EU Penalties on Chinese EVs, P3 Market Insights, and Volkswagen China Ambitions

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In this issue, we delve into the recent tariffs imposed by the European Commission on Chinese electric vehicles, a move that has significant implications for the industry. We'll share insights from the P3 Group on the current state and future prospects of China's electric vehicle market.

Additionally, we explore Volkswagen's ambitious plans to accelerate its presence in China, leveraging its collaboration with XPeng to achieve this goal.

We hope you find this edition insightful and informative!

The Race to the Bottom: Challenges in Chinas Electric Vehicle Market

In China, the electric vehicle market is reaching a critical point of oversaturation. With over 200 manufacturers already in the game and new OEMs continuously emerging, the competition is fierce. In 2023 alone, EV sales surged by 36%, amounting to 7.7 million units. Projections for 2024 suggest sales could hit 11 million units. However, the vast market and the similarity in technology among domestic OEMs make it difficult for any single company to stand out.

To differentiate themselves, Chinese EV manufacturers resort to two main strategies: introducing unique ideas and USPs or adopting a low-price strategy. The latter often leads to a downward spiral, where competitors match or undercut prices, leading to a phenomenon known as 内卷 (nei juan) or 互卷 (hu juan). This continuous price-cutting is unsustainable and could push many manufacturers towards bankruptcy, highlighting the urgent need for global expansion.

On average, Chinese electric vehicles are 20% cheaper than their European counterparts. However, they face challenges in brand recognition and customer trust. Various strategies, such as partnering with smartphone OEMs, are being explored to address these issues. While the future of mobility appears to be electric, much remains uncertain due to fluctuating political decisions.

_{Source: P3 Group - The Global Expansion of Chinese EV OEMs, July 2024}

Volkswagen's "In China, for China" Strategy Aims to Combat Market Share Decline

Volkswagen faces significant challenges in China, where the automotive market is increasingly dominated by domestic manufacturers. BYD, in particular, has emerged as a formidable competitor, pushing international brands out of the market. In 2019, Volkswagen held a 19% market share in China, which dropped to 14.5% last year, according to Reuters.

Despite this, VW remains undeterred and is doubling down on its "In China, for China" strategy, exemplified by the launch of its first China-specific EV, the VW ID. Unyx. The German automaker plans to introduce over 30 new electric or hybrid models in China by 2030. Volkswagen aims to increase its sales from approximately three million to four million vehicles and raise its market share to 15%. However, in the near term, Volkswagen expects to continue losing market share, as noted by CFO Arno Antlitz in an interview with Reuters. In Europe, the company hopes to maintain its current position.

The situation in China highlights the bleak outlook for foreign automakers in a country experiencing the fastest transition to electric vehicles globally and representing the largest automotive market: over a third of all new car registrations worldwide occur in China. Chinese manufacturers offer advanced and affordable models, making Volkswagen particularly vulnerable since a significant portion of its total sales comes from China.

VW and Xpeng Collaborate on E/E Architecture for China

Starting in 2026, VWs electric vehicles based on the China Main Platform (CMP) will feature an integrated E/E architecture developed with Xpeng. This partnership, initiated in July 2023 and finalized in February 2024, also includes two mid-range VW models based on Xpengs designs. VW's new China Electronic Architecture (CEA), evolved from the MEB platform, will be deployed in both CMP and MEB-based electric vehicles in China. Developed with input from VWs VCTC, Cariad China, and Xpeng engineers, CEA aims to streamline system complexity and improve cost efficiency.

By consolidating the E/E architecture, VW intends to lower costs, reduce system complexity, and accelerate the digitization of its model range in China, paving the way for advanced autonomous driving and smart cockpit features. The collaboration underscores the potential of the VW-Xpeng partnership, with both companies committed to expanding their technological and strategic alliance.

Headline Roundup

💡 Due to Tariffs: Zeekr Considers EV Manufacturing in Europe (EAN)

💡 "EU Made Mistakes" – SAIC Gets Hearing on Tariffs (EAN)

💡 Hongqi: From Chinese State Limousine to Tesla Killer? (EAN)

💡 New BYD Seal with 800-Volt Technology Likely to Launch in Early August (EAN)

💡 Disagreement Among EU Members Over China Tariffs (EAN)

💡 China's Auto Market Power Grows: This Year Could See the End of Europe's Export Surplus to the Far East (Business-Insider)

💡 How Chinese Automakers Are Intensifying Their Attack on Europe (Manager Magazin)

💡 Software and EVs: Mitsubishi Strengthens Nissan-Honda Alliance (electrive)

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Sebastian & team | China EV Pulse