At last month's Paris Motor Show, Chinese companies accounted for about a fifth of exhibitors. Notably, unlike the grand promotions seen at domestic auto shows, Chinese companies adopted a warmer stance of "respecting century-old brands" and a steady strategy at the Paris show. The favorable factors behind this are: on the one hand, competitors have a new understanding of China's technological level and a sincere intention to cooperate; on the other hand, the acceptance of Chinese cars by potential customers in the European market is gradually increasing.

With overseas evaluation agencies increasingly recognizing and praising China's technological research and development, this has to some extent influenced public opinion and industry attitudes. A recent study by the Australian Strategic Policy Institute was widely reported by foreign media. The report stated that of the 64 core technologies analyzed, China leads the world in 57, including quantum sensors, batteries, electric vehicles, and advanced robotics. The institute predicts that China will dominate the rapidly growing renewable energy economy this century, with new energy electric vehicles and batteries being the dominant forces.

A more significant response was to a survey finding that "two-thirds of Germans are willing to buy Chinese cars," which was widely disseminated by German online media. It is understood that the German Automobile Club (ADAC)'s Market and Public Opinion Research Department surveyed 1,079 adult drivers residing primarily in Germany in July this year. The survey revealed that 74% of those aged 30-39 and 72% of those aged 18-29 could envision purchasing a car from a Chinese manufacturer. The survey also showed that up to 80% of respondents planned to buy Chinese-made products in the field of pure electric vehicles. Even according to segment market research, even among luxury car drivers with the highest loyalty, 60% do not exclude purchasing Chinese cars in the future.

▍The competitive advantage of Chinese cars cannot be ignored

Additionally, 83% of respondents said the main reason for purchasing Chinese brand cars was the price advantage, followed by technological innovation (55%) and attractive design (37%). Regarding product quality, which European users care about the most, ADAC's Technical President Schultz also explained, "Our tests show that Chinese manufacturers have caught up in recent years, and their products can now compete with other globally renowned brands." According to him, test results conducted by ADAC and the European New Car Assessment Programme (Euro NCAP) show that Chinese cars are strong competitors, performing impressively in many test categories. For example, in Euro NCAP crash tests, all models except two received a "five-star safety rating"; in the field of safety performance, especially in the turning test for the normal function of the Electronic Stability Program (ESP), the candidate test models did not show any weaknesses. However, many European manufacturers' cars recorded poor results. During the interview, some ADAC experts also affirmed that most Chinese-made vehicles use high-quality materials, and their body and interior craftsmanship are professional.

Of course, these tests and studies have also revealed some negative opinions that Chinese companies should pay attention to. Factors mentioned in the survey results for those unwilling to accept Chinese cars include general reservations about Chinese cars (54%), too narrow a coverage of maintenance and distribution networks (40%), quality concerns (39%), and privacy data protection (26%). ADAC added, "Due to the still narrow coverage of maintenance and distribution networks, especially for new, smaller brands, there is obvious uncertainty about future spare parts supply."

In another report titled "Testing Chinese Cars: How Good Are Companies Like BYD and NIO?", ADAC also mentioned, "The windshield is broken, but a new one cannot be found at all. Customers of Chinese brands often have such or similar experiences." Some users also reported in the survey feedback, "In some cases, the delivery time for some spare parts can be several weeks. Therefore, accident repairs may take a long time. Especially for body parts, which are often difficult to buy, the downtime is particularly long." Fortunately, the newcomer Xpeng seems to have realized this problem. The head of Xpeng Germany recently told the media, "Xpeng will establish its own spare parts warehouse in Germany to avoid waiting for parts shipped from China every time a bumper is replaced." In addition, the report also mentioned that the handling and driving assistance systems of Chinese cars still need improvement, such as errors and defects in Advanced Traveler Assistance Systems (ATAS) and navigation when recognizing traffic signs, using lane-keeping, and vehicle distance detection systems. However, ADAC recently stated that Chinese manufacturers have quickly responded to criticism. For example, the new model launched by NIO in the second half of this year has significantly improved ATAS performance through system upgrades.

Some industry experts say the question now is whether the speed of technological improvement and network service capacity building can keep up with the increasing number of new Chinese brand cars on European roads in the future. In addition, Chinese companies also face many difficulties due to differences in the usage environment. As more than 70% of new car users in Germany are around 50 years old, their demand and adaptability to intelligent and connected technology are lower than those in the Chinese market, and there is still a long way to go in cultivating consumers. Furthermore, the European Union will require the mandatory use of physical buttons, knobs, or levers for electrical accessories such as driving mode switching, air conditioning, windows, sunroofs, and wipers in new cars by 2026. For Chinese brands accustomed to using large screens and voice control technology in the domestic market, this also requires redesign and development. Therefore, slowing down and focusing, while studying local market consumption characteristics and steadily promoting joint ventures and cooperation, will be the main tasks for Chinese companies to expand their European strategy in the next three to five years.

