2022 is the year of China's automobile export boom. From January to November 2022, Chinese automobile enterprises exported 2.785 million vehicles, a year-on-year increase of 55%. Among them, the export volume of new energy vehicles is 593,000 units, an increase of 100%.
Based on this trend, China's total automobile exports in the whole year are expected to exceed 3 million units. Europe is also a major destination for China's new energy vehicle exports. Global automobile companies such as BMW, Renault, and Tesla have made China their manufacturing base for new energy vehicles. Can China gain competitiveness globally through the tempering of the European market?
Looking at the data, European automobiles are also accelerating towards electrification. The sales volume of pure electric vehicles in Europe from January to September was 1.003 million units, while that of plug-in hybrid electric vehicles was 688,000 units. Currently, Chinese enterprises that have gone global include SAIC Group (MG), BYD, and in fact, Tesla and BMW also use China's manufacturing capabilities to provide cost-effective pure electric vehicle products to overseas markets.
SAIC's MG has already sold more than 100,000 units in Europe in the first 11 months of this year, a year-on-year increase of 106%. Among them, sales on the European continent exceeded 50,000 units, a year-on-year increase of 160%; sales in the UK near 50,000 units, a year-on-year increase of 64%. Europe has become the first "100,000-level" overseas market for the MG brand, with products spread across 38 countries such as the UK, France, and Germany.
How long can China's excellent performance in exporting new energy vehicles last? The next step is how to consolidate China's automobile advantages and expand the market influence of independent brands, which has become a hot topic of public opinion.
For example, models like the MG Mulan pure electric vehicle are not bestsellers in the Chinese market. In the process of entering the global market, relying on China as the world's largest new energy vehicle production market, it can seize the opportunity and have cost advantages. The MG brand encountered a vacuum period in the global new energy vehicle market, that is, the current situation where European, Japanese, and Korean cars have relatively few new energy vehicle models in the market.
## What should Chinese automobiles do to enter Europe?
We have seen China's automobile industry systematically entering advanced automobile markets, starting to learn market rules, understand European market demands, and truly achieve global design and development.
The access standards to the European and American markets in the automotive industry are different from those in China, and require targeted development to meet the requirements. The European Union’s requirements for the import of electric vehicles include design, environmental impact, functionality, power, and overall safety. Therefore, pure electric vehicles produced in China for export to Europe must meet the technical standards specified by the European Union, including whole vehicle type approval, component and system safety.
The first requirement is whole vehicle type approval.
The European Union is one of the most stringent markets in the world for import and export regulations, and has strict access standards and regulatory systems for product consistency assurance, quality control systems, and automobile scrapping and recycling. The EWVTA (European Whole Vehicle Type Approval) certification involves multiple testing items such as vehicle safety, performance, environmental protection, and range, and is the most prestigious certification system worldwide. Type approval refers to the verification of a batch of equipment with the same design and manufacturing by testing samples, and this certification is valid for the entire batch of equipment.
In the automotive industry, the EU certification, together with US certification and Japanese certification, constitutes the world’s three major certification systems for automobiles. The EU Commission mandates its member countries to use whole vehicle, safety components, and system certification. Only automotive products that have passed certification can be sold in the EU market. In this regard, the EU is constantly adjusting and improving the standards.
The second requirement is for batteries.
On the one hand, Europe’s safety requirements for batteries revolve around the United Nations Economic Commission for Europe (UNECE) Regulation No. 100, which details unified regulations for special requirements for electric systems of battery-powered road vehicles. Starting from January 1st, 2022, the EU will implement a new Battery Law, abolishing the existing EU Battery Directive (2006/66/EC). The implementation method changes from “directive” to “regulation,” to ensure that the batteries put into the EU market are sustainable, high-performance, and safe throughout their entire life cycle.
Mandatory requirements are imposed on the sustainability, harmful substances, carbon footprint, recycled raw materials, and electrochemical performance of batteries. Especially for power batteries over 2kWh, high requirements are imposed.
