Chinese car companies are coming for Europe. VW and Mercedes should be nervous

Chinese automaker XPeng will start selling its P7 sedan in the German auto market this year.
XPeng

Chinese automakers have their sights set on world domination. With their recent push into Europe, experts say companies like Volkswagen, Mercedes-Benz, and BMW should be nervous.

The Chinese auto industry has been booming in recent years. Chinese EV companies are expected to outsell foreign brands there, including Ford, GM, and others, for the first time this year. As other global automakers’ market share falls in China, homegrown players are expected to continue an upward trajectory for the foreseeable future.

That’s despite recent signs of an easing EV market in China. Even with some lessening demand, Chinese manufacturers are pushing full speed ahead in their global expansion, with Europe top of mind.

This is worrying executives at some major legacy auto companies, according to several reports out of the Munich auto show. Chinese firms took the spotlight at the show, which historically put German manufacturers at center stage.

Instead, this year, show goers and industry leaders saw major news from several of China’s biggest auto players. BYD is bringing a midsize sedan and midsize SUV to Europe later this year. XPeng already operates in four European markets, and just announced plans to start selling in Germany in the coming months. Leapmotor, too, is planning a European expansion in 2024.

Germany is “losing our competitiveness,” Hildegard Mueller, president of the German Association of the Automotive Industry, said in a Reuters report out of the auto show.

Chinese automakers have a lot working in their favor

Any lag in EV development that European automakers have gotten away with is now catching up to them. Consulting firm KPMG estimates Chinese companies could account for 15% of market share in Europe within just two years.

Some experts say that’s because China’s electric vehicle players are far more technologically savvy than many other industry leaders, and they have their fingers on the pulse of consumer demand.

As the global auto industry electrifies, China also already has longstanding advantage with its EV battery supply chain and production, as it controls a large portion of crucial battery development.

Chinese EV companies also have an edge against rivals in producing EVs at bigger scale and lower costs, a crucial measure of any electric car companies’ future success.

With China’s automakers undercutting each other and rivals on pricing, “The base car market segment will either vanish or will not be done by European manufacturers,” said Oliver Zipse, BMW CEO, per Reuters.

Chinese auto companies are also coming for the U.S.

Though the European auto market may have fewer barriers to entry than the U.S., eventually, these companies are likely to stake their claim in the American car-buying market, too.

“In our view, China will shift from being an importer to exporter of cars,” Morgan Stanley analysts said in an August note. Companies there recently overtook Japanese automakers in vehicle exports globally.