Fleets will ultimately determine if Chinese EVs can take Europe by storm

Tuesday 23rd May 2023

Headshot of Jon Lawes - Managing Director at Novuna Vehicle Solutions

Jon Lawes, Managing Director at MHC Mobility, outlines why Chinese EVs may appeal to Europe's fleet managers as Chinese OEMs plan to start selling cars in the region's auto market in the near future.

A recent string of announcements from a number of Chinese electric vehicle (EV) manufacturers that they plan to start selling cars in Europe by the end of this year marks the latest stage in Chinese EV brands’ attempts to break into the region’s auto market. With 60 percent of all EVs globally now on China’s roads, the country’s electric carmakers have switched their focus increasingly to exports, and Europe is undoubtedly one of their principal targets.

However, it’s not yet clear whether China’s up-and-coming brands can eclipse more recognizable and established European rivals – but fleet managers, who collectively buy over 50% of Europe’s passenger vehicles, are likely to be instrumental one way or another.

Disruption and price pressure

There is no doubt that Chinese EVs hold some considerable advantages over their European counterparts, with the potential to disrupt the market. The most fundamental of these is price.

Because of cheaper production costs and a more advanced supply chain, it’s estimated that Chinese OEMs can, on average, build battery electric vehicles for approximately €10,000 less than European rivals. Chinese EVs also typically include more luxury features such as in-car fridges and facial recognition technologies.

An injection of new competition from Chinese OEMs could also force European and US OEMs to cut their own prices, while Chinese brands will provide a welcome source of extra supply at a time when other brands are struggling to meet demand.

Several Chinese EV models have also recently received five-star safety ratings from the European New Car Assessment Program (NCAP). This recognition could prove highly significant, as a high rating is often a prerequisite for widespread adoption by corporate buyers.

Together, this could be good news for fleet managers, who are under constant pressure to cut costs and meet client demands, particularly in the current environment of inflation and supply chain woes. It could also be good news for decarbonizing mobility more broadly.

Slow down, speed bumps ahead

However, Chinese EVs still face considerable hurdles in their quest to penetrate the European market.

The most fundamental is brand recognition. With close to zero presence in Europe, Chinese EV brands will face stiff competition from household names such as Tesla as well as the traditional European manufacturers who have ramped up their EV offerings.

Lack of recognition alone is unlikely to prove an insurmountable barrier for Chinese manufacturers, as has been demonstrated in the past by Japanese and Korean carmakers. For fleets, though, accessibility to experienced servicing professionals and parts for maintenance will remain a key concern. We’re also unlikely to see widespread adoption of challenger brands without assurances about longevity and durability.

Policy and geopolitics

Meanwhile, Chinese automakers could yet fall victim to a growing geopolitical rivalry between China and the West. Chinese EV OEMs are currently dependent on U.S. chip brands for their advanced semiconductors and Chinese manufacturers could be hit by any escalation of the trade war between these major powers.

Concerns have also been raised about data security. Much like fears over cellphone maker Huawei, which has been excluded from 5G networks in several EU member states on security grounds, there is unease about Chinese EV data-collection technology being co-opted. With or without basis, these fears are part of the debate and could cause prospective European buyers to think twice.

Finally, European manufacturers will receive a boost from the Net Zero Industry Act – Europe’s answer to America’s Inflation Reduction Act to make home-grown industry more competitive. The EU plans to generate 40 percent of green technology – including EVs – within the EU by 2030. This could help narrow China’s growing EV lead as European brands tap subsidies not open to their Chinese competitors – even if remains to be seen how these policies play out in practice.

‘Not if but when’ – and fleets could be key

What does all this mean for Europe’s EV market? While there are some considerable obstacles ahead for Chinese EV brands’ expansion into Europe, the simple fact is that they offer very competitively priced EVs, with more features as standard, than comparable European or U.S. rivals.

In a market as hungry for EVs as Europe, they are bound to make considerable headway before too long. Exactly how long may depend on fleet managers.

If fleet managers and business customers can be convinced that Chinese EVs are an effective way to green corporate fleets, we may be seeing many more of them on Europe’s roads sooner rather than later. That in turn is bound to shift consumer sentiment and open-up the road ahead for China’s EV makers.