Chinese EVs, Made the world of cars stand still

For decades, Europe marketed its products as symbols of quality and prestige: Swiss chocolate, Italian fashion, French wine, and German cars. Especially with cars, one had to agree that Europeans, particularly the Germans, led the world in automotive technology. But now, Europe’s car industry is facing a significant decline. The numbers speak for themselves: 大众 stock is down more than 20% this year, 宝马 has dropped nearly 30%, Porsche AG is down 16%, Mercedes-Benz AG 11%, and Stellantis 36%. These companies once dominated the global car market. So, what happened?

Take BMW, for instance. The company recently cut its profit forecast for this year from 10% to 7%. As a result, its shares plunged more than 11% on a single day—the biggest drop since the pandemic. Clearly, something is amiss.

Experts point to two main reasons for the downturn: falling demand and the failed electric vehicle (EV) bet. Let’s examine both.

Four countries—France, Spain, Italy, and Germany—make up a significant portion of car sales in Europe. Last month, sales in these countries fell by 16% compared to the same period last year. Why? The economic outlook isn’t promising. Germany, Europe’s largest economy, entered a technical recession last year. In 2023, inflation remains stubborn, and interest rates are still high. Buying a car has become too risky for many.

This trend goes beyond Europe. In India, car sales are also down, with dealers holding 780,000 unsold vehicles in stock. The problem is global.

The shift to electric vehicles has not worked out as European automakers hoped. EVs cost significantly more upfront compared to traditional combustion engine vehicles. While running costs are lower, consumers still prioritize the initial price. Enter Chinese EV makers.

比亚迪 , a Chinese company, offers EVs for under €38,000, while a Volkswagen EV costs around €46,000. The BYD model also comes with more features and a trendier design. Consumers are naturally opting for the more affordable, feature-rich Chinese cars. As a result, European automakers are losing market share in the EV sector. Stellantis made up 4% of EV sales in 2022; now they’re down to 2.7%. Volkswagen Group fell from 7.5% in 2023 to just over 6.5%, while Mercedes-Benz dropped from 2.5% to 1.9%.

European automakers are responding to the downturn with cost-cutting measures, including potential factory closures. They're also adapting their strategies in two key ways:

1. Delaying EV goals: Major companies are extending their timeline for phasing out combustion engines beyond 2030.
2. Reconsidering China approach: While the EU proposed tariffs on Chinese EVs, automakers are cautious due to China's importance as a market. This dilemma highlights the industry's complex challenges.

European automakers face a more profound challenge: the risk of becoming outdated. The same thing happened to American automakers. Once the dominant players in the auto market, American companies failed to keep up with new trends and innovations, leaving regions like the U.S. car belt in decline. Europe now faces a similar problem.

Yes, European cars are still seen as status symbols, and their quality remains high. But they are no longer seen as futuristic or cutting-edge—certainly not like Tesla or BYD. European carmakers need a dramatic shift in their approach, or they risk losing their dominance.

In Jordan, the government increased taxes on EVs on the same day the U.S. did. Whether this was a coordinated move or a coincidence remains unclear. It's also uncertain how much of an impact the Jordanian market will have on Chinese EV sales. However, in my opinion, Chinese EVs are poised to become another major success story, much like 华为 in the tech world. That said, the situation with Chinese EVs is playing out differently. Chinese automakers are approaching this market with distinct strategies, leveraging partnerships and competitive pricing to gain a foothold, as evidenced by Manaseer Group collaboration with W Motors in Jordan.

Moreover, 比亚迪 recently took over an old 福特 Factory in Cama?ari, Brazil, abandoned by the American automaker. This is part of China's broader global strategy to capture more of the EV market. In Japan, the rise of Chinese EVs is causing concern for companies that have a strong foothold in Southeast Asia. A Japanese official noted that China’s ability to sell both electric vehicles and critical battery materials poses a major risk to Japan. Meanwhile, Mexico has tread carefully, prioritizing its relationship with the U.S. Leftist President Andrés Manuel López Obrador has nationalized lithium supplies and revoked a concession from China's Ganfeng. Despite this, Mexican consumers are increasingly embracing Chinese cars—last year, one in five cars sold in Mexico was made in China, Meanwhile, Saudi Arabia is making strategic moves in the EV sector all the way from Lucid Motors to Ceer motors and teaming up with china to build EV supply chain, From Metals to Manufacturing.

According to the International Energy Agency (IEA) , global EV sales are set to rise sharply. This year, 10.1 million EVs are expected to be sold in China, 3.4 million in Europe, and 1.7 million in the U.S. Sales in the rest of the world will total fewer than 1.5 million.

Yet, the IEA forecasts the global EV fleet will grow eightfold to about 240 million by 2030. This implies annual global EV sales of 20 million by 2025 and 40 million by 2030, accounting for 30% of all car sales. Much of this growth will likely come from new markets, where Chinese automakers like BYD are already making inroads.

For European automakers, the path forward is challenging. They need to innovate and compete in the EV market, where they are currently falling behind. They also need to reconsider their pricing strategies to make EVs more accessible to a broader range of consumers.

If Europe’s car industry fails to adapt, it risks going the way of the American auto industry—once dominant but now a shadow of its former self.