Chinese and European carmakers went head-to-head at the Paris auto show on Monday, with tensions heating up as the EU prepares to impose steep tariffs on Chinese-made electric cars and the industry struggles.
This year’s event – Europe’s largest motor show – has come at an important time. Struggling European automakers need to prove they are still in the game, while Chinese rivals aim to gain ground in a competitive market.
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There was some consensus, however, with leaders from both regions warning of the dangers of EU taxation.
“Who pays the debt? Consumers. So this makes people very worried. It will prevent poor people from buying,” Stella Li, senior vice president of Chinese EV giant BYD, told Reuters.
The CEO of Stellantis, Carlos Tavares, warned that the tariffs will lead to Chinese car manufacturers setting up plants in Europe, which will add to the power in the region and lead to some local manufacturers closing factories.
Nine Chinese brands including BYD and Leapmotor are presenting their latest models at this year’s event, according to Paris Motor Show CEO Serge Gachot. That is the same as in 2022 when they make about half of the existing products.
This year, they make almost one-fifth of the products thanks to a very strong show from the European car industry – a sign of its determination to protect its home territory.
Earlier this month, EU member states partially backed tariffs on Chinese-made EVs of up to 45%, aimed at countering what Brussels says are unfair subsidies from Beijing to Chinese manufacturers. Beijing denies unfair competition and has threatened countermeasures.
Although Chinese car manufacturers have criticized this move by the EU, they are still pushing ahead with plans to expand into Europe and so far no one has said they will raise prices to cope with the jobs.
China’s GAC told Reuters on Sunday that the show marks the launch of its European ambitions, while homegrown Leapmotor said on Monday it aims to have 500 units sold in Europe by late 2025.
Chinese EV makers such as BYD have so far priced their vehicles slightly below European rivals, giving them an advantage. That will also help offset low margins at home. Like the Japanese and South Korean automakers before them, they also offer better equipment and offer more features as standard.
Yet even BYD, which already sells EVs across Europe and sponsored the European soccer championships this summer, still has low brand recognition, so it hopes to make a splash with its electric Sea Lion 07 SUV launch.
New Chinese entrants such as Dongfeng, Seres and FAW are also showing new models as they seek overseas EV sales to offset a weak domestic market and a vicious price war there.
Pressure is on to try to lower prices in Europe as well, as EV makers try to close the gap with cheaper gasoline vehicles.
“My personal opinion is that we will reach price parity in Europe in 2-3 years. Everyone, if you want to compete, needs to work hard to reach that goal,” said Leapmotor International CEO Tianshu Xin.
Passenger car sales in China rose 4.3% in September from a year earlier, after a five-month decline on aid from the government to boost trade as part of a stimulus package. European sales hit a three-year low in August.
In another development for the EV market, the French government said on Thursday it would reduce its support for EV buyers, joining Germany which ended its subsidy program late last year.
‘ALARM BELLS’
Chinese car manufacturers also need to do well in Europe because they are locked out of the American market.
European car manufacturers were hit hard such as Volkswagen, Mercedes-Benz and BMW
all issuing profit warnings mainly due to the weak Chinese market. Stellantis lowered its revenue forecast due to problems establishing its US business.
Stellantis’ Tavares on Monday declined to rule out job cuts or product cuts.
“We will have to make great efforts”, he said, adding that it is up to customers to decide which brands have a future.
Volkswagen is also locked in a battle with powerful unions over cost-cutting that could see it close German factories for the first time and cut thousands of jobs.
Europeans are struggling to compete with Chinese rivals’ lower costs and their ability to develop new EVs in just two years, at least twice as fast as traditional Western automakers.
“The Europeans have big bells,” says Stax’s Dunne. “They realized they needed to do something really big and they only had a few years left to do it.”
First published: October 14 2024 | 11:40 p.m IST
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