▍Chinese companies optimize their strategic layout in Europe and no longer pursue scale and speed

GAC Group booth at the Paris Motor Show (Photo: GAC Group)

With a long-term perspective, Chinese automakers are systematically adjusting the pace of entering the European market through preliminary groundwork and local agency surveys. In early October, amidst a complex backdrop of praise and EU tariff barriers, Chinese automakers and operators at the Paris Motor Show unanimously chose to deliver strategic layouts instead of simple new car roadshows. Feng Xingya, General Manager of GAC Group, told global media, "GAC's European strategy was not a spur-of-the-moment decision but was clearly planned as an important part of its internationalization strategy long before announcing the 'Trillion GAC' development plan for 2030." He emphasized, "We have high hopes for the European market because Europe's pursuit of green environmental protection aligns well with the transformation direction of new energy vehicles in China. Therefore, the European market will occupy a prominent position in our international layout, with a planned share close to one-third of the total."

Mr. Feng also has a deep understanding of the difficulty of developing the European market and the brand loyalty of European users, especially in the high-end market. In an exclusive interview with reporters, he said, "We are well aware of the challenges of entering the European market, especially the complexity in product preparation and logistical services. Therefore, we insist on not using non-European standard products for trial sales, as this concerns not only the brand image but also consumer responsibility."

When asked whether to conduct small-batch export trials first, Mr. Feng also gave a negative answer. "Although small-batch trials are feasible, establishing long-term spare parts reserves for a small number of vehicles is clearly neither economical nor realistic. Therefore, we are intensively preparing products to ensure that the first product can fully meet European standards and meet the highest requirements in terms of safety and quality." Mr. Feng said, "We are also aware that under the new tariff policy, some products may lose competitiveness. Therefore, we need to adjust our product mix and optimize our technology roadmap. In terms of production, GAC will adhere to the principle of 'production only when there is demand.'"

During the Paris Motor Show, the EU voted to impose tariffs on Chinese car exports, and France also voted in favor. The relevant Chinese government departments immediately responded with strong opposition and reserved the right to take corresponding measures. The five-year new tariff undoubtedly added a layer of gloom to the heads of participating Chinese manufacturers. European media are obviously very concerned about whether Chinese companies can produce locally to solve the tariff issue. Regarding this, Feng Xingya also believes that "this is a complex issue, and we are still conducting in-depth research." But he emphasized, "One thing is clear, which is that GAC proposes to produce where there is demand. We will not produce locally in Europe to solve the tariff issue. This is our basic logic and principle."

Among other participating Chinese automakers, some promote their strategies by selling products exclusively for Europe, while others explore future markets through joint ventures, cooperation, and network layout. BYD chooses to continue its advancement in Europe with marketable new products. At the Paris Motor Show, BYD launched the SEALION 7 (Hai Shi 07EV), which was interpreted by foreign media as a direct competitor to the Tesla Model Y. The displayed high-end model, the Yang Wang U8, was described as an SUV that can "swim for 30 minutes." Shu Youxing, General Manager of BYD's European Auto Sales Business Department, told local media at the auto show, "In 2022, BYD made its European debut with three cars at the Paris Motor Show. Just two years later, we have eight models for consumers to choose from." He believes this represents BYD's commitment to deeply cultivating the European market. Li Ke, Executive Vice President of BYD, was interviewed by Reuters during the auto show. She revealed that in addition to producing complete vehicles in Europe, BYD would also produce components and even assemble battery packs, but core assemblies such as battery cells could only be imported from China. She also optimistically predicted on Bloomberg Finance that half of BYD's future sales would come from overseas markets.

LEVC, a joint venture with the European automotive group Stellantis, has already made advance layouts through its foreign partner, and its products were just launched in Europe in October. At the Paris Motor Show, they also brought four models, including the compact SUV B10, which will be produced in Poland for sale throughout Europe. According to the strategic cooperation agreement signed by both parties in October 2023, LEVC is responsible for products and technology, while the Stellantis Group is responsible for LEAP brand marketing and channel construction. They plan to establish 350 brand sales outlets in 13 countries by the end of this year, mainly in Western European countries such as the UK, France, Germany, and Belgium. Xin Tianshu, head of LEVC International, said, "As business demand grows, we can quickly and flexibly localize models outside China and further explore more development opportunities."

Xpeng, one of the new forces in car manufacturing, also launched the smart electric vehicle P7+ at the exhibition. During the launch, French President Emmanuel Macron, the host, also visited the Xpeng booth and invited Xpeng to invest in France. Marcus Schürig, head of the German market for Xpeng, said during the auto show, "Entering the European market is a significant milestone for Xpeng, and we are delighted to have a place in one of the world's most competitive automotive markets." According to statistics, in the first half of 2024, Xpeng registered 2,223 pure electric vehicles in 18 Western European markets (including EU member states that joined before 2004, Norway, Switzerland, Iceland, and the UK), nearly three times more than NIO.

Typeset by Yang Shuo