Europe needs to catch up on EVs is key message from Munich auto show

Europe's automakers have a fight on their hands to erase China's lead in developing affordable electric vehicles, industry analysts and executives said at the IAA Mobility auto show in Munich.

"It must be a battle. They (Chinese EV makers) are clearly very competitive in the electric car value chain," Renault CEO Luca de Meo said. "I think they are a generation ahead of us."

"We need to catch up very quickly," he added.

Chinese automakers including MG, BYD and Xpeng are targeting Europe's EV market, where EV sales soared nearly 55 percent to about 820,000 vehicles in the first seven months, making up about 13 percent of all car sales.

Renault unveiled a battery-electric version of its Scenic compact crossover at the show on Monday. The Scenic will be priced at a level that is within reach for many customers, similar to a hybrid model of the same size and category, de Meo said.

Renault said it will release the prices for the Scenic E-Tech later in the year, with a launch planned in the first quarter of 2024.

BMW CEO Oliver Zipse said Chinese brands pose an "imminent risk" to Europe's mass market automakers.

"The base car market segment will either vanish or will not be done by European manufacturers," Zipse said on Sunday in reference to China's push into Europe.

BMW previewed its next-generation electric cars in Munich with the Vision Neue Klasse concept.

Mercedes-Benz CEO Ola Kallenius described the road to electromobility as a marathon in which the company is currently only at kilometer eight or nine.

“In this race, it is important to maintain tactical flexibility but have strategic clarity,” Kallenius said on the sidelines of the show.

Mercedes unveiled the Concept CLA Class electric sedan, which previews its new range of compact cars.

Volkswagen Group unveiled a performance version of its upcoming ID2 small EV that will use the GTI badge and the DarkRebel show car for its Cupra brand that highlights a new design-oriented approach for the automaker's 10 brands.

VW Group CEO Oliver Blume does not yet see the ambitions of the Chinese automakers for Europe as a threat. "We have the vehicle know-how, we have the quality level. And we have a brand heritage. The newcomers don't have that," he said.

Pricewise, he said, the difference with traditional automakers in Europe will not be that great.

"The Chinese will not be able to offer the cost level they offer in China in Europe," Blume said.

Xpeng President Brian Gu said while European carmakers currently lag behind China, they have made a "huge commitment" to EVs with partnerships and large investments in technology.

"I would never discount the large (carmakers) trying really hard to come back and focus on this important transition," Gu said.

Auto industry analyst Ferdinand Dudenhoeffer said the Chinese are "world champions" at making batteries, which can make up 40 percent of an EV's cost.

Chinese battery makers setting up in Germany are helping to lower EV costs and German politicians need to make sure they are "not driven out of the country with stupid decoupling strategies," Dudenhoeffer said.

The Chinese presence is being felt heavily at the Munich show. About 41 percent of exhibitors at this year's event are headquartered in Asia, with double the number of Chinese companies attending compared with the 2021 Munich show.

Xpeng said that it will enter the German and French markets starting in 2024 with the G9 and G6 SUVs and P7 large sedan. Xpeng's visibility soared after VW recently announced it would work with the company to develop electric models for the Chinese market.

BYD showed off its new electric offerings for the European market, including the Seal U compact sport utility vehicle and the Seal sedan. The latter will start from 44,900 euros ($48,470) in Germany, putting it in direct competition with Tesla’s Model 3 and several of VW's cars.

Fabian Brandt of consultancy Oliver Wyman said of the show: "What used to be a performance for the German car industry to demonstrate its extremely strong position is now a meeting of equals between progressive players from around the world, especially China."

The arrival of Chinese EV makers has raised concerns they will undercut local automakers and come to dominate EV sales.

The average price of an EV in China was less than 32,000 euros ($35,000) in the first half of 2022 compared with about 56,000 euros in Europe, according to researchers at JATO Dynamics.

"Europe needs to stop being naive from a macroeconomic point of view in the face of China," Renault's engineering head Gilles Le Borgne, told journalists on Sunday, pointing to the country's control of the full battery supply chain.

Reuters, Bloomberg and Automobilwoche contributed to this report