How Chinese brands are using EVs to gain foothold in Europe

A Chinese manufacturer achieved a breakthrough in European sales during the first quarter. MG, the British brand owned by SAIC Motor, captured almost 2 percent of the region’s electric vehicle market with the ZS EV small SUV.

MG’s success came despite selling the ZS EV in just five European markets, led by the UK, where the SUV accounted for 10 percent of the country’s electric vehicle sales in the first quarter, making it the UK’s No. 3-selling battery-powered model behind the Tesla Model 3 and the Nissan Leaf.

In total, EVs represented 39 percent of MG’s 2,300 first-quarter sales, second only to Tesla’s 100 percent, according to data from Berlin-based analyst Matthias Schmidt.

Since MG switched to Chinese ownership in 2005, it had failed to reach a level of success in the UK that would have allowed it to make the long-promised leap into markets in continental Europe. Last year’s launch of the ZS EV, with its competitive range and affordable price tag, changed that.

Now MG is also selling in Norway, the Netherlands, Italy and France.

“If it wasn’t for electric it would be much, much tougher to do that,” MG UK Sales and Marketing Manager Daniel Gregorious told Automotive News Europe.

SAIC isn’t the only Chinese automaker hoping that the country’s know-how in electric propulsion will be the catalyst to persuade skeptical European customers to consider a Chinese car.

BYD will return to the European electric car market this year with the Tang SUV, and newcomer Aiways’s debut model in Europe will be U5 SUV.

Another startup, Byton, has promised a 2021 launch for its M-Byte crossover in select European markets, and BAIC Chairman Xu Heyi said last year he wanted to launch the Arcfox electric brand in Europe, without giving a timeframe.

Nio, meanwhile, has postponed plans for a 2021 launch of its premium electric SUVs in Europe, citing difficulties imposed by the COVID-19 pandemic. Nio is still determined to establish sales in Europe, its president, Lihong Qin told Automotive News Europe.

Volvo Cars’ Chinese-built Polestar brand says it is on track to launch the Polestar 2 this year in seven European markets, with customer deliveries of the electric sedan starting in August. JAC EVs will be launched by Italian importer DR Automobiles later this year.

Generous government incentives in multiple European markets and the reluctance of established brands to sell more EVs than needed to fulfill emissions regulations give Chinese automakers the perfect opportunity to launch electric cars, Schmidt believes. “They have a five-year window to break into the market before it effectively becomes closed,” he said.

The window shuts in 2025, which is when the next CO2-reduction targets take effect and Europe’s automakers will be forced to ramp up EV sales further, Schmidt believes.

Chinese automakers, however, are wary of moving too fast after previous attempts to lure Europe’s famously choosy car buyers went awry.

Brands that tried and failed to achieve a foothold in Europe included Great Wall Motor and Qoros Auto, while the disastrous 2005 crash test of Jiangling’s Landwind midsize SUV and the poor performance of the Brilliance BS6 in a 2007 crash test forced the brands to withdraw from Europe.

“I’m very careful about launching a model,” BYD Auto Europe Managing Director Isbrand Ho said, “If you launch successfully, you can rely on that success for many years to come. If you launch improperly it will take many years to fix that.”

He cites Great Wall as an example. “It was the wrong market, the product was not right, the image was not right, the aftersales and spare parts were not in place and it failed miserably,” he said.

BYD first tried marketing the e6 electric taxi in cities such as London, but the company is now best known for selling electric buses across the region. For the launch of the Tang, a cheaper rival to the Audi e-tron, BYD is focusing first on Norway, where EVs are the country’s top-sellers.

BYD’s electric sedan, the Han, will follow. Sales will begin before year-end and will be handled by a local importer, RSA. “I believe you need bricks and mortar to service the vehicle, especially when these vehicles are new and the brand is unknown,” Ho said.

Norway still leads Europe in terms of EV penetration, which makes it more open to new brands, Ho believes. “The automotive landscape is changing. By selecting a neutral, open country as far as brand loyalty is concerned, we will be able to gauge that change more accurately than if we launched in Frankfurt or Munich,” the BYD executive said.

Perception is now a bigger hurdle than quality, believes Michael Dunne, founder of China-focused automotive consultancy ZoZoGo. “The new generation of Chinese EV products are much improved,” he said. “They are bound to run up against some resistance in major markets such as Germany, France and Spain, but they could have success in smaller pro-EV markets like Norway.”

Chinese brands selling combustion-engine cars already have made small gains in emerging markets such as Russia. China’s leading brand there is Haval, part of the Great Wall group, which increased its share to 1.2 percent of the market in the first five months of 2020 compared with 0.7 percent in the same period the year before.

That growth won’t be enough to satisfy the Chinese government, which pushes local automakers, many of which it holds a stake in or owns outright, to aggressively export. “China is now sitting on 40 million units of auto production capacity. With domestic demand running about half that level, state-owned automakers are ramping up exports to sustain the jobs,” Dunne said.

Chinese automakers are taking different approaches to establishing their brands. Brands such as MG and BYD are launching in select, EV-friendly markets like Norway and the Netherlands.

However, while BYD and MG are relying on a traditional dealer network, others are following Tesla’s lead by focusing on online sales bolstered by a handful of prominent stores in big city centers. Polestar, for example, plans 20 so-called ‘spaces’ in cities starting in Oslo, Norway, to help support its online sales operation.

Aiways, meanwhile, plans to lease the U5, with test drives initially offered in Germany by Euronics, a retail chain focused on branded consumer electronics.

Service and maintenance for the EV will be carried out by German car repair chain Auto-Teile-Unger (ATU). Aiways has also shipped 500 U5s to the island of Corsica to be used as rental vehicles.

Additional barriers remain. The cost of launching in Europe could be too great to bear, especially following the downturn caused by the pandemic. “I think the Chinese market and Chinese companies need to recover first,” Francisco Riberas, chairman of Spanish metal parts supplier Gestamp, told Automotive News Europe.

But for those with the cash reserves and agility to move quickly, now might be the time. “While the established brands are marketing EVs with the handbrake still partially engaged, this is the one big chance for the Chinese to enter the market,” said independent analyst Schmidt. “They could be a force to be reckoned with.”