A recent influx of cheap Chinese battery electric vehicles (BEVs) into the European market has European Union leaders worried. While most nations with EV transition plans have invested in EV subsidies and incentives, China is spending much more on its domestic electric vehicle industry.
The Chinese government has invested billions of dollars into subsidizing the EV production process, allowing local automakers to price their electric cars much lower than other car makers. With competition in China’s EV market heating up by the day, Chinese carmakers such as BYD are starting to expand to European markets.
Their affordable offerings stand out in stark contrast to the expensive EVs offered by Western carmakers, including Tesla and Mercedes, making the Chinese versions more attractive to European customers. Even though European leaders aren’t thrilled about Chinese EV makers taking over their markets, EU drivers love Chinese electric cars.
For example, when Copenhagen, Denmark, resident Laima Springe-Janssen was looking for a car to replace her internal combustion engine (ICE) vehicle, she considered Nissan and Volvo as replacement vehicles. However, with the Volvo being quite costly with the extras included and the Nissan lacking the “wow factor” she was looking for, Springe-Janssen bought a compact BYD SUV for around $50,000.
On top of being relatively affordable with all the bells and whistles, the Atto 3 SUV came with an extra winter tire set as well as two years of free charging. Springe-Janssen’s husband liked the Chinese EV so much he is thinking of replacing his Volkswagen Skoda with a BYD model. Chinese carmakers have won over Springe-Janssen, her husband, and many other European drivers in recent months as these companies have expanded into Europe.
By mid-September, so many Chinese electric cars were flooding into Europe that the European Commission launched a probe into whether EV subsidies by China’s government were artificially lowering electric vehicle prices and making it difficult for Western automakers to compete. The commission has 12 months to determine whether the region should impose additional car tariffs on Chinese vehicle imports.
While this move may make the market more competitive for European carmakers, it likely won’t go well with customers who generally prefer affordable products; it could also draw the ire of the Chinese government. The Chinese Chamber of Commerce said it opposed the investigation and argued that subsidies were not responsible for the country’s competitive edge in the EV sector.
For some U.S. companies that are investing in developing electric trucks and other specialized vehicles, such as Workhorse Group Inc. (NASDAQ: WKHS), the competition isn’t yet as stiff and they could make inroads into their chosen market segments before other players join the space.
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