Celebrate Your Success: How Car Karaoke Signals Victory for Chinese Companies

If Chinese automakers can be believed, there’s a significant love for karaoke among the populace. Some enthusiasts are so passionate that they want karaoke features integrated into their family vehicles.

Arno Antlitz, Volkswagen’s CFO, expressed that this was something that would have baffled the European mindset just a few years back. Nevertheless, the innovations found in electric vehicles from Chinese brands like BYD and XPENG are illustrative of the lessons Volkswagen and its European counterparts have had to absorb as they strive to catch up with their Chinese rivals in the global electric vehicle arena.

“No one in Wolfsburg thinks karaoke is necessary in a car,” Antlitz remarked during a Financial Times meeting last week. “Yet, you need it.”

A decade ago, such openness from the world’s second-largest automaker would have been surprising. Little advocacy existed for Chinese brands in Europe, where the automotive industry was largely dominated by long-established manufacturers from Germany, France, the UK, and Japan, as well as South Korea. The rise of battery technology, however, paved the way for Chinese manufacturers, bolstered by substantial state subsidies, to aim for dominance in the burgeoning electric vehicle sector.

They seized this opportunity. Data from EV analyst Matthias Schmidt shows that in early 2024, Chinese brands gained over 10% of European EV sales, though that figure slid back to 7.7% by February. Yet, the scale of the Chinese domestic market is unmatched, with 12.8 million battery and hybrid cars sold in China by 2024, exceeding the entire European auto market.

The swift advancements from China have caught competitors off guard, especially following a technological leap during the pandemic. Bentley’s Frank Stephen Walliser described the innovations unveiled at the 2023 Shanghai Motor Show as a “shock that comes after a period of silence.”

Chinese manufacturers are increasingly vying for a future where vehicles are seamlessly integrated into users’ digital lives and predominantly self-driving. While Tesla remains a leader among Western automakers, China’s BYD is close behind, with CEO Elon Musk reportedly more focused on supporting Donald Trump’s presidential ambitions than on automotive innovation. Despite backing health measures, Trump’s policies are projected to significantly hinder American manufacturers.

Chris McNally, an analyst from Evercore ISI, noted in a report after attending the Shanghai show that experiences like handling driving tasks while enjoying massage seats in an Aito M8 Luxury SUV and watching films on a retractable projector screen showcase the innovation at a fraction of the price of Western luxury vehicles.

According to McNally, the global market share held by major automakers in Detroit, Germany, and Japan has dropped from 74% to 60% over the past five years. “If you’re a US/EU manufacturer not planning to offer affordable, scalable EVs in the next five years, you could face serious challenges by the 2030s,” he warned.

He further questioned whether the fight is lost for Western makers, suggesting they may make a strong comeback during this phase of automotive evolution.

BYD’s Seagull, priced around £6,000 in China, showcases autonomous technology comparable to much costlier vehicles, branded as “God’s Eye.” This pricing was achieved using heavier sodium-ion batteries, which compromise range for affordability, yet it highlights a challenge that European manufacturers face.

A consulting firm Bain & Company evaluated that Chinese automakers, on average, can develop cars at just 27% of the cost of European counterparts.

This isn’t just about undercutting prices. Last week, during a test run organized by the British lobby group for automakers and traders, BYD’s £33,300 Seal U DM-I, a plug-in hybrid family SUV, went head-to-head with Volkswagen’s plug-in hybrid Tiguan, which can cost upwards of £10,000 more.

Participating state-owned automakers included Omoda and Jaecoo Brands alongside Leapmotor, Geely (which owns Volvo, Polestar, and Smart Brands), and Xpeng. During a week of trials, the Guardian discovered an abundance of driver assistance features and a spacious interior rivaling that of the Tesla Model Y.

All these vehicles are priced competitively with minimal distinction from European offerings. They provide a smooth ride and impressive voice assistance, allowing drivers to open the sunroof without diverting their attention from the road. A standout from the trials was the swift MG Cyberstar Electric Sports car manufactured by state-owned SAIC.

There are indications of resistance from Europe. Priced at £23,000, the Renault 5 has rapidly gained traction as one of the first affordable electric vehicles manufactured in Europe. While Renault is working diligently to lower production costs, its profitability remains uncertain, though the model has garnered significant popularity.

The French carmaker is also aiming to cut the sales timeline from three years to two, with assistance from an unnamed Chinese partner, for its upcoming models like the Renault 4 and the next Twingo.

If coexistence isn’t feasible, joining forces seems to be a favored strategy among Europeans. Volkswagen has invested in XPENG (also known as Xiaopeng), while Stellantis is planning to introduce jumping cars in Europe and utilize that technology. Additionally, Scandinavian brands such as Volvo and Polestar are increasingly reliant on technology from their parent company, China’s Geely.

UK’s JLR is collaborating with Chery to produce more affordable vehicles under the revived Land Rover Freelander name. According to JLR CEO Adrian Mardell, the vehicle set to launch in the latter half of 2026 “could be global.” Nissan’s Ivan Espinosa hinted that Japanese manufacturers could assemble Chinese cars in Sunderland, northeastern England, to fill excess capacity.

Shunning Chinese technology is not an option for many firms, even if they desire to do so. Most batteries are produced in China, with a few competitors from Japan and Korea. Europe’s battery champion, Northvolt, has faced setbacks. In the meantime, BYD announced in March that its new battery could offer a 250-mile range with just a five-minute charge, causing CATL shares to surge 16% during its market debut in Hong Kong.

Europe possesses certain defensive advantages, including a vast network of dealerships (still preferred by consumers for purchasing) and maintenance garages, which slow the progress of Chinese brands.

“European consumers tend to be quite conservative and very brand loyal,” remarked Eric Zeyer, head of Bain & Company’s European automotive division. “It’s exceedingly challenging for Chinese manufacturers to break into Europe and replicate their domestic success.”

He warned that without strategic moves, Chinese brands risk disappearing from the market, similar to the fate of US electric brand Fisker.

Despite the prevalent challenges, European automotive leaders assert the game isn’t lost, even as it’s evident that China is set to capture a significant share of the global automotive market.

Bentley’s Walliser noted that “Chinese manufacturers are more agile and quicker to adapt,” while also embracing new technologies. “This isn’t magic,” he stated. “It can be achieved here too.”

“Don’t underestimate the resilience of automotive companies,” added Luca de Meo, CEO of Renault.