The pace of change in the automotive industry is accelerating and evolving into myriad new dynamics as Chinese manufacturers push to expand globally, particularly in North American and European markets.
Their goal is to win new-car buyers’ hearts and minds — and to play catch-up. Just a few years ago, China was a part-time player in the global car industry. Today, it dominates in the production of electric vehicles, thanks in part to its ability to produce low-cost batteries, and is on course to become one of the world’s biggest vehicle exporters.
New entrants offer greater choice for customers, and fresh impetus to a stagnating EV market. But for the established hierarchy, they bring fresh challenges. Ford, BMW, Fiat, Citroen and others need to be very aware of how the trickle of new entrants that started with Tesla could turn into a torrent with many compelling new Chinese players.
Price is a key motivator
Chinese vehicles are not only turning heads but also making a clear statement with high-profile sponsorship deals and ad campaigns. Ultimately, it comes down to the buyer to choose tried and trusted traditional players or explore new horizons.
Escalent’s “Chinese Automotive Brand Impact Study” of more than 1,600 new-car buyers in Europe and more than 1,000 new-car buyers in the U.S. shows that from a buyer perspective, Chinese brands could fast-track their way into consideration. This is despite the threat of double-digit tariffs in many markets, including President Donald Trump’s 10 percent tariffs on Chinese imports.
All too often seen as the fictional baddie of global commerce, China tends to trail other countries when it comes to consumer trust. But when the focus is on cars, the credibility gap closes with people willing to change their mind for a model of comparable price.
Kerrigan Advisors’ proprietary annual OEM Survey of over 100 executives reveals that the majority of respondents are worried about the financial impact of Chinese automakers’ growing global market share, and most expect that the EV transition to be slower than expected. The survey also queried executives on their outlooks for dealership valuations and profitability, as well as their expectations for the future of dealer networks and facility requirements.
The price reduction tipping point where European buyers are willing to transition from “biased” to “buyer” is a 27 percent cut on average, although 1 in 10 needs to see only a 10 percent price benefit. In comparison, 12 percent of U.S. buyers think Chinese cars should be up to 10 percent less expensive, while nearly one-third say they should be 11 to 20 percent cheaper.
While price is a powerful persuader, we found there are certain expectations among consumers. In Europe, the vast majority (72 percent) of buyers expect Chinese cars to be cheaper than established brands. This compares with 68 percent in the U.S., although a notable 24 percent believe they should be the same price.
Younger buyers are less likely to pigeonhole Chinese brands as the budget option and need less of a financial incentive. Among those 35 and under in Europe, about 1 in 5 would only need to see up to a 10 percent reduction to consider buying Chinese cars.
This is positive news for Chinese brands eager to move away from their “cheap copy” image and to be seen among a new generation of car buyers as innovative.
Nio is one Chinese brand capitalizing on a premium image at an affordable price, with its low-cost Onvo set to launch in Europe soon. Polestar, a Swedish automaker partially owned by the Chinese company Geely, is another brand eager to prove its innovation credentials, positioning itself as a premium EV brand with a focus on cutting-edge technology and sustainability.
Familiarity breeds intent
Car buyers must have gotten the memo. While the majority of respondents have never heard of most Chinese car brands, there’s definitely a growing sense of awareness.
Of the top 25 most familiar car brands among car buyers in Europe, three Chinese brands make the list — MG (22), Polestar (24) and BYD (25). Polestar is the only Chinese-owned brand to crack the top 25 in the U.S. However, 45 percent of U.S. new-car buyers are at least somewhat familiar with MG and 21 percent are at least somewhat familiar with BYD.
Study respondents in Europe and the U.S. also responded favorably when shown unbranded images of Chinese cars alongside more mainstream models. There are specific Chinese brands whose design and specs make them more compelling than other vehicles in the segment.
In the U.S., for example, buyers are more likely to consider the BYD Shark plug-in hybrid than the Ford F-150 Lightning EV while the Nio ES6 and the Xpeng G9 had higher consideration than the Tesla Model X.
This focus on “brand” alongside a price that is likely to be less than those of the alternatives could change the car landscape very quickly. Even with relatively nascent levels of activity in Europe and North America, this should be setting off alarm bells for established brands that should be looking over their shoulders at the growing threat.
Mark Carpenter is managing director, Automotive Europe, at Escalent.
