The go-global strategy of Chinese electric vehicle (EV) makers has hit speed bumps after Beijing warned them not to invest in certain markets and a battery maker’s failed US$4 billion plan for production in Germany provided a bitter lesson.
Companies are realising that cost advantages and a grasp of core technologies are not enough to guarantee the success of multibillion-dollar investments in countries where consumers are not yet familiar with Chinese EV brands.
Insufficient knowledge of the legal landscape and a lack of charging infrastructure in overseas markets could also be stumbling blocks to growth outside mainland China, industry officials and analysts said.
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“Chinese carmakers got off an early start to develop EVs, and they are in a leading position now,” Sam Wu, CEO of Ford Motor China, said at the Hongqiao Forum in Shanghai last week. “But they are still in search of a path to the global market so that consumers around the world can access their best products at the lowest prices.”
Punitive tariffs slapped on Chinese EVs by the US and European Union have made it difficult for companies to crank up sales in major car markets. So building local plants to bypass the trade barriers has been a primary tactic for Chinese companies including BYD, the world’s largest EV builder, and state-owned Chery Automobile.
Chery and Dongfeng Motor have been reportedly in talks with the Italian government on plant construction in the European country.
A sign for MG, a brand of Chinese state-owned carmaker SAIC, is displayed at a showroom in Santander, Spain, on June 13, 2024. Photo: Reuters alt=A sign for MG, a brand of Chinese state-owned carmaker SAIC, is displayed at a showroom in Santander, Spain, on June 13, 2024. Photo: Reuters>
But last month China’s Ministry of Commerce required mainland carmakers to refrain from making major investments in EU countries that backed additional tariffs of up to 35 per cent on Chinese-made EVs, according to Reuters.
“Besides geopolitical risks, business risks are huge for Chinese companies too if they rush to build factories and supply chains in the EU,” said David Zhang, general secretary of the International Intelligent Vehicle Engineering Association. “Marketing and branding is important too. You need the local consumers to understand your brand and products before you can sell the vehicles to them.”
