Can’t beat them? Join them. European automakers rev up stakes in Chinese EV makers
European automakers are snapping up stakes in Chinese electric vehicle makers in a bid to crack the market amid cut-throat competition on the continent.
Traditional car manufacturers are under threat from a slew of Chinese brands expanding into Europe and offering highly competitive prices for new electric makes.
Stellantis, which owns Vauxhall and Peugeot, announced last week it would invest €1.5bn (£1.31bn) in the Hangzhou-based startup Leapmotor, acquiring 20 per cent of the company and forming a joint venture to sell EVs outside of China.
In July, Volkswagen purchased five per cent of the Guangzhou-based Xiaopeng Motors, investing $700m and agreeing on a strategic partnership to develop new models.
Analysts said that similar investments from big European brands were likely, as China’s highly developed EV supply chain and cheaper batteries knock out traditional competition.
Mike Dean, European automotive analyst, told City PM: “This is a growing trend, with many EU brands falling behind Chinese domestic brands, many of who are start-ups, in terms of battery costs, connectivity, big screens, connectivity, infotainment, software and assisted driving.”
“This is amid a fiercely competitive and unsustainable Chinese auto market where BEVs are being priced below combustion engine (ICE) vehicles. In comparison – in the UK, the average BEV is 50 per cent more expensive than an average ICE.”
Dean added: “EU automakers need access to the technology and a low cost base while most Chinese new entrants are loss making and require a significant cash injection.”
Stellantis chief executive Carlos Tavares has been outspoken about his fears surrounding the influx of Chinese carmakers, warning in January the industry had a “terrible fight” on its hands.
Following the investment in Leapmotor last week, he said: “We don’t want to be the victims of the Chinese offensive on the world, we want to be leading the way and controlling it.”
Volkswagen, which led the market throughout the combustion engine era, trimmed its EV production in July amid declining demand. In its most recent outlook, the carmaker retained its targets but is in the midst of a strategy shift to slash costs.
Chief Financial Officer Arno Antlitz warned following the announcement that it may lose EV market share over the next couple of years, as it waits for its two Xpeng-produced models to come to market.
The moves from both Volkswagen and Stellantis mark a significant shift in the prevailing approach, which has so far been to compete with leading Chinese brands BYD and MG on price.
Last month, the European Commission launched an anti-subsidy investigation into Chinese battery electric imports, with its chief Ursula von der Leyen claiming that prices were “kept artificially low by huge state subsidies”.
Nishita Aggarwal, Automotive Analyst at EIU, said: “We do expect European automakers to boost their investments in Chinese electric vehicle (EV) companies for two reasons.”
That includes safeguarding their market position in the EV space, while counterbalancing lost market share as Chinese automaker’s EV sales in Europe soar.