The case for persuading Chinese car makers and suppliers to manufacture locally in Europe has mainly centred so far around the need to shore up jobs, but there’s another, perhaps more crucial aspect. They can help local players learn from a region that’s taken the lead in not just automotive innovation and electrification but also low-cost manufacturing.
“Knowledge comes on two feet,” Roland Busch, CEO of German automotive supplier and manufacturing specialist Siemens, told an audience at an event held on the sidelines of the Munich motor show in September.
Busch referenced the Chinese battery industry, which, he said, was five to 10 years ahead of most of the rest of the world, bar some Asian players. “It’s not copying, but learning. If we get more and more people here, manufacturing stuff, they bring Chinese machines and we start learning,” he said.
Right now, almost all Chinese cars sold in Europe are built in China. Imports from the country rose to account for 6% of all cars sold in Europe in the first half of this year, according to European automotive manufacturers' group ACEA. The figure rose to 6.7% in the third quarter, according to data from independent researcher Matthias Schmidt. That is the highest for any country outside the European Union.
Car makers generally prefer to build close to where they sell because it allows them to be more reactive to changing tastes, cuts shipping costs and ties them more closely to the markets they sell in.
Local production is generally considered too expensive unless you’re selling between 75k-100k of a single model annually in the region and many Chinese firms are now almost there. For example, MG sold over 45,000 of the HS compact SUV in the first eight months, BYD shifted 44,000 of the Seal U plug-in hybrid SUV and between them Chery brands Jaecoo and Omoda sold over 50,000 of the related Jaecoo 7 and Omoda 5.
However, the Chinese low-cost manufacturing advantage has so far kept automotive production at home, with only some battery makers such as CATL in Hungary setting up shop in Europe.
The EU’s tariffs on Chinese-built EVs introduced last year were ostensibly designed to level the playing field for local manufacturers that lacked the same access to subsidies and other state aid enjoyed by Chinese firms.
If the tariffs were also created to encourage China’s car makers to set up shop in in Europe, the result is a “profound failure”, according to Grzegorz Stec from the Brussels office for the Mercator Institute for China Studies. “Chinese EV brands doubled their market share in the EU in the last year, in part by quadrupling exports of plug-in hybrids,” he wrote in a recent report.
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