Evaluation: German automakers struggle to defend their turf from Chinese language rivals

SHANGHAI/BERLIN, April 19 (Reuters) – German automakers have turned up in full drive at Shanghai’s Auto Present as they struggle to remain on high of shopper traits within the nation that may outline whether or not they keep their market dominance within the electrical age each at residence and overseas.

Their heavy presence – with your entire board of Volkswagen AG (VOWG_p.DE) and greater than 100 VW workers attending, in distinction to Japanese or French automakers – reveals they’re taking the problem significantly, stated Yale Zhang of Shanghai-based consultancy Automotive Foresight.

However with German firms counting on China for a 3rd of their passenger automobile gross sales, additionally they have essentially the most to lose.

“Loads of options in our vehicles are impressed by China,” Oliver Zipse, CEO of BMW (BMWG.DE), accompanied by his gross sales and know-how chiefs, instructed a information convention, including that the Chinese language market was forward of the worldwide curve.

His feedback mark the facility shift from the combustion-engine age when German vehicles have been seen in China as the top of worldwide engineering, to the electrical age when German automakers are studying from their Chinese language counterparts who’ve moved sooner on creating know-how for electrical autos (EVs) that units them aside.

Volkswagen executives have stated the corporate’s unrivalled international scale will assist it win the race for reasonably priced EVs – however that capability may flip from a blessing to a curse if gross sales dip, with the market share of China’s BYD Co Ltd (002594.SZ) surpassing that of the Volkswagen model’s this 12 months to date.

Whereas the battery-electric automobile market share of German automakers in China is rising, it’s nonetheless miniscule. The mixed market share of the battery-electric automobile market in China held by Audi (VOWG_p.DE), BMW (BMWG.DE), Volkswagen and Mercedes-Benz (MBGn.DE) rose to 4.8% in 2022 from 2.2% in 2020, in line with a Reuters evaluation of gross sales knowledge from the Chinese language Affiliation of Car Producers. The EV gross sales of all 4 German manufacturers added as much as solely 1 / 4 of BYD’s in 2022.

German carmakers’ whole market share within the nation rose from 19.9% in 2015 to 24.6% in 2019, however has fallen again right down to 19.1%, in line with knowledge offered to Reuters by Germany’s autos affiliation VDA.

“The Chinese language market is not as secure for German carmakers because it was,” Thomas Luk, associate at administration consultancy Kearney, stated on the sidelines of the Shanghai present.

“Changing into sooner will not be sufficient to maintain up … their enterprise tradition should change,” he stated.

SHIFT IN THINKING

Analysts in Shanghai pointed to the tendency of German carmakers to market their new EVs as an electrical model of their combustion-engine predecessors as an indication that the businesses had not but made the psychological shift in direction of placing electrification first.

“You will need to see EVs as a brand new era of merchandise, relatively than an extension of combustion-engine vehicles,” Zhang stated. “Hopefully the Shanghai present can shake that false impression.”

“If overseas manufacturers are cussed with their pondering, they are going to be phased out,” Feng Xinya, president of Chinese language state-owned producer GAC Group, stated.

Chinese language manufacturers have additionally adopted new gross sales methods to make inroads in Europe which analysts stated European legacy manufacturers should study from to maintain up within the digital age.

Manufacturers like Nio (9866.HK) and Lynk & Co, owned by Geely (GEELY.UL) and Volvo Vehicles (VOLCARb.ST), have arrange neighborhood areas, cafes and bars, which Nio has stated interprets into gross sales by way of peer-to-peer suggestions.

Many are additionally adopting direct gross sales, an method German automakers like BMW and Mercedes-Benz have additionally stated in current months they’re shifting in direction of.

“One of many key targets of this technique is to manage the client expertise totally,” McKinsey wrote in a December report.

Nonetheless, sources stated Chinese language manufacturers have been focusing first on dominating their home market earlier than taking a extra aggressive technique in Europe, the place Asian battery makers have already laid strong floor.

Chinese language EV manufacturers have been for now setting costs greater to keep away from upsetting European policymakers involved that they are going to flood the market although they’re able to provide far decrease costs, stated a supply who requested to not be named.

BYD this week unveiled the Seagull, an electrical automobile with a variety of over 300 km whose value begins at simply $11,000 – cheaper than many entry-level combustion-engine fashions in Europe. The corporate is planning to deliver the Seal and Dolphin fashions to Europe later this 12 months.

“The Chinese language are extra cautious in Europe,” Luk stated.

In China, although, the battle is fierce.

“I was cautious with utilizing the phrase ‘doomed,'” Zhang of Automotive Perception stated. “However I’m fairly certain now, at the very least in China, overseas manufacturers’ days are numbered.”

Reporting by Victoria Waldersee in Berlin, and by Ilona Wissenbach, Zhang Yan, Kevin Krolicki, Brenda Goh and Casey Corridor
Writing by Victoria Waldersee
Enhancing by Ben Klayman and Matthew Lewis

Our Requirements: The Thomson Reuters Belief Rules.