China EV Insights | Vol.006

China's EVs Continue Their March into Europe

BYD plans to invest $1 billion in a new factory in Turkey to avoid the additional tariffs imposed by the EU on Chinese-made electric vehicles. The new factory is expected to produce 150,000 EVs and plug-in hybrid vehicles annually and is scheduled to begin production by the end of 2026. This move follows BYD's establishment of a factory in Hungary and aims to secure a base for exports to the European market. The European Commission has imposed additional tariffs on Chinese EVs, arguing that Chinese government subsidies have affected market competition in Europe. By producing in Turkey, BYD can take advantage of its customs union with the EU to reduce costs and enhance competitiveness. Turkey's strategic location, being along the Belt and Road Initiative and a transit point for the China-Europe Railway Express, is beneficial for BYD's expansion into European and other regional markets.

Other Chinese automakers, such as Chery and SAIC Motor's MG brand, are also considering investments in Turkey. Meanwhile, Western manufacturers like Tesla face higher product prices due to additional tariffs, and European and Japanese automakers are also taking measures to respond to the challenges posed by Chinese companies. Chinese companies are reducing costs through self-production and domestic procurement, and if they establish supply chains in Europe, they will further enhance their price competitiveness, impacting the global automotive market.

Factory Closures and Dealer Withdrawals: Dongfeng Nissan Struggles for a Comeback

Dongfeng Nissan announces closure of Changzhou factory, a first in over 50 years in China. This move is part of strategic adjustments and responses to changing business environments, aiming to optimize capacity and resources for corporate transformation. Despite closing Changzhou, Dongfeng Nissan still operates five production bases in China, with capacity exceeding current market demand.

The company faces challenges like declining sales, dealer withdrawals, and insufficient competitiveness in new energy vehicles (NEVs). Since 2018, Nissan's annual sales in China have fallen, dropping below 800,000 units in 2023. NEV models, such as the Venucia brand, lag significantly behind market leaders.

Although an early entrant in the NEV sector, Dongfeng Nissan struggled with market promotion and pricing, weakening its competitiveness. For instance, the Sylphy EV has poor sales, and the ARIYA's high price led to a lukewarm response. To address market changes, Dongfeng Nissan plans to launch five NEV models in three years, enhance local supplier cooperation, and boost R&D capabilities.

Efforts include recruiting technical talent, collaborating with Baidu, and potential partnerships with Huawei in smart driving. These initiatives highlight Dongfeng Nissan's proactive approach in NEVs and intelligentization. Despite challenges, the company seeks breakthroughs and transformation.

Closing the Changzhou factory reflects the competitive Chinese automotive market and joint ventures' transformation pressures. By strengthening NEV development, market promotion, and local tech partnerships, Dongfeng Nissan aims to find new growth points in market competition.

Tesla Also Has a "Roster" in China

Tesla achieves new milestones in the Chinese market with the Model Y included in Jiangsu Province's government procurement list for new energy vehicles and adopted by state enterprises in Shanghai's Lingang New Area for utility purposes. This move strengthens Tesla's appeal among financially stable demographics in China. The introduction of a "5-Year 0% Interest" car purchase policy triggered a 280 billion yuan increase in Tesla's stock overnight, with a nearly 30% rise since July. Sales figures for the first half of 2024 show the Model Y leading, underscoring Tesla's leadership in electric and smart vehicle technologies over domestic competitors in China.

In 2023, Tesla globally delivered 1.81 million electric vehicles, marking a 38% growth rate, with the Model Y emerging as the top-selling single model worldwide. Despite a decline in global deliveries in Q2 2024, Tesla's market expectations remain high, fueling significant stock gains. Although Tesla's market share in China has decreased slightly, incentives and the inclusion of the Model Y in government procurement catalogs aim to stimulate sales. Tesla's success is attributed to its advanced electric and smart technologies, with the Model Y's efficiency outperforming domestic new energy vehicles. Domestic manufacturers in China face intensified competition, necessitating improvements in product quality and technological innovation to compete effectively against Tesla's expanding market presence.