The new Battery Law also proposes management requirements for battery waste, including recovery efficiency and recovery targets. Information exchange systems and passports must be established for batteries. In the new energy field, the EU mainly sets access thresholds for batteries.
China’s new energy vehicles need comprehensive support to go global.
Future Development of China’s Automotive Industry
China is also well prepared for this. On November 28th this year, the China Automotive Standardization Research Institute was established in Tianjin, which is a research institute specializing in automotive standardization research and application. The institute will be responsible for technical management of national and industry standards in the automotive field, representing China in coordinating and formulating regulatory standards for United Nations and other international automotive standards. Focusing on standardization research of more than 10 advanced automotive technologies and promoting the development of over 80 new standardization projects.
Regarding standardization research, it is hoped that in the process of exporting China’s automotive industry in the future, we can take the lead by aligning our national standards with international automotive standards developed by developed countries in the automotive industry and countries along the Belt and Road. By strengthening forward-looking technology and standardization basic research, focusing on key areas such as autonomous driving, network security, electric vehicle safety, and fuel cells in the automotive industry, accelerating the development of new standards, and actively promoting the coordination of international automotive standards and regulations.
In the past development, we have seen the automotive industry is a typical globalized industry, with each car manufacturer having its own standard system, while also forming national standards by setting technical standards. Taking Germany as an example, the federal government has unified standards for cars that go on the road every year. Only by reaching the national administrative standards can companies and products qualify to enter the German auto parts market.
The VDA6.1 standard, familiar to the industry, is the first part of the automotive quality standard formulated by the German Association of the Automotive Industry (VDA) in 1991, which was developed by the German Automotive Manufacturers Association and its main producers and suppliers. Enterprises and products that meet this standard are qualified to enter the German auto parts market. Through Germany’s influence on European automobiles, new content and systems have been continuously added.
At present, global electric vehicle and intelligent vehicle standards have added many new things beyond the original quality system, such as functional safety and information security, which is also a huge challenge for China’s automotive industry to move towards globalization.
How will China’s automotive industry develop in the future?
Chinese car companies now see the European market as a springboard for finding breakthroughs in automotive standardization and Chinese car companies. In 2022, with the largest export volume, most car companies have a relatively simple way of exporting and are in the initial stage of exporting mainly automotive products directly.
Among Chinese brand car companies, there are also investments overseas, but the investment scale is small and the localization level is not high. For example, companies such as Geely, Great Wall Motors, BAIC and SAIC-GM-Wuling have invested in overseas factories, mainly for CKD (complete knock-down) and SKD (semi-knock-down) assembly production, providing technology and process equipment, charging certain technology usage fees, and exporting components. However, the factory’s operating management and product sales have low participation level. Such investment strategies are still mainly small-scale and long-term sustainable development faces management and operational risks.In addition, there are issues with overseas sales and service system construction, plus a lack of support such as consumer credit and financing. Due to the high risk of overseas investment, it results in unreasonable sales and after-sales service network layout. Most companies adopt the cooperation mode of entrusting agents, which causes problems such as long cycle of parts supply, relatively backward after-sales service, and weak publicity. This in turn leads to low brand influence.
The long-term goal of the global development of the Chinese automobile industry is direct investment and overseas production. With the establishment of an overseas production system, management mode, supply chain, corporate culture and brand all need to be exported to achieve system construction.
Currently, the most critical issue is that our new energy vehicles still revolve around Chinese market demand, such as in accordance with subsidy policies. As the market shifts towards pure marketization driven by policies, Chinese automakers must begin to learn to collect demands from different markets, i.e., China, Southeast Asia, Middle East, Australia, Europe, and then merge and manage those demands. Afterward, they can build a new energy vehicle platform and vehicle types facing the global market. This is the inevitable path for Chinese automobile design and engineering capabilities to stand on the world stage.
I think the global breakthrough of China’s automobile industry is a long-term and systematic work, and is an excellent opportunity for China’s manufacturing to change its original reputation to the global front. I believe that Chinese automakers can seize this rare opportunity.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.