Germany is fighting for electric cars – moving forward

German car manufacturers are facing competition in the electric market with China. People want to show strength at the Beijing Motor Show. A race to catch up at high speed: can it work?

When the motor show begins in Beijing today, it’s not just about new models, new technology and prices. It’s also about power and powerlessness – and about making a statement. Chinese and international manufacturers are presenting themselves at the motor show in Beijing. And above all there is one question: How do German and European car manufacturers position themselves to compete with the competition from China?

The motor show takes place every two years, alternating with Shanghai – now the leading trade fair for the industry and more important than the IAA in Germany or the exhibitions in Geneva or Paris. China is the largest car market in the world, and the German car industry is massively dependent on it.

Around 75 million cars were sold worldwide last year – almost a third of them in China. But business for companies like Volkswagen and Mercedes in the People’s Republic is not going well. In China, BYD dethroned Volkswagen last year.

Electromobility on another level in China

Unlike Europe and the USA, China is relying more heavily on electric drives: more than one in three new cars there are now electric. A total of around 6.3 million electric cars were sold in China last year. For comparison: According to the Federal Motor Transport Authority, around 524,000 electric cars were newly registered in Germany in 2023. That was more than in any year before. China has around seventeen times as many inhabitants as Germany – but electromobility in the People’s Republic is on a different level than here.

And the potential for the future is huge, because compared to the total population, significantly fewer people there have a car than, for example, in the states of America or Europe. Car expert Stefan Bratzel from CAR, the Center Automotive Research in Bergisch Gladbach, says opposite tagesschau.dethe dynamics of the Chinese electrical market were underestimated.

And BYD dominates the Chinese market for electric cars – in 2023, the only foreign manufacturer represented in the top 20 was Tesla. “The fact that not a single German manufacturer was among the top ten best-selling models in China should set alarm bells ringing at the corporate headquarters in Wolfsburg, Stuttgart and Munich,” writes Sebastian Bock, managing director of the environmental protection organization Transport & Environment (T&E), tagesschau.de.

Freighter full of Chinese electric cars on the way

On the one hand, German manufacturers need answers about their own role in the important Chinese market, and on the other hand, they are looking at the market entry of Chinese manufacturers in Germany. Large Chinese freighters have been heading to Europe and Germany for months. On board electric cars.

That makes an impression – if you look at the numbers, almost 34,000 models from China were newly registered in this country in 2023. According to the Federal Motor Transport Authority, there were almost 400 electric cars from BYD in the first three months of this year, almost a hundred from NIO and around 600 from Polestar. Numbers that are likely to increase. Also because brands like BYD and SAIC are currently building a fleet of car freighters to send their vehicles around the world. China’s car exports were 58 percent higher last year than the previous year, which is changing the vehicle market.

The situation in many European ports will certainly also be discussed at the Beijing Motor Show. Because a lot of cars from China are currently piled up there. According to a report by the Financial Times Some companies would have booked time slots for delivery without ordering onward transport. In addition, it is currently fundamentally difficult for car manufacturers to find trucks for onward transport. The fact that Chinese electric cars are piling up in ports could also be because they are not selling their vehicles in Europe as quickly as expected.

Is China’s strategy working?

Nevertheless, experts at the International Energy Agency IEA also say that growing exports from Chinese manufacturers could further increase the pressure on car prices. In addition, electric cars are more attractive than combustion engines. According to IEA information, more than 60 percent of electric cars sold in China in 2023 were cheaper to purchase than a corresponding combustion engine.

At Volkswagen they are not afraid of the freighters with Chinese electric cars; Rather, they are convinced that the strategy of sending a lot of cars to Europe is not working. Chinese manufacturers can still score points when it comes to manufacturing costs, but on the whole, freight costs, customs duties and advertising, for example to make the brands known on the German market, also have to be taken into account. According to Volkswagen, Chinese suppliers would have to compete in the same environment, i.e. produce in Europe.

