To succeed in Europe, Chinese manufacturers must start manufacturing locally

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In the last two years, a rising force has been in Europe. We are talking about Chinese manufacturers, which, like the Japanese and Koreans 30 or 40 years ago, are now facing a phase that, after the initial shock, represents major challenges to consolidate their presence.

In the 80s and 90s, Japanese groups saw the opportunity to make their way to Europe and the United States and began an expansion to take advantage of their high efficiency and the quality of their cars.

But Europe has stopped imports with the highest annual quotas, something that has led Asian brands to build their first factories on Western soil. We already know the rest of the story, which is a bestseller and has been part of the lists of the most appreciated and sold models.

Today, Chinese manufacturers face the same problem. In this case, the giant Asian brands have a strong advantage in terms of production costs for cars and batteries, which allows them to be more competitive. Something that has once again raised suspicions in Europe accuses China of providing illegal aid to its manufacturers, which would give them a competitive advantage over European companies.

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Building factories is a real and intimate alternative

According to William Wang, director of MG in Europe, «If you can sell 200,000 cars a year, it is better to manufacture locally. Advantages for MG include greater responsiveness to European tastes and better market integration.“.

If we look at MG’s own numbers, we saw that this year they sold 170,000 cars in Europe until October, which means a growth of 123% year-on-year. A number that brings the possibility of building a factory where they are already looking for and negotiating a location.

This is despite the fact that MG has reached a theoretical maximum limit for car imports, preventing it from growing further. Something to do with the difficulties and costs of shipping cars from China.

A European factory that will provide a solution to this problem, and what BYD is also working on, could even be installed in Spain, especially in the area of ​​Galicia.

To Succeed In Europe, Chinese Manufacturers Must Start Manufacturing Locally
Sold By Chinese Manufacturers In Europe

An implementation of Chinese groups that began in 2019 was created in the laboratory in Norway, where, in addition to strong assistance, the manufacturers of the Asian giant do not have to pay the 10% EU tariff. Something that favors the arrival of brands like Nio, Xpeng, and BYD.

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From there, they expanded into the European market with varying degrees of success, and by the end of October, the Chinese brands were cornered. a 3% market share in all of Western Europe.

The point is that building factories in Europe can be a solution to a problem, but it also means having to deal with huge investments.

Experts have shown it Making a car in China is between 20 and 25% cheaper than in Europe. Something that means they have a bigger advantage over the Japanese.

The reason for betting on this alternative is that it will reduce the chance of hearing the trade war drums that are currently being planned for car imports from China to Europe.

If Chinese groups take over market share, Europe will impose heavy tariffs, which will dilute a good part of the sales margin and give an advantage to brands with factories on the old continent. .

To Succeed In Europe, Chinese Manufacturers Must Start Manufacturing Locally
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There is also the issue of culture. China and Europe have very different car cultures. This means that the tastes of Europeans are not easy to know when the company is based in China. That is why more and more Asian brands have development centers in our market to respond to tastes and changing trends in a more precise and faster way.

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Finally, another reason that is not often considered but is very important. And with a factory close to your market, you can build, deliver, and collect your car quickly. On the other hand, if you need to ship the car from China, it takes between 6 and 8 weeks from the time the car leaves the production line until it reaches the customer. And that has an impact on the accounts.

Aspects that show that Chinese manufacturers have reached the opportunity to start building their factories in Europe, as the Japanese and Koreans did at that time. Now it remains to be seen who will get that investment and the strong generation of direct and indirect jobs, both in the production of cars and in the production of batteries that are usually involved.