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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Can China’s Most Popular EV Conquer Europe?

A new US$4,400 China-made city car overtook the Tesla Model 3 as the best-selling electric vehicle (EV) in China this August, and has been the top-selling EV in the world’s largest automotive market since then.    Wuling, a Chinese joint venture of General Motors, SAIC Motor, and Liuzhou Wuling Motors, launched the Hong Guang MINI EV in July. The car has limited range capabilities and a top speed of just 60 mph, but it has been selling like hot cakes in China due to its affordability. The starting price of the Hong Guang MINI EV is just US$4,400 (28,800 Chinese yuan), around ten times lower than the starting price of a Tesla Model 3.  

The target customers of the Hong Guang MINI EV are young first-time buyers attracted by the very low price tag, as well as drivers looking for a mini car for city drives.  

The cheapest EV anywhere in the world, Hong Guang MINI EV has quickly gained popularity in China, toppling Tesla Model 3 from the top spot of the best-selling electric cars in the world’s largest car market. 

China’s EV manufacturers are expected to start expanding overseas this decade, while Beijing already controls a large part of the global EV supply chain, beginning with critical minerals processing.  

“Over the next five years we anticipate Chinese players across the EV supply chain to aggressively enter the overseas market,” UBS said in a note in October, as carried by CNBC. “We believe China materials costs are lower than the overseas market. If this advantage can sustain, China could realize a cost advantage over ex-China players,” according to UBS analysts.

The cheapest China-made EV, if it launches in Europe, could be much more affordable than other electric cars of Western automakers, especially in lower-income countries in Central and Eastern Europe, automotive expert Neil Winton writes in Forbes.

Yet, despite a possibly unrivaled price advantage, such a micro EV is unlikely to take Europe’s electric vehicle market by storm, as it did in China. 

Related: Shale Executives See Little Chance Of Significant Growth

First off, the base price of US$4,400 will likely be higher in Europe. Then, the Hong Guang MINI EV must pass the European Union (EU) car standards and regulations, including in safety, and it’s not certain that this vehicle, as-is, can. Next, a cheap, clean city-only car in Europe, especially in Eastern Europe, is unlikely to become popular. Drivers still prefer traditional cars, the bigger the better. The urban-mobility EV limits car use too much—no chance of driving the car to a weekend getaway, so it’s likely to be the second car in a household for city-only movement and errands. For the overwhelming majority of households in the EU’s poorest country, Bulgaria, for example, a second car is a luxury they cannot afford. 

In addition, the sheer volumes of the car markets in Eastern Europe cannot compete with the car sales in the more affluent Western European car markets, where EV sales have been growing in the past year, despite the slump in the overall car market during the pandemic.  

Nearly 80 percent of all-electric car sales are concentrated in just six Western European countries with some of the highest GDPs, according to a report from the European Automobile Manufacturers Association, ACEA, from last month. There is a clear split in the affordability of EVs between Central-Eastern Europe and Western Europe, as well as a pronounced North-South divide running across the continent, the EV market shares in Greece and Italy are as low as in Romania and Bulgaria, for example. 

EV sales in Europe increased by 57 percent in the first half of 2020, in an overall vehicle market that declined by 37 percent, according to EV-volumes.com. The biggest contributors to the EV sales growth were the affluent and large Western European car markets Germany, France, and the UK. In those markets, the top-selling EVs are VW, Renault, Nissan, Tesla, and Jaguar I-Pace, which are set to benefit from further green incentives the European governments are rolling out to ‘build back greener’ from COVID-19. 

It is unlikely that the cheapest Chinese EV will be able to compete with any of the above-mentioned brands in the biggest car markets in Western Europe. While in lower-income Eastern Europe, the market for Chinese EV manufacturers is just too small.  

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on December 07 2020 said:
    I have also maintained that Tesla is a huge bubble waiting to burst like the US housing market bubble that burst in 2008/9 plunging the global banking system in its worst crisis in history and bringing the global economy to its knees. It is the media that is pushing up the stocks of Tesla. The rise in the Tesla stocks is based on what it will achieve in the future and not what it has so far achieved. The basis is a projection by Tesla projection that it will sell 6 million EVs by 2030 or 25% of all EV sales in the world as compared with less than 100,000 now.

    Now I can add that China’s EVs will be behind the bursting of the Tesla Bubble. China’s EVs already dominate the Chinese market, the world’s biggest car market and they have already beaten Tesla Model 3 in this market. Soon China’s EVs will be on their way to dominating the global car market.

    The assumption that China’s cheap EVs may not pass the European Union (EU) car standards and regulations, including in safety, is a flawed assumption. Chinese technology and manufactured goods already dominate the US, the EU and other major markets. EVs will be no exception. Furthermore, China can offer cheap EVs as well luxurious ones at prices which can beat Tesla’s and other European manufacturers’ hands down.

    China hasn’t become the world’s largest economy based on purchasing power parity (PPP) with manufactured products that lack safety, reliability, performance and price advantage. Is it then any wonder why the best western names in laptops and and electronic systems are manufactured in China.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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