Shulou(Shulou.com)11/24 Report--

It's a lie to say no.

Author | Wang Lei Chumen

Editor | on the continent

You can't wake up people pretending to be asleep, but interests can.

When Chinese brands are booming in the electric car market, most established car companies are still gobbling up gas car dividends, and it is hard to say that they are actively sensitive to the electrified transformation until Chinese electric car brands hit their doorstep.

This year's Munich auto show, let the outside world see the energy of Chinese brands, BYD in Europe to build factories, stores, the new power also plans to break through the hometown of cars. Arrogant Europeans can't sit still at last.

On the afternoon of September 13, European Commission President Ursula von der Lane (Ursula von der Leyen) announced in his annual "State of the Union address" to the European Parliament in Strasbourg that he would launch a countervailing investigation into China's electric vehicles.

Source: CCCEU "the global market is now flooded with cheaper electric cars, and huge state subsidies are artificially driving down their prices, which is distorting our market."

Mr von der Lane's argument is tantamount to an article, which is, of course, intended to protect local European car companies.

Similarly, the German chancellor also cheered German automakers at the Munich auto show, saying they should be encouraged, not scared, in the face of competition from Chinese companies. Then with a big wave of his hand, he came up with an incentive plan of 110 billion euros.

For a long time in the past, Europe's automotive technology and manufacturing level are models of the global automotive industry, BBA's hometown is in Germany, which is enough to prove its leadership.

However, the Chinese automobile industry on the other side of the ocean, starting with the "ten cities and thousands of cars" more than a decade ago, is indomitable on the road of de-fueling. So we can see that more and more Chinese brand electric cars have emerged in the European market.

It is obvious that all the gifts have already been secretly priced.

01. The attitude of all parties as early as July this year, it was reported that the European Union was about to launch an anti-dumping and countervailing investigation against Chinese-made electric vehicles.

The reason is that the European Union is uneasy about the large-scale entry of Chinese electric vehicles into the European market, and they are worried that electric vehicles imported from China will pour into the European market at a very fast speed and on a very large scale, thus threatening the production of electric vehicles in Europe.

According to the International Energy Agency (IEA), 16 per cent of electric vehicles sold in Europe were imported from China in 2022, when Thierry Breton, the EU's internal market commissioner, said: "in favor of a dumping investigation into Chinese electric vehicles, the rapid increase in the number of electric vehicles imported from China has become a problem for the EU industry."

Source: CCCEU but what is interesting is that EU countries have different attitudes towards the countervailing investigation of electric vehicles in China.

The July investigation was mainly carried out by France, whose president said, "We do not want to use French taxpayers' money to accelerate industrialization outside the European Union."

According to local media in Europe, France is fierce because about 40 per cent of French subsidies for electric car purchases in the first quarter of 2023 go to Chinese companies.

So France plans to adjust the conditions for the implementation of electric vehicle subsidies and conduct a survey of electric vehicles in China.

Unlike France, Germany believes that if the EU takes trade relief measures against China, it may lead to China's counteraction, and even damage the European automobile industry.

Germany can be forgiven for this relatively moderate attitude. BBA and Volkswagen still have irreplaceable advantages in the domestic market. These companies have just announced strategic plans for the Chinese market, so Germany is very "careful".

In the face of this latest countervailing investigation, the EU-China Chamber of Commerce also responded quickly.

Source: CCCEU EU Chamber of Commerce in China said that the EU should be urged to take an objective view of the development of China's electric vehicle industry, rather than arbitrarily using unilateral economic and trade tools to prevent or increase the development and operating costs of Chinese electric vehicle products in Europe. "the opening up of the European market should be reflected in concrete actions and should provide a fair, just and non-discriminatory business environment for foreign enterprises."

Chinese companies, including the electric vehicle industry, are committed to realizing the vision of global carbon neutrality and will make unremitting efforts to this end, the statement said. The EU-China Chamber of Commerce hopes that EU policy makers and industry will work together to contribute to the green development of the world.

02. Why is Europe insisting on imposing restrictions on Chinese electric cars behind the countervailing investigation?

Let's start with a set of data. Chinese brands' share of the EU market has risen from less than 1 per cent in 2021 to 2.8 per cent this year, according to SAR.

In the electric car market, Chinese manufacturers account for 8 per cent of total sales, up from 6 per cent last year and 4 per cent in 2021. In the first half of this year, Chinese carmakers sold almost the same amount of electric vehicles in Europe as they did in 2022.

