We still need to develop the Chinese market. Why seek far when the near is available? This makes no sense.

Main Text

Recently, the information about the European Union imposing tariffs on Chinese automakers has been continuously spreading online. BYD, Geely Automobile, and SAIC Motor Corporation have been imposed with anti-subsidy tariffs of 17.4%, 20%, and 38.1% respectively. Among these automakers, SAIC Motor Corporation and its brand MG have been hit the hardest by the EU tariffs.

Regarding the EU tariff increase, SAIC MG directly expressed on social media platforms that they were being targeted. Because in the future, the tariffs on pure electric vehicles imported by SAIC MG into the European market will reach as high as 48.1%, far higher than other automakers. However, SAIC MG has also responded aggressively to the EU tariff increase, stating that they will not retreat and will not stop their steps towards the world.

After Europe tightened its trade barriers, how SAIC MG will break the deadlock in the future has also become a concern of the industry. It is worth noting that SAIC MG has a significant market share in the European market, once reaching 72%. After this tax increase, SAIC MG is bound to suffer a considerable blow in the short term.

However, in China, the world's largest automobile market, SAIC MG's influence is gradually diminishing. Facing internal and external troubles, finding a new way forward is a topic that SAIC MG has to consider.

External Troubles

Based on the available information, the EU plans to impose temporary anti-subsidy tariffs on pure electric vehicles imported from China starting from July 4th. However, the current EU tariff on imported vehicles is 10%. If Europe starts to impose trade tariffs, the tariff rate on pure electric vehicles imported by SAIC MG into Europe will reach 48.1%, higher than other Chinese brand electric vehicles. This led to SAIC MG publicly expressing on social media platforms that they were being targeted.

SAIC MG being targeted in the European market cannot be separated from two major factors. On the one hand, SAIC MG's models are too popular in the European market. Take 2023 as an example, SAIC MG's cumulative sales in Europe reached 230,000 vehicles, with a market share of 72.7%. This means that out of every 10 cars exported from China to the European market, 7 models are from the SAIC MG brand. This is also why SAIC MG has been the sales champion of Chinese automotive brands in Europe for 12 consecutive years, surpassing BYD, Geely, Great Wall, and other automakers.

A set of data further confirms the rapid development of SAIC MG in Europe. According to statistics, in 2018, SAIC MG's sales in Europe were just over 9,000 vehicles, but by 2023, they had grown to over 230,000 vehicles, a 25-fold increase in market performance over a period of 6 years, which can be described as unstoppable.

Not only that, MG4 EV, under the SAIC MG brand, even took the top spot in European pure electric compact car sales in 2023, with an annual total sales of 109,900 vehicles. It has also successfully entered the best-selling pure electric vehicle sales list in countries and regions such as the UK, France, Spain, and has won multiple awards, including the Car of the Year award in major automotive countries such as the UK, France, and Germany.

However, the market share of automobiles in a country or region is limited. As SAIC MG's market share in overseas markets continues to rise, the market share of European local automakers will continue to shrink. Out of protection for local enterprises, Europe has to raise import tariff thresholds, forcing SAIC MG to increase vehicle prices and weaken its market competitiveness.

On the other hand, European local automakers have been relatively slow in their transition to electric vehicles. In fact, the annual sales base of SAIC MG is not particularly high. Even domestically, it is not as good as the monthly sales of a single automaker. The average monthly sales of MG4 EV in Europe are also less than 10,000 vehicles. Under such circumstances, SAIC MG still leads the European market, indicating that European local automakers are quite weak in the field of new energy vehicles. It is reported that early this year, European automotive brands such as Mercedes-Benz and Audi directly announced that they would slow down the process of comprehensive electrification and abandon the goal of achieving comprehensive electrification by 2030, which also provided an opportunity for Chinese automakers to develop in Europe.

On one side, European automakers' new energy business has not shown significant improvement, and on the other side, Chinese electric vehicle companies are rapidly making gains. This inevitably creates a sense of crisis in Europe. Under such circumstances, Europe can only find ways to try to hinder the expansion of Chinese new energy vehicles overseas. Since SAIC MG has a large market share in the European market, it has become a key target.

Actually, from the perspective of Europeans, it is not difficult to understand why Europe has raised the entry threshold for MG's pure electric vehicles. If you put yourself in their shoes, if the market share of imported cars entering the Chinese market continues to rise, leading to a continuous decline in the sales of Chinese automakers, then the entire automotive industry chain will be affected. In this situation, no country wants to cede its automotive industry to other countries. Therefore, raising import tariff thresholds and forcing imported cars to increase market prices can better stabilize the industrial development of local automakers.

Many people may wonder why Europe mainly targets SAIC MG instead of BYD? After all, whether it is domestic sales or global performance, BYD's performance is stronger than SAIC MG.

This is inseparable from SAIC MG's historical and cultural advantages in the European market. MG is a brand born in Oxford, England, and its market position in the UK was similar to that of China's Hongqi brand. Therefore, MG's appeal in Europe cannot be underestimated. Although it has been acquired by SAIC Motor for more than a decade, SAIC has fully implanted its own products into the century-old MG brand. However, MG still has a high reputation and influence in the European market. It holds a high position in the hearts of many Europeans, and some Europeans even believe that MG still belongs to a high-end British brand.

