It's Five Minutes to Midnight for Europe.

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In this issue, we cover a range of critical developments shaping the global electric vehicle landscape. Daniel Kirchert issues a stark warning: "It's five minutes to midnight for European automakers," as the EU considers tariffs on Chinese cars amidst a growing trade dispute.

We also explore Shanghai's ambitious plan to fully electrify its bus and taxi fleet by 2027 and Volkswagen's strategic shift in China, aiming to create a "Wolfsburg of the East."

Additionally, we examine BYDs restructuring efforts in Europe following sales challenges and Dongfeng's introduction of the Nammi Box, a budget EV now available in Europe, to just name some more topics.

Stay tuned for these and more insights in this packed edition.

Daniel Kirchert Warns: "It's Five Minutes to Midnight for European Automakers"

Lately, the electric vehicle market has experienced a significant transformation, largely driven by the rapid advancements and strategic initiatives emanating from China. Daniel Kirchert, a seasoned automotive industry expert with extensive experience in product strategy, dealership network development, and joint venture operations, has offered deep insights into this shifting landscape.

Kirchert, who has held pivotal roles at BMW, Nissan, Infiniti, and EV startups like Byton, is now leading Noyo Mobility, a Swiss platform aimed at facilitating the entry of Chinese EVs into the European market. His perspective sheds light on the challenges and opportunities facing both European and Chinese automakers as they navigate this dynamic environment.

European Tariffs on Chinese EVs: A Misstep in Policy?

Kirchert is critical of the recent European tariffs on Chinese EVs, which he views as a "catastrophic political mistake." He argues that these tariffs could hinder the progress of EV adoption in Europe, particularly in the budget segment where options are limited. "We are in a phase where the political focus should be on accelerating electromobility," Kirchert says, emphasizing that Chinese manufacturers could play a crucial role in providing affordable EVs that could help meet Europes climate goals. Instead of imposing tariffs, Kirchert suggests that Europe should invest more in genuine innovation and transformation to sustainably promote EVs.

He also points out that while the tariffs are a setback, they are likely to accelerate the localization of Chinese EV production in Europe, as manufacturers seek ways to bypass these barriers. Recent discussions, such as those involving the Italian government and Chinese companies about establishing production facilities in Italy, underscore this trend. Kirchert predicts that despite the tariffs, Chinese manufacturers will continue to push forward, possibly even benefiting from localized production in Europe.

China's Recipe for Success in the EV Market

Kirchert attributes Chinas dominance in the EV market to a combination of effective industrial policy and entrepreneurial spirit. The Chinese government identified electromobility as a top priority over a decade ago and implemented long-term strategies to build a robust supply chain for battery production. This foresight has paid off, as Chinese companies have rapidly advanced in battery technology, enabling them to produce EVs with energy efficiency and cost-effectiveness on par with or even superior to established players like Tesla.

Moreover, Kirchert highlights the significant role of Chinese entrepreneurs, such as those behind NIO, XPeng, and Li Auto, in driving innovation. These companies have not only matched, but in some cases surpassed the benchmarks set by global leaders like Tesla. Kirchert notes that this entrepreneurial drive, supported by a competitive market environment, has been crucial in pushing Chinese automakers to develop high-quality, innovative EVs at a pace that is unmatched globally.

Challenges and Opportunities for European Automakers

The rise of Chinese EVs presents a significant challenge for European automakers, particularly in China, where German brands have seen their market share in the EV segment plummet. Kirchert warns that this trend could eventually extend to Europe if local manufacturers do not adapt quickly. The "China Speed" of vehicle development—where new models are brought to market in just 24 months compared to the 48 to 60 months typical in Europe—poses a particular threat, as it allows Chinese companies to innovate and iterate much faster.

However, Kirchert also sees potential for collaboration between European and Chinese companies. He cites the partnership between Volkswagen and XPeng as a promising example of how European manufacturers can leverage Chinese expertise in software and technology to enhance their own offerings. Such collaborations could help European companies stay competitive by combining the strengths of both regions.

The Road Ahead: A Competitive and Collaborative Future

Looking forward, Kirchert is cautiously optimistic about the future of the EV market in Europe. He believes that while the competition will be fierce, with many Chinese brands likely to enter and exit the market, those that succeed could capture a significant share—potentially up to 20% of the European market. He also anticipates more partnerships between European and Chinese companies, as both sides recognize the benefits of combining their respective strengths.

