Europe is getting confused because of Chinese electric vehicles
Some of the latest models made in China are up to 50 percent cheaper than those made in Europe.
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The following article was translated using both Microsoft Azure Open AI and Google Translation AI. The original article can be found in Eropa Semakin Pusing gara-gara Kendaraan Listrik China
The Renault electric car, Scenic E-Tech, was unveiled at the Geneva International Motor Show (GIMS) in Switzerland on Monday (26/2/2024).
GENEVA, MONDAY — Chinese-made electric vehicles have yet to stop perplexing European automakers. One way Europe is dealing with China is by forcing supplier partners to lower the prices of raw materials and spare parts.
The spotlight on China's electric car prices resurfaced at the Geneva International Motor Show (GIMS) that began on Monday (26/2/2024). China's manufacturers SAIC and BYD are bringing two big ambitions.
Also read: The “Invasion” of Chinese Electric Cars, a Dilemma for Germany and France
SAIC unveils M3 Hybrid, while BYD brings Seal to compete in the list of best cars according to GIMS 2024. If it wins, Seal will become the first electric car from China to achieve the prestigious award.
French giant, Renault, introduced the R5 at GIMS. "Those products are truly different," said Managing Director of AlixPartners, Nick Parker, regarding the European and Chinese manufacturers.
Renault's booth at the Geneva International Motor Show (GIMS) in Switzerland, Monday (26/2/2024).
He highlighted the fact that European manufacturers choose an open supply chain system and involve multiple companies in various locations. The supply chain for electric vehicles and oil materials is different. Meanwhile, Chinese companies use an integrated system for both electric and gasoline vehicles. China's method has been tested to reduce costs.
In the UK, a number of BYD products are up to 27% cheaper than those made by Volkswagen. Several of the latest models from China are up to 50% cheaper than their European counterparts.
Also read: Chinese Automotive Products Challenge Europe
Therefore, according to Stellantis CEO Carlos Tavares, production costs must be redirected. Instead of being fully borne by the manufacturer, the costs need to be shared by the suppliers of raw materials and components. This is because 85 percent of the production costs of electric vehicles are related to raw materials. This shift opens up opportunities for price reduction.
In Bloomberg's report last week, Stellantis also explored supply chain links with VW and Renault. The alliance is expected to eliminate mutual undercutting efforts between them. The alliance is also to face Chinese players.
BYD booth at the Geneva International Motor Show (GIMS) in Switzerland, Monday (26/2/2024).
Parker stated that it is not easy to ask suppliers to share the burden of production costs. They are already struggling themselves. This is evidenced by many suppliers to the automotive industry having laid off workers.
Pressure has been felt by a number of suppliers. Companies such as Forvia, Continental, and Bosch have warned that if the pressure to cut production costs continues, more layoffs will occur.
Also read: EU Investigates Chinese Electric Cars
Several experts and analysts say that big suppliers with large capitals must adapt to this new reality. However, it will be different for small suppliers, such as Allgaier (Germany) who filed for bankruptcy in July 2023.
Meanwhile, Director of Cox Automotive Philip Nothard warned that suppliers could easily switch partnerships if they continue to be pressured. The risk of such a diversion is significant in the current situation.
The Renault electric car, Scenic E-Tech, was showcased at the Geneva International Motor Show (GIMS) in Switzerland on Monday (26/2/2024).
Nothard stated that automotive manufacturers actually need to provide support to their supplier partners. This is to maintain the production ecosystem amidst financial difficulties faced by various suppliers.
Automotive Alliance
Meanwhile, Luca de Meo hopes that the European automotive industry can be like the aviation industry on the continent. The CEO of Renault and President of the European Automobile Manufacturers' Association (ACEA) refers to Airbus which is the parent of the European aerospace industry on the global stage.
Also read: Electric Cars, China's Trojan Horse in the Multipolar Era
The alliance, according to De Meo, will allow Europe to reduce production costs. This is because the burden is shared by more parties. However, Airbus is forcing Europe to provide a lot of subsidies.
According to De Meo, whether we like it or not, the electric car industry must learn from China when it comes to the supply chain. China controls everything from the mining of raw materials to the production of spare parts. China also builds a network of power refill stations and is more flexible when it comes to adaptation.
The Renault booth at the Geneva International Motor Show (GIMS) in Switzerland on Monday (26/2/2024).
While Europe or North America only control a part of the supply chain. Moreover, the regulations in Europe are even more complicated than in China. Consequently, European investors are much more cautious. Therefore, it will take decades for Europe to emulate China.
Ask for subsidies
Unfortunately, he also offers a solution that is not in line with the spirit of the market and free competition that Europe is campaigning for. According to him, the European electric car industry needs protection for several years to come.
Also read: Chinese electric car batteries, a product that worries Biden
He requested subsidies and policies that are more favorable to the European electric car industry. However, in several countries and regions, the EU continues to reject protectionism.
Regarding this issue, he argued that China and the US are also doing it. The US provides subsidies of thousands of US dollars per unit for certain new electric car categories. Meanwhile, China has long been accused of subsidizing its electric vehicle industry.
The prototype of "Ineos Fusilier" was showcased in London, UK, on 23 February 2024. Ineos will make the vehicle an electric car for off-road fans.
One of the things de Meo highlighted was the domestic component level regulations (TKDN). The EU and the UK have agreed that the TKDN for electric vehicles should be at least 45 percent. This rule is impossible as long as the EU and the UK cannot produce their own batteries and various electric vehicle components that are more affordable and efficient.
ACEA suggests that the European Union overhauls its regulations to ensure that policies are no longer biased and do not solve problems. "Every time we see a new rule, we find issues in the system," said De Meo.
Also read: Hard Work Keeping Cars Away from Paris
Nowadays, batteries and various components of electric vehicles are more efficiently imported from China. However, cars with domestic component requirements below 45 percent will be subjected to an additional 10 percent tax on factory output prices. This regulation is one of the reasons why electric cars produced in the EU are expensive.
Renault is reported to be preparing a small and affordable electric car. It is targeted to be priced below 20,000 euros and is expected to be launched in the next three years. The car is said to use smaller batteries that are more suitable for urban movement needs.
According to De Meo, it would not be appropriate for the EU to force the production of electric vehicles with large-capacity batteries. Large-capacity batteries are not environmentally friendly and do not align with the EU's goal of promoting electric vehicles. The goal of increasing electric vehicles can only be achieved if the size of cars is reduced.
In the current situation, the European automotive industry will struggle to achieve production targets and energy transition. In Germany, there is a target of 15 million electric cars operating in the next seven years. Unfortunately, looking at sales trends, the target will be difficult to achieve.
Also read: Vietnamese Electric Vehicle Manufacturer, VinFast, Ready to Invest in Indonesia
The market is currently slowing down, as reflected by the low registration of new electric cars in Germany. It decreased from 30% in 2022 to 11.4% in 2023. According to German automotive authorities, there are only 1.3 million pure electric cars in Germany as of October 2023. In order to reach the target, Germany needs to add almost 14 million electric cars in the next seven years. (REUTERS/AFP)