China's share of the European electric car market has more than doubled in less than two years.

It is worth mentioning that in the European pure electric vehicle market, Volvo, Mingjue and Jixing, the top three brands by sales in 2022, are all European local car brands acquired by Chinese car companies, accounting for 8.6% of the European pure electric vehicle market share.

In the first eight months of this year, SAIC MG sold 135000 vehicles across Europe, up 148 per cent from a year earlier, and ranked first in new car sales in the UK (non-EU), Germany, France and other countries. In the first eight months of this year, the main selling model MG4 has sold more than 40,000 cars in Europe, making it the top seller of pure electric compact cars in Europe.

Because of the huge historical burden, the development of electric cars by European local car companies can not be packed as light as Chinese brands.

At the same time, the European electric car market is not as big as the domestic market. Recently, foreign media reported that Volkswagen's Zwickau factory in eastern Germany is considering layoffs. The reason given is that the weak demand for electric cars in Europe can only cut off excess labor costs.

In addition, as the supply chain does not have local advantages, different pricing in different countries also chills many European people.

Not long ago, German netizens made a scene on the Internet because the Chinese version of ID.3 was cheap. The reason is that the "German-made" ID.3 sold for 39990 euros, or about 322200 yuan, which is 2.5 times the price in China.

Some German netizens could not hold back for a moment, saying, "Germans should stop buying Volkswagen."

Volkswagen immediately said that the price difference between the two countries was caused by multiple factors.

First of all, the Chinese market has the advantage of production cost and low energy cost. Second, all the suppliers of the model are from China, and the shorter transportation routes and lower production costs make the sales price cheaper. Third, Volkswagen lowered its price because the "price war" instigated by Tesla became increasingly fierce in the Chinese market.

In the public response, the supply chain became the key.

In the traditional automobile era, the traditional supply chain dominated by engines and other key components is basically controlled by European, American and Japanese enterprises, and these supply chains are highly closed. However, in the era of new energy development, the structure is changing, and Chinese suppliers occupy a more and more important position.

Under the superposition of layers of supply cost advantages, it has created the unmatched competitiveness and price advantage of Chinese cars.

03. No hindrance to the growth of independent brands? The EU countervailing investigation is bound to affect the pace of Chinese car companies going to sea, and once the EU finds that the conclusion is established, exports to Europe may face punitive tariffs.

But it's like a coin with both sides.

While preventing Chinese car companies from going abroad, the EU countervailing investigation will also force Chinese car companies to speed up the construction of overseas factories. It is reported that leading car companies such as SAIC, BYD and Great Wall are already gearing up for localized production in Europe, and the earliest batch of local European products are likely to be offline in 2025.

The Ningde era also had a plan to go out to sea to build a factory early. Today, the plant in Arnstadt, Thuringia, Germany, has successfully achieved mass production of lithium-ion battery cells, and five more production lines will be put into operation in the future. the plant is expected to meet 14GWh's initial capacity target at the beginning of 2024. Its subsidiaries also launched a power battery industry chain project in Indonesia in April last year.

In addition, including Guoxuan Hi-Tech, Yiwei Lithium Energy and Honeycomb Energy also have plans to set up power battery production lines overseas.

Despite the huge investment in building factories in Europe, it may now be the only way for Chinese brands to go abroad, and it will also make the whole overseas business more perfect and independent.

Source: BYD and for this latest survey, many people think that it does not hinder the long-term logic of the rise of independent brands.

Citic Securities believes that at present, electric cars in China do not take low prices as the selling point, but their competitiveness comes from technology accumulation, quality control and user experience. At present, the EU's potential policy and landing time for Chinese electric vehicles are not clear. "We are optimistic about the overseas competitiveness of Chinese tram products and are optimistic that Chinese car companies will explore a win-win model in their practice of going abroad."

Zhongtai Power New pointed out that the incident has nothing to do with power batteries, has nothing to do with the mid-stream of lithium power, and is expected to be less likely to reflect tariffs. Even if it is eventually established, Europe accounts for a relatively small proportion of China's exporting countries at present. It has little impact on the current sales and performance expectations of companies.

This article is from the official account of Wechat: Chaodian Lab (ID:SuperEV-Lab), author: Wang Lei Chumen

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