China-Made EVs Fill European Ports as Buyers Remain Wary

The Chinese automotive industry has run headlong into an issue that may prevent it from competing effectively in foreign markets: buyers are not buying electric cars manufactured in China. The east Asian nation’s auto industry has come a significantly long way over the past several decades, evolving from a sector that essentially produced clones of Western vehicles to one that’s now producing some of the best vehicles on the globe.

Years of major investments by Beijing have helped car manufacturers in China cut vehicle production costs by a wide margin, allowing them to price their cars at much lower price points compared to Western automakers. As such, Chinese offerings tend to be more affordable, despite being of a similar or even higher quality to cars manufactured in the West. This lower price point should give these Chinese companies a hypothetical leg up in a market pressured by high electric vehicle prices and high borrowing costs.

Indeed, the European Commission has even launched a probe into the cheap Chinese EVs streaming into Europe to determine whether the Chinese government used subsidies to lower its automakers’ electric vehicle prices. However, a growing number of Chinese electric cars are piling up at European ports, and sellers are struggling to find buyers, despite their lower prices. Some China-made electric cars have spent up to 18 months parked at port car parks because their manufacturers have failed to rouse buyer interest.

Although Chinese EVs have received plenty of popular reviews and typically feature high-quality technology, their makers aren’t having an easy time breaking into the century-old-plus automotive industry. Challenging the leaders of a sector as established as car making, where brand recognition is everything, is an uphill task. Challengers have little to no brand image and have to deal with trade protectionism as well as buyer wariness and limited buyer faith.

China’s automotive sector draws a comparison to Japan in the 1960s and 1970s when the country was attempting to move into Western car markets. Japanese carmakers offered commendable products that unfortunately lacked the longevity, design and finesse of Western-made cars. Many American buyers were also unwilling to buy cars made in the nation responsible for the Pearl Harbor attacks. Even so, by focusing on consistently producing reliable, affordable and increasingly well-designed vehicles, Japan became an automotive giant in the 1990s and 2000s.

China is currently in a similar position, facing plenty of suspicion from Western buyers who are wary of Chinese products and still remember all the illegal and legal clones of Western cars developed in China. The nation’s financial might may have helped its carmakers hire the best car-making experts on the globe and slash production costs, but China has been unable to buy customers’ loyalty so far. As with Japan, attracting and retaining customers will take consistently high-quality products combined with time.

The existing unease about Chinese EVs should give manufacturers such as Nikola Corporation (NASDAQ: NKLA) an advantage, which they should exploit and get a foothold in the European market for EVs. That advantage may not last for an unlimited time, so speed may be of the essence.

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