According to the article written by Tony Chen, Head of Investment Research at UBS Asset Management, the European Commission initiated an investigation in October into Chinese electric car manufacturers suspected of receiving national subsidies. The EU believes that Chinese state subsidies will create an “unfair trade competition environment” for EU electric car manufacturers.

If the EU’s investigation uncovers “subsidy evidence,” it will result in the calculation of corresponding “average anti-subsidy taxes,” which will apply to all electric vehicles imported from China, including prominent models produced in China such as Volkswagen, Tesla, BMW, and others.

The UBS research team suggests that, in the worst-case scenario, the EU may impose additional tariffs on Chinese electric cars imported into the EU.

What led to the trade conflict between China and the EU in electric vehicles? Firstly, the disparity in tariffs plays a crucial role.

Currently, Chinese cars entering the European market face a 10% import tariff, while in China, the situation is reversed, with a 15% tariff imposed on cars imported from Europe. This significant gap indicates potential room for negotiation.

Additionally, a report from the European Commission reveals that China’s market share for electric vehicles in Europe has risen to 8%, with expectations to reach 15% by 2025.

However, this figure includes cars manufactured in China for international brands, not exclusively domestically produced Chinese electric vehicles. According to JATO, an automotive industry research organization, the market share of “pure” Chinese brand electric vehicles in Europe was still below 1% as of the first half of this year. Nevertheless, overall, it underscores the strong presence of Chinese-manufactured electric vehicles in Europe.

From a practical standpoint, initiating a trade war in the electric vehicle sector involves consideration of various complex background factors. China is not only a primary supplier of raw materials to Europe but also a crucial market for European brands. In fact, China is already the world’s largest sales market for electric vehicles.

Chinese Electric Cars Enjoy High Margins, Positioned for Price Wars

The research team at UBS believes that, given the potential to boost sales through lower pricing, the competitive pricing of electric vehicles between Chinese and European brands will be crucial. Taking Tesla as an example, the company has adopted an aggressive pricing strategy for its EVs. In April, Tesla lowered the selling prices in the European region, with the retail price for the popular Model Y around €46,000. According to JATO, the Model Y is currently the best-selling EV in the European Union this year, showcasing the positive impact of a competitive pricing strategy on sales.

Following this argument, another set of data from JATO reveals that the selling prices of Chinese brand EVs in Europe range from €50,000 to €60,000, approximately in line with the European average.

In comparison, the average selling price of Chinese EVs domestically in China is only around €30,000. This indicates that Chinese EV manufacturers exporting to the European market enjoy relatively higher margins, providing them with the capability to engage in price wars. One major reason for the cost advantage of Chinese electric cars lies in battery manufacturing.

According to a previous report by TrendForce, Chinese battery manufacturers command a global market share exceeding 60%, allowing them to cover the entire battery production chain, share production costs, and continually advance new technologies. Since batteries represent approximately 40% of the total vehicle cost, Chinese electric cars offer superior cost-effectiveness.

On the other hand, the space for European car manufacturers to gain a competitive advantage through subsidies has gradually diminished. As the EV market expands, government subsidies in Europe are losing momentum. Germany has already reduced EV subsidies from €5,000 per vehicle to €3,000 this year.

Similarly, subsidies in the Netherlands, of a similar scale, are subject to quota limitations and were even exhausted by mid-2022. This implies that entering a price war could place European EVs at a relative disadvantage.

Overall, the EV market exhibits high price sensitivity, and European automakers face challenges in terms of cost competitiveness. In contrast, Chinese EV manufacturers have a cost advantage. Consequently, there is a growing possibility of a trade conflict in the European electric vehicle market.

(Photo credit: Pixabay)

According to IJIWEI News, two Indian government officials have revealed that India is considering Tesla’s request to reduce import duties on electric vehicles as an enticement for the company to establish a factory in the country.

Tesla has reportedly indicated that establishing a facility in India hinges on government concessions regarding import duties. Officials mentioned that Tesla insists on “at least a duty relaxation for a certain transition period” and added that “there would be sunset clauses.”

Currently, India imposes a 70% tax on imported cars under $40,000 USD to support the local automobile industry, while those above $40,000 USD face a 100% duty. India is contemplating reducing tariffs on all electric vehicles to 15%, regardless of their selling price, although there’s no unified consensus within the government.