The largest Chinese car exporter Chery recently announced that it would set up its own production in Spain, while BYD, for example, wants to produce in Hungary. The electric car manufacturer Polestar also wants to build more cars outside of China; they want to ramp up production in the USA and sell them from there to the European Union.

More independence and yet collaboration

The Chinese automobile association is convinced that you can survive in Germany with your own electric cars – and not just in terms of price, but also in terms of innovations. “German manufacturers have to be at least as much more innovative as they are more expensive,” says car expert Stefan Bratzel from CAR when asked.

Politically, they actually want to become more independent of China – and the federal government has launched a so-called China strategy. But when it comes to cars, Scholz and the Chinese leadership agreed to closer cooperation during the Chancellor’s recent visit, including in the area of ​​automated and connected driving. The federal government insists on fair competition.

This is also the aim of German car manufacturers who want to compete with China. However, there is a warning about a trade dispute. The background is the punitive measures currently being examined by the EU Commission against Chinese electric car manufacturers due to dumping and overcapacity.

Difficult catch-up ahead

In order to compete with China, German car manufacturers urgently need to find solutions to the price problems. German manufacturers are not doing well, especially in the affordable electric car segment. On a list of the 30 cheapest electric cars from the ADAC, not a single German car manufacturer made it to the top. “Volkswagen is particularly affected, as it is most exposed to price wars in the volume segment,” says car expert Stefan Bratzel tagesschau.de.

Volkswagen itself is expecting two difficult years to catch up in the Chinese electric car market. “We are running at high speed to improve in this segment,” said boss Oliver Blume in Beijing. VW also wants to finance the development of its electric car business in China with sales in the combustion engine sector, which are still going well.

In Bratzel’s opinion, BWM and Mercedes as premium manufacturers still have a certain time advantage, but the Chinese manufacturers are attacking there too. The management consultancy Accenture believes that German car manufacturers don’t have to worry too much about the domestic market. Because the Chinese providers are not really cheap; many even misjudged their prices.

Electric cars for 20,000 euros

Nevertheless: In terms of price, the battle with manufacturers like BYD is difficult to win at the moment, at least for German manufacturers. “I expect a major consolidation due to the grueling price war that many Chinese manufacturers will not be able to survive,” said car expert Bratzel from CAR. Frank Schwope teaches automotive economics at the medium-sized business college in Cologne and Hanover and told the dpa news agency: “The affordable electric car from China is something like the great hope of the German citizen.”

German manufacturers have also been developing cheaper electric cars for a long time. But that will probably take some time. Opel speaks opposite tagesschau.de about wanting to offer a fully-fledged electric car starting at 25,000 euros “in the not too distant future”. Volkswagen is also planning a car for around 20,000 euros, but no decision has yet been made about its implementation, according to a spokesman. Car expert Schwope has doubts as to whether manufacturers will ever break these brands given inflation.

Slump in sales since purchase premiums were abolished

Since government purchase bonuses were abolished in Germany, the electric car business has been slowing down. The high prices in particular deter customers. However, current data from ADAC shows that customers can still benefit from significant price discounts. For example, there are currently discounts of up to 8,000 euros at Toyota, there are further discounts at Hyundai, Polestar and Fiat – VW, on the other hand, is discounting its ID models.

There is currently no discount, but there is a list price reduction at Tesla. The electric car crisis is not leaving Elon Musk unscathed. Tesla opened the books that night. There was the first drop in sales in around four years, and profits have recently fallen by more than half. Tesla also sold significantly fewer cars, so industry experts expected the numbers to be bad – but the result was below expectations.

Short Development time paired with innovations

The competition from China affects everyone – because the leading car manufacturers there have managed to drastically shorten the development time of their vehicles, coupled with advanced functions in the vehicles. It is also the taste of Chinese customers that German manufacturers in particular want and need to respond better to. It’s about good voice control, not just for the navigation system, but also, for example, to regulate the temperature in the car or adjust the seat – the connection to social networks must also work smoothly.

German manufacturers like Volkswagen know this – and are positioning themselves locally – through numerous partnerships with local tech companies and a development center for electric cars in the east of the People’s Republic. The motto is to think and produce more for China.