In contrast, BYD is an "outsider" in the European market. In addition, due to the fact that Chinese brands mainly followed a low-end route earlier, the quality of their vehicles varied greatly, so in the minds of some Europeans, Chinese cars are still synonymous with low-end. Undoubtedly, Europeans' stereotyped impression of Chinese cars has affected the development of BYD, Geely, and other Chinese brands in Europe. In fact, this phenomenon also exists in the domestic automotive market. Although independent models have made great progress in design, many consumers still find it difficult to accept spending hundreds of thousands of yuan on a domestic car. This is the influence of perception, but once consumers' perception is formed, it is difficult to change.

In addition to brand image, it is reported that SAIC MG's models will also be tuned and designed specifically for the European market. For example, the popular model MG4 EV mentioned above has driving performance that Europeans like, and even the price is relatively cheaper. It is reported that the starting price of MG4 EV in the local market is 26,995 pounds, while the starting price of Volkswagen ID.3 is as high as 35,700 pounds. Therefore, SAIC MG's models can serve as a substitute for many local models in Europe. All these factors are important reasons why SAIC MG's performance can outshine the European market.

How to Break the Deadlock?

The reason why SAIC MG's models are affordable is partly due to the strong technical foundation of SAIC MG, which enables it to create models with excellent product strength at lower costs, successfully attracting European consumers. On the other hand, Europe's tariffs on Chinese imported cars have not been high in the past. But now that Europe has raised the tariff threshold for SAIC MG, the price advantage of SAIC MG's models in the European market will be further weakened.

Europe is SAIC MG's largest overseas market. Facing such a large pie, SAIC MG has no intention of retreating and has responded aggressively to the EU's reinforcement of trade barriers, stating, "If we are targeted because we are doing the right thing, it is a character to insist on not retreating. SAIC MG's steps towards the world will not stop! And 48.1% is the distance MG leads in Europe."

How SAIC MG will adjust its overseas expansion plans in the face of European trade barriers is currently unclear, and it is not ruled out that it may build factories in Europe to produce electric vehicles in the future.

It is understood that last year, SAIC MG announced that it would build a production base in Europe and is currently selecting a site to produce electric vehicles and light trucks locally.

In fact, behind Europe's tariff increase, it may be an attempt to force Chinese automakers to build factories in Europe, allowing new energy technology-leading Chinese automakers to drive the development of the new energy industry chain in Europe, thereby helping Europe catch up in new energy and further enhancing its market competitiveness.

Facing Europe's刁难, it is unknown whether SAIC MG will adjust its factory construction plans in the future. However, judging from other Chinese automakers, other brands have seen the change in Europe's attitude towards Chinese electric vehicles and have had to suspend their overseas expansion plans in the European market. For example, Great Wall Motors, which had made a big fuss about entering the European market in the past two years, recently disbanded its European headquarters in Munich, Germany. On the other hand, there are also reports that the brand Zeekr plans to cancel all parallel export channels after June 30th. These measures may be Chinese automakers' response to the EU's tariff increase.

Of course, for SAIC MG, there is another way out, which is to produce vehicles in other countries and export them to Europe. It is understood that SAIC MG has already established production bases in Southeast Asia. As long as SAIC MG transfers its production lines to Southeast Asian countries, it can effectively avoid tariff increases when exporting vehicles to Europe.

In fact, in the process of upward development of every industry in China, it is basically inevitable to suffer external suppression. Companies like Huawei, ZTE, SMIC, and DJI are no exception. However, from an optimistic perspective, external suppression and blockade are both challenges and opportunities. Take Huawei as an example. When Huawei was sanctioned by the United States, it allowed more Chinese people to recognize Huawei and gained many loyal fans.

Although the EU tariff increase is a blow to SAIC MG, it also presents an opportunity. SAIC MG has also stated: "If you wear the crown, you must bear its weight." This statement reflects the fearless spirit of SAIC MG. Perhaps SAIC MG also wants to take full advantage of this opportunity to be suppressed by Europe to enhance its reputation in the domestic automotive market.

However, there is one difference between SAIC MG and Huawei's market performance. Huawei has always had a good reputation and popularity in the domestic mobile phone industry, and its products are deeply welcomed by consumers. In contrast, SAIC MG is already close to the edge in the domestic market. Since 2020, MG's market sales in China have declined comprehensively, gradually moving towards decline. It is reported that now SAIC MG's monthly sales in the domestic market are less than 10,000 vehicles, and the sales of its models are only in the single digits.

Europe has always been the key market for SAIC MG, and its attention to the domestic market is far less than that of the European market. The design of its models is also mainly aimed at overseas markets for research, development, and tuning. This is one of the main reasons why SAIC MG's performance in the domestic market has gradually declined. However, now that SAIC MG has not done well in China and is now being hit by Europe, although this situation deserves sympathy, its future survival is indeed worrying.

With internal troubles and external troubles, SAIC MG's situation is very passive. If external troubles are passive factors, then internal troubles are more often caused by SAIC MG's inaction. So, with such good technology and products, why couldn't SAIC MG do well in the Chinese market before?