As reported, the proposing officials hope that the aforementioned legislation will not only benefit India but also other qualifying manufacturers, instead of favoring a specific company alone.

Previously, there were reports suggesting Tesla’s intention to establish a factory in India for manufacturing low-cost electric vehicles, catering to the domestic market and planning for exports. However, Tesla’s 2022 plans for reduced import duties on electric vehicles were canceled as the Indian government insisted that the vehicles must be manufactured in India.

Over the past year, senior Tesla executives have met with Indian government officials at least three times. When Indian Prime Minister Narendra Modi visited the United States for an official visit in June this year, he met with Tesla CEO Elon Musk in New York to discuss the potential establishment of a plant in India.

(Photo credit: Pixabay)

According to IJIWEI’s news, during the Huawei Smart Mobility Conference held on November 9, Huawei, in collaboration with Chery, unveiled its first smart electric sedan, the Luxeed S7. Priced at a starting pre-sale cost of 258,000 RMB. Huawei had previewed the release of Luxeed S7 during a product launch event held on September 25th. “It will be superior to Tesla’s Model S in various aspects,” said Richard Yu, the CEO of Huawei.

The vehicle is produced on a new platform using Huawei’s smart automotive solution. It features the Huawei’s turing intelligent chassis, HarmonyOS 4 smart cockpit, and the advanced Huawei ADS 2.0 intelligent driving assistance system.

The Huawei ADS 2.0 advanced intelligent driving system is highlighted for its cutting-edge perception capabilities, obstacle recognition and processing abilities, and advanced features in intelligent driving and smart parking. The ADS 2.0 achieves a leading experience with nationwide map-agnostic driving, intelligent parking assistance, and continuous improvement over time, making it a top-tier intelligent driving system.

In terms of appearance, the Luxeed S7 incorporates an entirely new OneBox design to maximize the interior space, achieving a cabin space utilization rate of 88%. Richard Yu mentioned that after numerous internal discussions about pricing, it was found that all four versions of this car would incur losses. The hope lies in later substantial shipments of the car to offset these losses.

According to the introduction, the Luxeed S7 offers an impressive 800 kilometers of range, and a quick 15-minute charge can cover 400 kilometers. Richard Yu stated that in terms of energy consumption, the Luxeed S7 once again leads the industry with an energy consumption of 12.4 kWh per 100 kilometers.

Yu further mentioned that Huawei supports its partners in achieving commercial success through three cooperation modes: component supply mode, solution mode, and Huawei Smart Car mode. Currently, Huawei’s Smart Car model has four partner companies, including Seres, Chery, JAC Motors, and BAIC Group.

Currently, the Aito Series, including the M5, has seen cumulative deliveries surpass 120,000 vehicles, with the newly introduced M7 series achieving a cumulative sales total of 86,000 units. Even before its official release, the upcoming Aito Series M9 has received more than 25,000 pre-orders.

According to the introduction, Huawei’s Smart Travel Solution represents a strategic advancement in the Huawei Smart Choice Car model. It aims to leverage Huawei’s over 30 years of intelligent incremental component products in the ICT domain, technological solutions, and Huawei’s quality control, sales service, and brand marketing experiences accumulated over more than ten years in consumer businesses, deeply empowering partners to pioneer a new era of smart vehicles.

(Photo credit: Flickr)

Ford announced the withdrawal of its full-year financial forecast due to the impact of the recent labor strike and ongoing challenges in the EV sector. Most consumers are reluctant to pay higher prices for electric cars compared to traditional or hybrid vehicles. Ford also postponed its planned $12 billion investment in expanding electric vehicle production capacity but remains committed to its goal of advancing its electric vehicle business.

TrendForce’s Insights:

1. Slower Market Demand Spurs Automakers to Rethink EV Strategies

The United Auto Workers (UAW) union initiated a six-week strike in Detroit starting on September 15, 2023, motivated by demands for improved compensation and benefits. The strike came to an end when consensus was reached with Ford, Stellantis, and GM (General Motors), resulting in the signing of a new contract.

According to predictions from Deutsche Bank, this new agreement will add an estimated $6.2 to $7.2 billion in costs for each of the three major automakers. This cost increase is nearly equivalent to the expense of building an electric vehicle platform. Compounded by the impact of slowing demand for global new energy vehicles (BEV and PHEV), with growth rates decreasing from 54% in 2022 to 30% in 2023, Ford announced the suspension of its $12 billion electric vehicle investment plan. This plan includes its partnership with SK On for a battery factory and a partly reduction in production capacity for the Mustang Mach-E.

