Chinese cars are facing difficulties in finding buyers in Europe. Imported cars, many of which are Chinese electric vehicles, are piling up at European ports, with some spending up to 18 months in port car parks as manufacturers struggle to get them onto people’s driveways.
But entering an established market as a challenger is a complex operation. Chinese makers will have to contend with buyer wariness, a lack of brand image, trade protectionism and rapid outdatedness.
China is viewed with suspicion by many westerners, and its carmakers are similarly hampered by their recent legacy of producing both endorsed and illegal clones of European cars.
Strategic purchases of brands like Volvo, Lotus and MG have also given China existing brands that are respected and, more importantly, have some of the best engineering knowledge in the world.
Yet, even after buying up western brands, Chinese automakers have proven unable to buy loyalty from existing customers of brands like BMW, Porsche, Ferrari and Ford. For these buyers, the history of the brand in terms of known reliability and even things like motor sport success is something that Chinese makers, like the Japanese, will have to build up over time.
Existing manufacturers also have a legacy of reliability that buyers have experienced for themselves, giving a huge brand loyalty benefit. Add to this a lack of an established dealer network outside of China and you see how Chinese makers struggle against the established competition.
China has a price advantage compared to Europe or the US. Economies of scale, excellent shipping links and cheap labour mean that Chinese cars are cheaper both to make and buy.
However, in many countries they are subject to high import tariffs. The EU currently imposes a 10% import tariff on each car brought in. And in the US, car imports from China are subject to a 27.5% tariff.
These tariffs may well rise further. The EU is conducting an investigation into whether its tariff is too low. If it concludes this later this year, higher duties will be applied retrospectively to imported cars.
Cars, and specifically electric vehicles, are also in a phase of their development where they see rapid changes and updates. Traditionally, vehicle models would see a market life of between four and seven years, perhaps with small updates in trim, colour palette or feature availability.
But Tesla has turned this on its head. The Tesla Model S, for example, has seen almost continuous product updates that make it barely recognisable in terms of hardware from a car released in 2012. Chinese automakers have taken note. They are bringing out new models around 30% faster than in most other nations.
Tesla is supporting owners of older cars with upgrades, at extra expense, to bring them in line with the latest hardware. Without guaranteed software support like this, the rate at which Chinese automakers are bringing out new models could make buyers wary that the product they have bought will soon become outdated compared to buying a car on a more traditional update cycle.
