With the aim of attracting British consumers, Tesla displayed its vehicles and vibrant signage at its dealership located at the iconic Hogarth Rotary in West London. Engaging with 500,000 drivers daily, the American automaker has established itself as the top seller of electric cars in the UK. However, passersby are now met with a new sight: the twin Chinese brands Omoda and Jaecoo, both under the umbrella of the state-owned Chery Automobile.
Chinese automotive brands are gaining traction across Europe, surpassing Korean competitors in sales for the first time in Western Europe as of September. The UK plays a crucial role in this success, with 30% of the 500,000 Chinese cars sold in Western Europe from January to September being purchased by British consumers, as reported by Berlin-based auto analyst Matthias Schmidt.
“Their success has been impressive,” remarks Steve Young, managing director of Hogarth dealerships, part of the Turkish group Setash Otmotiv. “This location makes a bold statement — it’s like waving a flag for us. Every minute the lights shift, and drivers find themselves captivated outside.”
Steve Young, beside a Jeku car at his West London dealership, notes that Chinese automakers are “becoming increasingly competitive.” Photo: Graham Robertson/Guardian
Chinese automotive firms, bolstered by support from both national and local governments, are seizing the opportunity presented by the transition to electric vehicles to take a leading role in the global car market.
Challenges such as elevated trade barriers in the EU and U.S. and global supply chain disruptions are currently impacting the industry. Following the Netherlands’ move to regulate the Chinese-owned semiconductor firm Nexperia, export restrictions on critical semiconductors have begun to surface. Additionally, China’s limitations on rare earth metals crucial for various automotive components are unsettling for executives in the industry, leading Brussels to expedite negotiations for a moratorium similar to last month’s U.S.-China trade agreement.
Despite these hurdles, the UK continues to maintain an open stance and has emerged as a key playing field.
Leading the charge is China’s BYD, expected to surpass Tesla this year to become the largest battery electric vehicle manufacturer globally. Sales in the UK have soared tenfold in September compared to the previous year, establishing BYD as its largest market outside of China.
Other participants are also joining the fray, with Chery Automobile recognized as Britain’s top-selling Chinese manufacturer in October. The Jaecoo, Omoda, and Chery brands are targeting the UK market with electric and hybrid offerings that merge small batteries with traditional petrol engines. While MG represents a historic British name, its monthly sales, manufactured by state-owned SAIC, have surpassed those of the proud British nameplate Vauxhall (despite much of its production occurring in Germany).
Meanwhile, Swedish brands Volvo and Polestar, both owned by China’s Geely Automobile, alongside Great Wall Motors, Volkswagen-backed Expen, and Stellantis-backed Leap Motor, have each sold over 1,000 vehicles in the UK this year, preparatory to extensive product launches.
In the U.S., Chinese electric and hybrid vehicles are subject to a 100% tariff, while EU tariffs vary by manufacturer, falling between 17% to 38%. Although these rates are not excessive, they do not encompass hybrid cars, inadvertently encouraging Chinese manufacturers to market vehicles with higher emissions. Countries such as Italy and Spain are also emerging as targets for Chinese sellers.
Conversely, the UK—a significant car importer—is confronted with new tariffs but is keen on introducing electric models to fulfill carbon reduction goals.
Mike Hawes, chief executive of the Motor Vehicle Manufacturers’ Trade Association, stated that Britain desires both a thriving domestic market and a robust manufacturing base, grounded in “free and fair trade.”
“British car buyers benefit from having over 50 global brands at their disposal, and the market remains receptive to new entrants,” he asserts. Chinese brands are “stimulating competition as established market players adapt, enhance model development, and lower costs.”
While diplomatic issues may affect relations, recent tensions surrounding accusations of Chinese espionage have underscored the UK’s inconsistent attitude towards the world’s second-largest economy.
“The primary factor is [the lack of tariffs in the UK] — there are no domestic manufacturers to safeguard,” noted Tu Le, a former auto worker in Detroit and Shanghai who established the consultancy Sino Auto Insights.
According to Mr. Schmidt, British consumers are increasingly receptive to earlier waves of international brands. In the 1980s, Prime Minister Margaret Thatcher attracted Japanese manufacturers such as Nissan, Honda, and Toyota to establish operations in Britain, promoting the country as a portal to Europe (a distinction complicated decades later by Brexit-imposed rules of origin). The next wave consisted of imported Korean cars.
“We are witnessing history repeat itself,” Schmidt remarked. The UK has emerged as the initial European entry point for Chinese brands, despite the absence of a local manufacturing base.
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Historically, low-quality Chinese cars were often dismissed as jokes by Western executives, a perception that has long subsided. Forecasts predict China will surpass Japan in 2023 to become the largest global exporter. Similar to Europe, Chinese brands are still selling in Russia, whereas their European counterparts have faced blockades following the full-scale invasion of Ukraine in 2022. Meanwhile, interest in Latin America is steadily increasing.
“There have been two waves of Chinese entry into Europe,” Young states. “Some of the initial products did not align with UK market demands. However, the brands have generally improved.”
The push for expansion, driven by regional competition in urban centers, has led to significant overcapacity within Chinese automotive factories. While the potential output could reach 55.5 million vehicles annually, actual production is just under half that figure, according to Bloomberg, citing data from the Shanghai-based Gasgoo Automotive Research Institute.
This has sparked fierce price competition within the Chinese market. The Chinese Communist Party has urged manufacturers to avoid excessive competitive behaviors, fearing “entrainment,” which could lead to destructive competition that stifles advancement.
Domestic pricing pressures contribute to more rational export strategies. Nevertheless, according to Andrew Bergbaum, global leader for automotive and industrial at consulting firm AlixPartners, the Chinese brands successfully breaking into European markets typically retail their vehicles at higher prices than in China—a sign of strength rather than desperation.
“The exporting brands are often well-established,” Bergbaum explained. “This represents a strategic move rather than a fire sale. The ability to command higher prices is highly attractive.”
China’s market influx coincides with Europe grappling with excess factory capacities. AlixPartners estimates that European automakers could be carrying two excess factories, potentially risking up to 2 million sales to Chinese brands in the forthcoming years.
This surplus capacity, combined with tariff incentives for local construction, suggests Chinese automakers might acquire properties from older rivals. This is already occurring in Barcelona, where Chery Automobile has taken over a factory previously owned by Japan’s Nissan.
European lawmakers and manufacturers argue that substantial subsidies have diluted the profits of Chinese automakers (though Western companies rarely lack support from their governments). Yet, the primary driver behind the surge in sales in China remains straightforward: consumer preference.
“British drivers are benefitting,” stated Tanya Sinclair, chief executive of British Electric Vehicle, a group funded by the industry advocating for increased battery sales.
“Regardless of the name change, the appeal is evident: high standards, competitive pricing, and innovation that enhances standards universally,” she affirms. “As long as the UK vehicle market is integral to the battery electric future, British cars will maintain a strong presence. However, competition and variety are paramount to a robust market.”
Exploring the features available in vehicles reveals their allure for customers. Special offerings from some Chinese brands range from novelty features like built-in karaoke apps to advanced technologies such as driver assistance systems—importantly, made available at far lower prices than European luxury brands.
“Ultimately, it’s about value,” Lee states. “These cars are exceptional. If I create a superior product that offers greater value to the customer, I’ve succeeded.”
Source: www.theguardian.com
