China’s EV Advantage In Europe Hits Unexpected Ship Snag

06 Dec 2023 by Neil Winton · Forbes

Potential Chinese Game ChangersJATO Dynamics

Forecasting electric car sales in Europe used to be easy. The only way was up, exponential, and China would win.

Sales growth has recently slowed as manufacturers ran out of early adopters. The pace is expected to accelerate again after 2025 as EU and U.K. regulations impose quotas to force EV sales.

But an unexpected complication has appeared which might knock China’s plans sideways, at least in the short-term; a lack of specialized ships to transport all these new electric cars to Europe, according to Schmidt Automotive Research.

Will this provide an unexpected lifeline to European manufacturers who currently sit about 5 years behind China in the business of making and selling electric cars and its price advantage of about 30%? China is now making hay in the early market consisting mainly of electric SUVs priced between €30,000 ($32,500) and €50,000 ($54,000). China was set to score even bigger when the mass market for electric cars explodes next year and in 2025.

According to investment bank UBS, battery electric sales in Europe will hit 2.1 million this year, 2.5 million in 2024, 3.6 million in 2025, then more than double to 9.6 million in 2030.

The first Chinese scouts signalling the start of the real electric car revolution will appear next year. These are vehicles which make a mockery of the misguided European view of the affordable electric car. So far these European contenders add up to little vehicles like the Renault 5, the Zoe replacement, priced at around €25,000 ($27,000). The Renault Twingo replacement, the Legend, will be priced at close to €20,000 ($21,500). The latest Chinese vehicles, probably starting next year with the BYD Seagull, will be seriously cheaper. They are practical, urban vehicles that provide maybe 90% of normal motoring requirements, which average around 30 miles a day. They will end range anxiety because nobody would dream of taking one on a long journey.

Seagull prices will start close to €10,000 ($10,800) and even less for the Wuling Bingo, according to JATO Dynamics, which says BYD will sell between 20,000 and 30,000 Seagulls a year in Europe. The Bingo’s range is likely to be around 120 miles.

JATO Dynamics Global Analyst Felipe Munoz said Chinese manufacturers will succeed in this entry-level sector because Europeans can't do it and make money. Eventually, the Chinese will set up factories in Europe.

But big Chinese sales in Europe require expensive vehicle transporters, and according to Schmidt Automotive, there aren’t enough to go around. Perhaps European manufacturers have been presented with a “get out of jail card”, or at least some breathing space to make up lost ground?

Schmidt Automotive said about 440,000 Chinese cars and SUVs were shipped to Western Europe in the first 10 months of 2023. Just over 60% were Chinese and the rest Western brands like Tesla, BMW and Renault’s Dacia.

Renault 5 Electric. (Photo by Richard Bord/Getty Images)Getty Images

“However, it appears that current shipping capacity boundaries are limiting further growth, with roughly no more than 50,000 units able to be shipped per month from China to Western Europe. We see Chinese manufacturers unable to surpass more than 3% of the Western European car market,” Schmidt Automotive said.

In October, annual car and SUV sales across Western Europe were running at an annual rate of 13.6 million, according to GlobalData.

Schmidt Automotive said during the Covid emergency and the industry slowdown, many older ocean-going car transporters were scrapped but replacements were slow to appear, and cars are now piling up in ports waiting to be exported.

“Due to the lack of supply the price for chartering vessels has completely exploded, likely wiping out a larger part of the production savings made from manufacturing vehicles in lower-cost countries like China,” Schmidt Automotive’s Matt Schmidt said. He didn’t say when the transportation problem would be fixed.

Renault Twingogetty

At the same time, Europeans are also having problems with costs as the EV supply chain stutters, undermining the ability to build cheap cars to thwart Chinese imports.

Luca de Meo, CEO of Renault, and president of the European Automobile Manufacturers Association, said the EU needs to help its own automakers catch up with the Chinese.

“We need to collaborate with policy-makers to create the conditions for manufacturing a diverse range of zero-emissions models, including small, affordable electric vehicles that are profitable to produce in Europe,” de Meo said in a recent speech.

Government subsidies would go down well.

“This way we can tackle many challenges with the same silver bullet, especially when it comes to urban mobility. We also need to work on the demand side through adequate fit-for-purpose incentive schemes, at all policy levels, from the EU down to urban and local authorities,” de Meo said.

Another possible lifeline for European industry would be the imposition of higher tariffs on China’s imports. The EU Commission is currently investigating Chinese subsidies on its EVs. The probe started in October and is expected to last 13 months. The Commission could impose provisional duties on top of the current 10% tariff after 4 months and that could include, in February, higher import duties for up to 5 years.

Investment bank UBS believes that whatever happens with the EU, leading Chinese manufacturers will likely open European factories.

That makes sense to Schmidt Automotive, which said Volvo’s new EX30 will now also be made in Belgium. Initial plans called for it to be imported from China.

“Once these new vessels come online in one to two years the EU is expected to introduce higher import tariffs for cars being manufactured in China as part of the EU’s ongoing investigation. So once the shipping capacity and prices come down the price manufacturers will have to pay to drive each one of those shiny new models onto the dockside of a European port is likely to increase. The Chinese invasion may not be as straightforward as many commentators have predicted,” Schmidt said.