In conclusion, Kirchert emphasizes the need for the European automotive industry to focus on innovation and move beyond outdated debates over alternative fuels. The future, he asserts, lies in embracing electromobility fully and proactively. As he puts it, "We need to make a leap forward and redefine our competition with China through innovation."

Daniel Kirchert's insights provide a sobering yet hopeful perspective on the evolving global EV market. While the challenges are significant, the opportunities for those who can adapt and innovate are immense. As Europe grapples with its strategic decisions in this space, the lessons from Chinas rapid rise could prove invaluable in shaping a sustainable and competitive future for the region's automotive industry.

EU Mulls Tariffs on Chinese Cars Amid Trade Dispute

• The EU-China trade dispute is escalating, with potential tariffs on Chinese cars imported into Europe, possibly leading to higher costs for Chinese brands like SAIC, Geely, and Great Wall this winter.

• The EU accuses China of unfair competition through heavy subsidies to its carmakers and is considering punitive tariffs by November 2024, with the maximum rate slightly reduced from 37.6% to 36.6%.

• These tariffs would impact both Chinese and European manufacturers producing in China, with possible price increases for electric vehicles in Europe and concerns about negative effects on global trade and the transition to EVs.

• The German automotive industry is particularly critical, fearing retaliatory measures from China, while some European countries support these protectionist measures. A final decision by the EU is expected before November.

The ongoing trade dispute between the European Union (EU) and China is intensifying, particularly around potential tariffs on Chinese cars imported into Europe. While it remains undecided whether these tariffs will be imposed, indications suggest that Chinese brands like SAIC, Geely, and Great Wall could face higher costs in the European market this winter.

The EU has long accused China of distorting competition through excessive subsidies to its domestic carmakers. In response, the EU is considering introducing punitive tariffs by November 2024, although the final rates might be slightly lower than initially proposed. After a thorough review, the maximum tariff rate has been reduced from 37.6% to 36.6%.

Despite this legal green light, the EU faces challenges, such as the lack of a legal basis to apply these tariffs retroactively to July. Impact on Manufacturers Some Chinese manufacturers will see a slight reduction in the proposed tariffs. For example, BYD’s tariff was reduced from 17.7% to 17.0%, Geely’s from 19.9% to 19.3%, and SAIC’s from 37.6% to 36.3%. These tariffs, if implemented, would likely increase the prices of Chinese-made electric vehicles in Europe, impacting their competitiveness.

These reductions signal that negotiations are still possible. However, the final decision depends on a majority vote from the EU's 27 member states, expected before November.

German & American manufacturers would also be affected

The tariffs would also affect European and American brands producing cars in China, such as Tesla, Volkswagen, BMW, and Mercedes. These companies could face higher costs when importing vehicles from their Chinese plants to Europe. For instance, Volkswagen manufactures its Cupra Tavascan in China and BMW produces the electric Mini Cooper in a joint venture with Great Wall Motors.

Tesla, which operates independently in China without a joint venture, negotiated a reduced tariff rate of 9%. However, most Tesla vehicles sold in Europe are produced at their Berlin plant.

Concerns from the German Industry The German automotive industry is particularly critical of these proposed tariffs, fearing retaliatory measures from China and the potential negative impact on global operations. Companies like BMW argue that such tariffs could undermine free trade and slow the transition to electric vehicles in Europe.

While the German industry and government are wary, countries like Italy, Spain, and France are more supportive of these protectionist measures. Given the EU’s voting system, which considers population size, the tariffs are likely to be approved.

The mere possibility of tariffs has already impacted Chinese car imports to Europe, with a noticeable dip in July. Some importers rushed shipments to avoid potential retroactive tariffs, but with retroactivity now off the table, it remains to be seen how Chinese brands will perform in the coming months.

Headline Roundup

💡 China’s Economic Shift Threatens Germany’s Export Model

For two decades, China was a key growth driver for Germany's economy, particularly benefiting its industrial sector. However, the dynamics have changed. German exports to China are shrinking as Chinese state-backed companies increasingly capture global market share, including in Germany itself. Holger Schmieding, Chief Economist at Berenberg Bank, warns that China's overcapacity, bolstered by subsidies, is pressuring German industries, particularly in automotive and machinery sectors, as these companies now aggressively export surplus goods at low prices.

