Will China "Bury" European Mid-Range Car Manufacturers?

As competition from Chinese automakers intensifies, European mid-range car manufacturers face significant challenges. This article explores the implications of this rivalry and its potential impact on the automotive landscape.

The landscape of the European automotive industry is shifting dramatically as concerns grow about the burgeoning competition from Chinese car manufacturers. With the electrification boom showing signs of stagnation, industry experts warn that European mid-range automakers may struggle to survive against an influx of Chinese brands. As highlighted by analysts, including those from the Croatian agency Hina, the future for several European car manufacturers looks increasingly uncertain in light of this fierce competition.

The Rise of Chinese Automakers

Chinese automotive firms have emerged as formidable players, offering vehicles that often mirror the design and features of premium European models while maintaining attractive price points. Among these manufacturers, Geely stands out. Established in 1986 as a motorcycle manufacturer, Geely made its foray into the automotive industry in 1997 and has since expanded its portfolio through strategic acquisitions, including Volvo and Lotus. The company’s rapid growth signals its intent to challenge traditional European brands.

Other Chinese competitors like BYD, XPeng, and Dongfeng are also making significant strides. Hina forecasts that these brands will leverage their pricing and product offerings to capture a larger market share in Europe, potentially leading to a paradigm shift in consumer preferences.

European Brands on Alert

While the premium segment of the market—featuring iconic brands like Mercedes, BMW, Audi, and Porsche—remains relatively secure, mid-range European manufacturers are sounding the alarm. Carlos Tavares, CEO of Stellantis, which produces vehicles under brands like Chrysler, Citroën, and Fiat, recently highlighted the precarious situation facing European manufacturers. He noted a staggering 48% decline in net profit for the first half of the year compared to 2022 and did not rule out the closure of factories in response to escalating competition from Chinese automakers.

Tavares warned that if Chinese manufacturers secure just 10% of the European market, it could equate to a loss of 1.5 million vehicles produced in European factories. This looming threat could force some manufacturers to either shut down operations or sell out to Chinese firms, reshaping the continent’s automotive landscape.

EU's Response to Chinese Competition

In a bid to protect the European automotive industry, the European Union has confirmed the imposition of additional tariffs on imported Chinese electric vehicles. The decision, however, was met with mixed reactions among member states. Five countries, including Germany and Hungary, opposed the move, concerned that such tariffs could provoke retaliatory actions from China and jeopardize sales in their domestic markets.

Despite this dissent, the European Commission has decided to impose countervailing duties on battery electric vehicles produced in China for the next five years, due to findings that Chinese manufacturers benefit from unfair state subsidies. The additional customs duties, which range from 7.8% to 35.3%, will place further pressure on Chinese manufacturers attempting to penetrate the European market.

Navigating a Competitive Future

The future of mid-range European car manufacturers hangs in the balance as they grapple with the dual challenges of rising Chinese competition and shifting consumer preferences. While premium brands may weather the storm, the fate of many mid-range companies remains precarious. Industry analysts suggest that without significant innovation and strategic adaptation, these manufacturers could struggle to maintain their foothold in an increasingly competitive environment.

A Shifting Landscape

As the battle for market share intensifies, the question remains: will China "bury" European mid-range car manufacturers? The landscape of the automotive industry is evolving, and only those manufacturers willing to adapt and innovate will survive. With the EU implementing protective measures and Chinese brands becoming ever more competitive, the next few years will be critical in determining the future of car manufacturing in Europe. The stakes are high, and the outcome will shape the industry for years to come.