The relentless march of globalization, fueled by technological advancements, has blurred the boundaries between nations, economies, and industries. Nowhere is this clearer than in the automotive industry, where China’s surging electric vehicle (EV) manufacturers are setting their sights on the European market, signaling a shift that carries both threats and opportunities for the Western automotive ecosystem.
Western Automakers: Concern or Complacency?
As Europe witnesses a dramatic 55% surge in EV sales, clocking in at about 820,000 vehicles in the first seven months of 2023 alone, Chinese EV giants, including but not limited to BYD, Nio, Xpeng, and Leapmotor, are keenly observing the market. The European EV sales now account for roughly 13% of all car sales, a figure that is sure to entice any major player in the industry.
But what truly sounds the alarms for European car manufacturers is the startling price difference. Research by Jato Dynamics reveals that the average EV in China cost less than 32,000 euros ($34,350) in H1 2022, a stark contrast to the 56,000 euros average in Europe. This gap has European automakers on edge, apprehensive about an impending influx of competitively priced Chinese EVs that could potentially eclipse local brands.
German Suppliers: From Threat to Opportunity
However, while European carmakers view this as a potential storm, major German auto suppliers are navigating towards what they perceive as a silver lining.
Companies such as Bosch, with deep-rooted Chinese partnerships, see the movement as a natural extension of their existing relationships. Bosch CEO Stefan Hartung’s statement at Munich’s IAA mobility show encapsulated this sentiment, noting that “Chinese manufacturers will adapt vehicles to the European market step by step through user experience and customer orientation.” Having collaborated with many of these Chinese manufacturers in China, Bosch considers the expansion not just good, but also natural. Moreover, Hartung believes that such a move is positive for competition and, by extension, the consumer.
Diving deeper into Bosch’s Chinese alliances reveals their hand in developing Advanced Driver Assistance Systems (ADAS) for a majority of BYD’s vehicles. They also produce electric motors for luxury EV brand Human Horizons and are an integral supplier for Nio.
Then there’s ZF Friedrichshafen. With roughly 40 establishments in China, which accounted for about 20% of its global sales in 2020, ZF’s engagement with China is undeniable. Notably, about 40% of its revenue from China is derived from Chinese car manufacturers.
ZF CEO Holger Klein, discussing the future, mentions, “When we talk to our Chinese customers, there are very concrete plans to build plants in Europe.” His statement showcases the gravity of the situation, suggesting a seismic shift in manufacturing locations, favoring Europe.
This sentiment found further affirmation at a Leapmotor event titled “Leap Together.” Held at the Munich car show to honor major suppliers, the names of ZF and Continental gleamed under the spotlight, pointing to their importance in the European-Chinese automotive nexus.
Continental’s perspective on the issue offers additional insights. Its CEO, Nikolai Setzer, when quizzed about the development, expects “the Chinese to go global and build plants in Europe.” Leveraging its vast global production and development locales, Continental feels confident in its ability to meet vehicle standards globally and thus is positioned as “a partner that could support that” European expansion.
In a testament to their preparedness, Setzer added, “We could take on new volumes (from Chinese customers in Europe) without needing to build a new plant.”
Conclusion
The impending European expansion of Chinese EV makers exemplifies the duality of globalization. While European car manufacturers might view it with trepidation, suppliers like Bosch, ZF, and Continental see it as a golden opportunity.
It’s a reminder that in a global economy, challenges can often be repackaged as opportunities with the right perspective and strategy. As the boundaries of the automotive world stretch and morph, the industry’s stakeholders must adapt, innovate, and sometimes even collaborate with erstwhile competitors.
The European automotive landscape is set for a transformation, and it remains to be seen how the interplay between local manufacturers and Chinese EV giants shapes its future trajectory. But one thing is clear – change is the only constant.
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