC, Dongfeng Sokon Automobile and SAIC's Maxus, according to Dataforce. The overall car market in the same period was up 18 percent.

Those showing more promise include Nio, up 109 percent at 1,475 sales; Great Wall's Ora brand, with 3,551 sales in the period; BYD, up 470 percent to 7,729; and Geely's Lynk & CO at 19,664, which was up 50 percent on the year before.

Polestar saw growth of 62 percent to 25,122, while MG remains the leader at 137,718 sales, up 135 percent.

Aside from MG, the threat from Chinese automakers looks stronger in theory than in practice.