As China’s auto offensive begins in Europe, Europeans are returning to China. After Stellantis, the Czech Skoda Auto (German Volkswagen group) is considering withdrawing from China. The final decision will be made next year, said managing director Klaus Zellmer weekly car week. “The competition is very intense there, so we will discuss with our partner how to proceed,” she said. Skoda could just be selling cars in the former Middle Kingdom, instead of manufacturing them there. It’s true that its local production was tripled last year to 54,400 units last year alone. The company from Mlada Boleslav would like to focus more on India, emphasizes Klaus Zellmer.
The largest manufacturer in China, the Volkswagen group delivered 3.3 million vehicles (-14%) to China last year, including 2.1 million cars (-17%) of the same Volkswagen brand (models produced locally) . Sales of these Volkswagens are in full decline. They are back to 2012 figures, far from the more than 3 million from 2016 to 2019. October 2022 was also its weakest month for a long time. Volkswagen held a total of 13% of the market last year, ahead of General Motors (12%) and Toyota (8%). The first Chinese was Geely with 7%.
Chinese brands on the rise
However, the electrification imposed by the central power of Beijing for ecological reasons but above all for energy independence – China is full of coal which supplies more than half of its plants – favors Chinese brands, who has increased by 25% last year on the market, while foreign manufacturers decreased by 6%. Openly favored by the Communist Party, in strong technical and qualitative progress, Chinese brands already claimed 45% of the total Chinese market in the first half of 2022, according to the CPCA Association of Passenger Car Manufacturers. And they took nearly half of that in ten months, according to Marklines Data Center. In the month of October alone, Chinese companies were as much as 54%! A tsunami. By models, five of the top ten sales are now generated by local vehicles, also according to Marklines Data Center.
The Japanese brands together fell in the space of ten months with a penetration of 19.3% (21% last year), the Germans, in sharp decline, also at 19.3%, the Americans at 9.4 %. The French (Peugeot and Citroën, Stellantis group), in full decline, represent only 0.8% of the market. Carlos Tavares, general manager of Stellantis, is in the process of negotiating the cessation of its production in China, after ending that of Jeep last July. “Western manufacturers that will have a strong industrial footprint in China will suffer, and I wouldn’t want to be in the place of Volkswagen or General Motors,” the leader said last October at the Paris Motor Show. He warned of a “clear politicization of the business climate in China for four or five years.” He saw in it “the application of a 2010 Chinese Communist Party document. We are heading towards growing tensions between the Western world and China. At some point there will be cross-sanctions that will put Western companies in very difficult situations. Difficult .”.
Canon prices thanks to low costs
In this period, Chinese producers are preparing to land their products on the European market, with high prices allowed in particular by much lower production costs than in Western Europe, the absence of trade union ties, much longer working hours and… the huge economies of scale achieved in their huge domestic market. In fact, purely electric vehicles accounted for 4.2 million units sold in the first ten months of 2022 in China (+93%), all brands combined, or 20% of the market.
MG, which sold more than 50,000 cars in Europe last year, announced in mid-September that it would “at least double its sales every year” in the Old Continent. The most popular Chinese car brand in Europe is aiming for 100,000 vehicles in 2022 and then 200,000 in 2023. The new MG4 compact sedan costs 22,990 euros in France, it is true (in the basic version and the bonus paid by the French state deducted). Or 10,000 less than the cheapest Renault Mégane E-Tech. A plant in the Eurozone is being studied.
China dominates the electric car
These producers have “ignored the development of internal combustion vehicles, because they realized that they would not catch up with the technological delay compared to Japanese, American or European producers,” explains Jamel Taganza, vice president of Inovev, a company specializing in the automotive sector. Therefore, since the 2010s they have focused on designing zero-emission vehicles. The decision taken last June by the states of the European Union to move towards a ban on the sale of new non-electric vehicles in 2035 gives them wings.
Cars, however, are just the tip of the iceberg. China, in fact, “check 75% of the global battery production chain, 50% of the total value of an electric model”, warns Luc Chatel, president of the French automotive platform. Batteries are fundamental: they represent 35 to 40% of the added value of a so-called zero-emissions car. However, ” two-thirds there will still be large battery factories in China in 2030,” predicts Philippe Varin, former CEO of PSA and author of a public report on the security of supplies. The Chinese investment bank CICC even estimates that the production of its compatriot CATL, the world’s leading battery producer, will triple between 2021 and 2025, thus securing 30% of world production.
Uyghur forced labor
China also produces “80% of the magnets used in electric motors and 90% of all electric motors themselves,” points out Guillaume Pitron, author of The War of Rare Metals. The hidden face of the energy and digital transition. Beijing is also jockeying for the same metals needed for batteries and electric motors. The former Middle Kingdom controls 60% and refines 80% according to expert consensus. And what China doesn’t produce, it closely controls… Chinese companies in fact control about 30% of world lithium production.
Even a European electric car made in Europe depends largely on China. This also raises the issue of Uyghur forced labour. It is “significantly” involved in the supply chain of global automakers such as Volkswagen, Mercedes-Benz, BMW, Tesla, Ford and GM, Toyota and Honda, Stellar on its brands Fiat, Chrysler, Dodge and Jeep, underline the four authors of a study published last week and coming from from the British University of Sheffield Hallam.