2. Automakers Must Adopt More Practical EV Development Strategies to Address Price and Range Concerns

The slowdown in electric vehicle market demand stems from the issues of high vehicle prices and range anxiety, which affect consumer willingness to make a purchase. Addressing these two problems requires increasing battery energy density to achieve comparable driving range to conventional vehicles and constructing an adequate charging infrastructure. However, achieving these goals will take time and effort.

With range anxiety still unresolved and the goal of banning fossil fuel vehicles unchanged, automakers positioned between policy and the market face transition risks. At this juncture, choosing to independently develop electric vehicle platforms might add financial burden and risk, with the associated costs reflected in vehicle prices, potentially eroding competitiveness. A more practical approach would involve considering alternative development strategies, such as exploring platform outsourcing to reduce manufacturing costs.

Automakers or Tier 1 suppliers with proprietary electric vehicle platforms have the option to lease their platform production capacity to companies that are currently unable or unwilling to independently develop their own platforms. This strategy can increase production efficiency for lessees, allowing them to commission the production of all or some of their electric vehicle models from the lessor, ultimately reducing manufacturing costs and accelerating the release of new vehicle models.

By doing so, companies can maintain their market share in the electric vehicle race while waiting for the right opportunity to reevaluate the potential for developing their own electric vehicle platforms. In summary, as the demand for electric vehicles slows down, automakers will face tighter financial constraints, making it crucial for them to explore how to collaboratively leverage existing resources to create electric vehicles that align with market demands.

Read more

• [News] Ford Shifts EV Investment Focus Amidst Fierce Price Competition

(Photo credit: Ford’s Facebook)

According to Yahoo’s report, recent developments in China’s automotive industry, particularly the electric vehicle sector, have been a mixed bag. While some companies have reported impressive export performance and surging delivery volumes, the overall market has faced challenges due to weak consumer demand and intense price wars.

Even NIO, which had previously pledged to enhance efficiency without layoffs, recently announced a workforce reduction of approximately 10%, affecting around 3,000 employees. This unexpected move has sent shockwaves through the industry and suggests that a layoff storm may be approaching the Chinese automotive sector.

Amidst numerous recent developments in the Chinese auto market, the most widely discussed topic is the announcement by NIO’s Chairman, William Li, regarding a workforce reduction of approximately 10%, with specific adjustments to be completed by November.

NIO, known as a market favorite and listed in both the U.S. and Hong Kong, has been considered one of the leading players in China’s new force of automotive companies. However, it now finds itself in the challenging position of staff downsizing, signaling a potentially tough year-end for China’s automotive industry.

While NIO, XPeng, and Li Auto, often hailed as representatives of the new forces in China’s automobile industry, had been at the forefront, NIO’s performance in 2023 seems to be lagging behind its peers.

In contrast to Li Auto, which has seen ten consecutive months of rising sales figures this year, and XPeng, which achieved a 292% year-on-year increase in October and set its record for single-month deliveries, NIO’s performance has been more volatile. Since reaching a peak delivery volume of 20,462 vehicles in July, NIO has struggled to maintain a consistent delivery rate of 20,000 vehicles per month.

Additionally, NIO’s losses have continued to grow quarter by quarter, with the company posting over ¥20 billion in net losses over the past year. In the same period, Li Auto recorded nearly ¥2 billion in profits, while XPeng faced losses of nearly ¥10 billion. Consequently, NIO holds the distinction of being the leader in losses among the new energy vehicle manufacturers. NIO’s layoffs serve as a cautionary signal, highlighting the pressing need to cut costs and enhance efficiency.

Amid China’s economic slowdown and intensified market competition, NIO’s challenges represent just a microcosm of the broader Chinese automotive industry. It’s not just NIO; in 2023, several automotive companies have already begun layoffs or faced closures. Examples include Levdeo, which filed for bankruptcy; WM Motor, which already closed its doors; and Enovate, which announced a suspension of operations.

Furthermore, the chill in the market is also affecting automotive supply chain companies. An industry insider candidly revealed that except for BYD and Li Auto, most car manufacturers are in the process of downsizing, indicating that the Chinese automotive industry is currently experiencing a major shake-up and a fierce battle for survival.

(Photo credit: Pixabay)