Logistics and Transport

The emergence of Chinese cars in Europe

27 de October de 2023

  • China’s automotive industry is experiencing its best times ever. This is an unprecedented growth in the European market, which is causing the EU to react to the massive arrival of Asian brands in EU countries.
  • The Spanish market is the market with the highest increase in the share of Chinese vehicles. Between January and September 2023, 27,174 Chinese-brand passenger cars were sold in Spain, four times the number registered in the same period in 2022.

In this article, we explain why Chinese cars are booming in Spain and Europe, examining the reasons behind their growing popularity and their impact on the European industry.

How has China’s automotive industry evolved?

The positioning of the Chinese automotive industry, although it has taken many by surprise, has not been forged overnight. It is the result of a network of knowledge and infrastructures that they have acquired largely through European know-how.

Despite late growth in the early 1990s, China has been involved with European companies for many years, learning about their processes and digitisation. Today, they are already the world’s largest vehicle manufacturer.The company is the undisputed leader in the electric vehicle sector.

How have they managed to position themselves?

In a scenario where brands were looking for cheap labour, the Chinese government provided land and workers in exchange for these companies collaborating with local firms. This has allowed them to learn about Western technology and apply it to the manufacture of their own vehicles.

A few decades ago, Chinese cars were seen as vehicles of poor quality, but in fact it was their huge domestic demand that absorbed the more sophisticated models, and the Chinese car industry was not able to keep up with the demand. the cheapest and poorest quality vehicles were those exported to mainly Latin American countries.at extremely low costs.

The tables have now turned, with Chinese cars marketed worldwide being very similar to those of European brands, with negligible differences in quality.

  • This is coupled with a very favourable tariff policy for China, where it costs them much less to sell cars in Europe than it costs European brands to sell in China.
  • In addition, the Chinese government is subsidising the country’s car companies to the tune of millions. This means that Europe, once a leading automotive power, is suddenly finding it hard to compete even within its own borders.
  • On top of that, China has seen the opportunity of electrification very well. In a country that does not have large reserves of oil or fossil fuels, the Chinese government has made a firm commitment to electrification, to such an extent that it has been encouraging its purchase in the domestic market for years. This has allowed them to advance much faster than Europe in the development of this technology, both in terms of the production of electric cars and their components, such as batteries, for which they also have large reserves of rare earths.

In a nutshell, the recent history of China’s motor industry is marked by rapid growth, openness to foreign investment, expansion of the domestic market and a strong focus on the production of electric vehicles.The company has become a major force in the global automotive landscape.

In which areas China competes against Europe

Although there are not so many differences with European cars, what makes them so different at the same time? Why have they gained market share so quickly? Here are 3 key reasons for the success of Chinese cars that Europe and America must address

  1. Leaders in innovation and access to raw materials:

The Asian market has been making a difference in the last decade in terms of innovation and development, largely because of its direct link to rare earths, which are essential elements for the manufacture of chips, batteries or any electronic component, and its new developments and investment. These developments are being financially supported by the Chinese government, in strategic markets such as offshore, automotive and hydrogen.

  • Commitment to electric vehicles:

Globally, the adoption of electric vehicles has been led by China, largely thanks to government policies that encourage their development and use in its own domestic market. Numerous Chinese companies have focused their efforts on the manufacture of electric vehicles, making major investments in this technology, which places them in a leading position in the electric car market.

  • Collaborations with other brands and countries:

Establishing relationships with European manufacturers has facilitated the transfer of know-how and cutting-edge technology, enabling China to become the global supplier to the industry. This cooperation, initially very beneficial for European companies in terms of access to cheap labour, has been very costly in the long term, as the Asian giant is taking over the leadership of the sector.

How is it affecting European industry and what does the future of the sector look like?

The growth of Chinese cars in Spain and Europe has shaken the car industry. European brands have been forced to become more competitive and invest in clean technologies to stay relevant in the market.. Until now, safety was a differentiating value, but the extensive technological equipment required as standard has partly eliminated this differentiating value. This is why the European Union is looking for alternatives to curb the arrival of Chinese cars.

La UE ha reconocido este reto y estudia imponer aranceles adicionales a los vehículos procedentes de China. However, it faces the constraint of not having a sufficiently competitive electric vehicle industry on European soil to limit the entry of these vehicles from abroad. Therefore, initiating a trade dispute could pose a risk both to the interests of European consumers and to the environmental interests set out in the 2030 agenda and to Europe’s climate neutrality in 2050.

Undoubtedly, the rise of Chinese cars in Spain and Europe is a phenomenon that has transformed the global automotive industry. The combination of competitive prices, advanced technology and sustainable options has attracted huge interest in countries such as Spain, Italy and France. As Asian manufacturers continue to improve the quality and reliability of their products, it is more than likely that they will continue to gain market share in Europe and put pressure on European brands. In this context, the EU will be forced to intervene to prevent, once again, China from taking away Europe’s leadership in one of its leading sectors.