The situation is exacerbated by Chinese firms, many operating at a loss with state approval, displacing "Made in Germany" products. The COVID-19 pandemic further dampened China's domestic demand, leading to an export surge that undercuts global competitors, including German companies. As the US and EU introduce tariffs to counter China's trade practices, Germany faces a critical challenge to its export-driven economic model.

💡 Shanghai to Fully Electrify Bus and Taxi Fleet by 2027

Shanghai is set to modernize its public transportation by transitioning its entire bus and taxi fleet to New Energy Vehicles (NEVs) by the end of 2027. According to the city's latest transport infrastructure plan, approximately 9% of these vehicles will be replaced annually with NEVs, including plug-in hybrids, battery electric vehicles, and fuel cell vehicles. Over the four-year period from 2024 to 2027, this initiative will involve replacing 6,200 buses and 11,000 taxis.

The focus will primarily be on battery-electric buses, with plans to improve battery maintenance and initiate pilot projects for fuel cell buses. All new or upgraded taxis will be required to be NEVs, ensuring the city's ambitious electrification goals are met.

💡 BYD Enters Pakistan with EV Production and Market Launch

Chinese EV manufacturer BYD is set to enter the Pakistani market by launching three electric vehicles—two SUVs and a sedan—in collaboration with Hub Power Company (Hubco). These vehicles will be available from Q4 2024, making BYD the first to introduce electric cars in Pakistan, where EV infrastructure is still limited. BYD also plans to establish flagship stores and experience centers in Karachi, Lahore, and Islamabad.

💡 Volkswagen Shifts China EV R&D to Create "Wolfsburg of the East"

Volkswagen is shifting its electric vehicle R&D resources in China to Anhui Province, aiming to create a "Wolfsburg of the East" near Hefei, modeled after its headquarters in Germany. The move involves relocating many employees and focusing on developing EVs for the Chinese market on the China Main Platform (CMP) with up to 40% cost savings. The new hub will also work closely with Xpeng on VW's new electronic architecture. This strategic consolidation reflects Volkswagen's commitment to strengthening its NEV presence in China through its joint venture, Volkswagen Anhui.

💡 BYD Restructures European Operations Amid Sales Struggles

Chinese EV giant BYD is struggling to gain a foothold in Europe, particularly in Germany, despite its dominance in the Chinese market. In 2023, BYD sold only 4,139 cars in Germany, capturing just 0.1% of the market, and 15,980 across Western Europe by mid-year. In response, BYD has restructured its European leadership, appointing Stella Li to replace Michael Shu as Europe head, and parted ways with its German importer, the Hedin Group, after a troubled partnership. BYD now plans to take more direct control of its German operations, possibly combining offline and online sales strategies starting in October.

💡 Foxconn Shifts Focus to EVs, Faces Tough Competition in China

Foxconn, widely known for manufacturing Apple's iPhones, is expanding into electric vehicle (EV) production, investing $150 million in a new 700-hectare facility in Zhengzhou, China. This move is part of Foxconn's strategy to reduce its reliance on Apple as iPhone sales decline in China. The company aims to produce EVs for various global brands, but it faces significant challenges in the highly competitive Chinese EV market, where success depends on securing large customers and excelling in software and technology. Foxconn is also investing heavily in EV supply chains across Southeast Asia and the U.S. to bolster its new venture, but industry experts remain skeptical about its ability to compete with established Chinese manufacturers.

💡 Dongfeng's Nammi Box: A Budget EV Arrives in Europe

Chinese state-owned automaker Dongfeng is expanding into Europe, starting with the launch of its compact electric car, the Dongfeng Nammi Box, in Switzerland and Norway in 2024. The Nammi Box, priced between €10,000 and €14,000 in China, will be imported by Noyo, a company founded by industry veteran Daniel Kirchert. The vehicle, featuring a 70 kW motor and a choice of two battery options, offers up to 430 km of range (CLTC) and will be priced at around €16,000 in Norway. Dongfeng aims to make affordable EVs accessible to a broader European audience, contributing to the region's shift toward sustainable mobility.

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Sebastian & team | China EV Pulse

📸 Image Credits (in order of appearance): 2326711943 / shutterstock - Daniel Kirchert / Noyo Mobility - 1808593099 / shutterstock - 1204164946 / shutterstock