Chinese electric vehicle manufacturers have witnessed a drastic slowdown in their growth across Europe, marking the end of five years of rapid expansion. The year 2024 brought significant challenges, primarily due to new trade barriers and the increasingly stagnant demand within the European auto market.
According to automotive researcher Dataforce, major Chinese brands, including Saic Motor’s MG, BYD, and Xpeng, collectively saw their registration of electric vehicles (EVs) drop by 3.5% throughout 2024, representing their first annual decline since gaining foothold in the European market. This contraction has left Chinese carmakers with about 8.5% of the overall EV market share, demonstrating the increasing competition and market saturation.
The slump can be directly attributed to December's imposition of European Union tariffs, which followed heated negotiations concerning state aid perceived to favor Chinese EVs unfairly. These tariffs have increased duties to over 45% for brands like MG, significantly altering the competitive dynamics. MG, once leading sales, has suffered from falling volumes after incentivizing purchases earlier to avoid anticipated fees.
Starting from December 2024, the new tariffs exacerbated challenges for these companies just as market conditions tightened, limiting their ability to maintain their previous sales momentum. Data suggests the Chinese automakers managed to secure 8.2% of the EV market by the end of December, compared with higher averages just months prior.
This shift signals warning signs for the future, as European competitors also confront the ramifications of these tariffs. Tesla and BMW have taken legal action against the tariffs, arguing they stifle competition and hinder overall progress within the auto industry. BMW stated, "The added fees will not strengthen European manufacturers’ competitiveness..." emphasizing the long-term consequences of these trade conflicts.
Despite the tariffs, BYD has managed to sustain its momentum within Europe. The company is poised to expand even amid tariffs totaling 17% on the standard 10% EU import duty. With strategic moves like entering the Greek market and partnering with French car leasing firm Ayvens, BYD aims to bolster its presence within corporate sectors. The firm is even setting plans for a new factory in Hungary, allowing it to manufacture vehicles within the EU and sidestep the brunt of trade barriers. Concurrently, BYD is investing heavily—over $1 billion—into building another facility in Turkey, where it can benefit from a customs-union agreement with the EU.
On the other hand, Xpeng has capitalized on its market entry strategy, establishing itself firmly as the third-largest player among Chinese EV brands by penetrating EV-friendly territories like Denmark and Norway. Such advancements inspire confidence, even as competition intensifies.
Jato Dynamics, another leading automotive researcher, insists the competitiveness of Chinese EV manufacturers poses an "existential threat" to established European firms, indicating the fierce battle underway within the global automotive market. While trade disputes hamper Chinese automakers' growth trajectories within Europe, their continued ascendance within China and other developing markets remains pronounced, showing the inherent strength of their cost advantages and production efficiencies. Consumer price advantages are stark, highlighted by products like BYD’s Atto 3, which carries a price of €37,990 (S$53,432)—notably cheaper than equivalent models from European competitors.
European consumers are still grappling with these pricing discrepancies, with BYD's Atto 3 selling for 44% less domestically than its German counterpart. Similarly, the MG4 compact SUV is significantly cheaper when sold back in China, prompting discussions among markets about true competition.
The imposed tariffs have jolted the entire auto industry, restricting the flexibility of Western carmakers like BMW and Tesla to absorb the additional costs. There’s concern about the overall impact on the decarbonization efforts within the industry; BMW has underscored the importance of fostering collaboration rather than conflict, insisting it remains hopeful for negotiated solutions to avert broader trade disputes. The German carmaker's statement reflects the growing realization among European automakers of the necessity for open dialogues with Chinese counterparts to maintain competitiveness and harmony within the market.
With the current climate, the future for Chinese electric vehicle manufacturers operating within Europe looks fraught with obstacles. The challenge lies not only within the internal market dynamics but also the relationships with regulations and other automakers, which have become increasing complex as tariffs and legal actions depict the current reality of this rapidly changing industry.