Chinese carmakers take another crack at the German market

Chinese carmakers are taking a second stab at cracking the German market more than a decade and a half after abysmal safety ratings stymied their first attempt.

Manufacturers such as Great Wall Motor, Geely and SAIC Motor have recently launched or are planning to release a slate of electric and hybrid models in Europe’s biggest car market, confident that strong supply chains and improving brand images will help them make inroads in the country.

EV maker Nio began selling its ET7 sedan on October 7, while Great Wall was expected to roll out its Ora Cat, a compact electric car with a retro design, and its Coffee 01 plug-in hybrid SUV in mid-October.

BYD plans to launch two electric SUVs — the Atto 3 and the Tang — and the Han electric sedan in Germany this month, following releases in Belgium, Denmark, the Netherlands and Sweden in September. BYD’s expansion got a boost on October 3 when Sixt, Germany’s biggest car rental company, announced it would buy 100,000 Atto 3s between now and 2028.

MG Motor, the UK unit of SAIC, began selling its electric compact MG4 in Europe last month, a milestone for the British carmaker as the MG4 is the first of its cars built completely on a Chinese-developed platform.

Sweden-based Polestar and Lynk & Co, which are both fully owned by China’s Geely, have already been gaining ground in Europe. Since mid-2020, Lynk & Co has delivered 26,000 of its plug-in hybrid 01s on the continent, most under a monthly Netflix-style rental scheme for a flat rate of €550 ($539). Polestar’s and Lynk’s market shares are still tiny in Germany’s EV market, however, at less than 1 per cent combined.

Alain Visser, Lynk’s chief executive for Europe, said the number would have been higher if not for supply chain issues.

“We could have sold many more cars if there had been enough supply from our factory in China,” Visser told Nikkei Asia. “But supply bottlenecks have recently been overcome, thanks to our parent company, Geely, prioritising us in the supply chain, so that our current delivery time in Germany stands at three to five months, compared to European automakers’ 10 to 15 months, which will make a major difference in customers’ buying decisions, to our benefit.”

European carmakers have been forced to reduce output not only because of a global chip shortage that hit the motor industry, but also because of a shortage of wiring harnesses. Ukraine is a main source of wiring harnesses for VW, BMW, Porsche, Audi and Mercedes, but production has been disrupted since Russia’s invasion.

Chinese carmakers’ foray into Germany comes as local brands have begun losing ground. In the first half of the year, German EVs have lost domestic market share to French, South Korean and US rivals.

“The growing foothold of the Chinese automakers is now raising the spectre for additional market share loss, with the good quality of the Chinese cars serving as a factor,” Stefan Bratzel, director of the Center of Automotive Management, recently told German daily Handelsblatt.

The latest shot in the arm for Chinese carmakers comes in the form of top-notch safety test results.

Great Wall Motor’s Ora and Wey each recently received a full five-star score from Euro NCAP, a European car safety performance assessment programme based in Belgium.

That is a sharp contrast with the first wave of Chinese car launches on the continent. In 2005, Jiangling Motors’ Landwind SUV famously earned a zero-star rating, and two years later, Brilliance’s BS6 sedan received just one star.

“Poor crash-test results were devastating for Chinese automakers’ image, especially in Germany, where build quality is considered very important,” Aled Williams, Euro NCAP programme manager, told Nikkei Asia following the recent tests of the Ora and Wey.

“But the latest tests showed that they have done their homework, and that they are now in a much better position than in the past to break into the German market, which is Europe’s toughest one due to very strong brand loyalty for German cars,” he said.

The sales push in Germany is a sign of the confidence Chinese carmakers have in their products. According to Tu Le, managing director at Shanghai-based Sino Auto Insights, the Chinese carmakers have begun to believe they can compete after seeing the poor reception of German EV offerings in China.

Tu added that with the US market more difficult to enter owing to its 27.5 per cent tariff on EVs imported from China, Chinese carmakers see Germany as one of their only opportunities to crack a sizeable overseas market.

“Germany is the largest market in Europe, so they will all slowly enter the market, first by establishing their brand, building excitement about their products, and then turning that into a full-on blitz within a few years,” Tu said.

“They are also racing against other Chinese EV players who are looking to beat them to the market. Many companies will fail, but the well-capitalised companies with good, reliable, well-designed products will find their way,” he added.

A version of this article was first published by Nikkei Asia on October 12 2022. ©2022 Nikkei Inc. All rights reserved.

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