Advance or retreat in the stalemate of Europe's electric transformation? This is a multiple-choice question facing Chinese car companies on the verge of "going global."

On September 19, the European Automobile Manufacturers Association released data showing that new car sales in the European Union in August decreased by 18.3% year-on-year, reaching the lowest level in three years. Among them, the sales volume of pure electric vehicles decreased by 43.9%, and the market is facing a collapse.

Subsidies are being phased out, demand is weakening, and the market continues to cool down, with the European electric vehicle market continuously losing consumers. In addition, the European Union has wielded the "tariff big stick" against electric vehicles produced in China, and a towering tariff barrier has cast another shadow over the path of Europe's electric transformation.

In the game, Chinese car companies still look eagerly towards Europe, with frequent news of overseas factory construction recently, becoming a common choice for mainstream car companies, and a huge amount of money is invested in brand construction in Europe, seeking growth in the market to be explored.

"Going against the wind" to find a way to Europe is behind the expansion ambitions of Chinese car companies that cannot be hidden.

The European market that cannot be given up

In 2023, it surpassed Japan to become the world's largest exporter, and the expansion of Chinese cars in the Middle East, Southeast Asia and other regions has a clear path and has gradually outlined a more mature blueprint.

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Compared with the global markets where Chinese car companies are keen on "going global" and starting localized production, the brand recognition of Chinese car companies in the European market is not high, and it still needs to face multiple pressures from local old car companies and global car giants if it wants to stand firm.Entering the European market comes with high barriers, strict policies, and both labor and operational costs are relatively high. It is not easy to complete localized production locally, and such "heavy asset" operations are also quite challenging for most domestic car manufacturers who are currently in a tight financial situation. A towering tariff barrier set by the European Union also adds a degree of uncertainty to the expansion of Chinese car manufacturers in Europe.

Despite an unfavorable start, why are Chinese car manufacturers still "going against the wind" towards Europe?

"The European market, especially the developed Western European market, has special significance for the globalization of Chinese cars, because true globalization must go through the baptism of mature markets," the Blue Book on the Globalization of Chinese Cars, jointly released by Magna and the Automobile Industry Branch of the China Council for the Promotion of International Trade, points out. Considering the political and economic environment, market size and maturity, as well as the industrial advantages of China's new energy vehicles, the importance of the European market for the globalization of Chinese cars is highlighted.

The overall European market is relatively large. According to data from the General Administration of Customs of China, in 2023, China exported 1.55 million electric vehicles, with 40% sold in Europe; electric vehicles made in China accounted for 19.5% of the European market in 2023. According to predictions by the European Federation for Transport and Environment, this figure will rise to 25% this year.

Although data released by the European Automobile Manufacturers Association shows that new car sales in the EU in August decreased by 18.3% year-on-year, reaching the lowest level in three years, with pure electric car sales dropping by 43.9%, marking the fourth consecutive month of decline, the European electric car market is facing a collapse.

However, it cannot be denied that under the goal of emission reduction, the transformation of electric vehicles is still an irreversible direction for the global automotive industry. When local car manufacturers fail to seize the opportunity to capture the market, it provides an opportunity for Chinese car manufacturers who are in a leading position in the new energy field to "pick up the pieces."

Accelerating global expansion, the European market has always been a "cake" that Chinese car manufacturers cannot give up.

At present, the main markets for domestic car manufacturers to go abroad, such as Southeast Asia, are still dominated by "low-priced cars." To transform from a major car exporter to a strong car country, it is necessary to build the brand recognition of Chinese cars in the high-end European market.

Yin Tongyue, Secretary of the Party Committee and Chairman of Chery Holding Group, said in an interview with 21st Century Economic Report that although China is a manufacturing powerhouse, it is a brand small country, and there are indeed issues with weak brand awareness and insufficient brand upward ability. When car brands enter overseas markets, they need to polish the "Made in China" golden signboard.

To complete the global leap of independent brands, it is not enough to rely solely on the volume of "low-priced cars"; it is necessary to truly enter competitive markets such as Europe and America, to meet the challenges of global giant car manufacturers. The European market has many old car brands, which are in a relatively leading position in terms of technology, quality, service, profitability, and brand recognition.Can it win the recognition of European consumers, truly achieve both quantity and quality in the global market, and be recognized by the international market? The European market is a link that self-owned brands need to cross.

The Blue Book judges that the window period for Chinese cars to layout in Europe is shortening. If Chinese cars want to seize the opportunity by leveraging the advantages of the development of the new energy industry, they must accelerate the layout and quickly put products into the European market, striving to become one of the first new energy car brands in the European market.

Tariff barriers catalyze local production

Entering Europe, "Made in Europe" has become a key word, and under the catalytic effect of European tariff barriers, accelerating the establishment of local factories to complete local production has become the choice of many car companies.

Chery took the lead. In April this year, Chery, known as the "export king," announced a joint venture with the Spanish car company Ebro-EV Motors to produce a new type of electric car, with a total investment of about 400 million euros. The production base is located in the former Nissan factory in Barcelona, becoming the first Chinese car company to produce cars in Europe.

Jochen Tueting, Managing Director of Chery Europe, once said that Chery expects its sales volume in the European region to be sufficient to support the establishment of its own assembly plant locally, and is exploring different possibilities in various parts of Europe, looking for potential opportunities to establish manufacturing plants locally in the future.

After taking the lead in Spain, Chery acquired its first production base in Europe, and recently there are rumors that it will go to the UK to build a factory, and the decision is just a matter of time; on the other hand, Chery is also negotiating with Italy. Chery will comprehensively consider multiple factors such as market, talent, and supply chain, and make the final decision.

In response to this, the company said that it is still in the research stage. Although the final decision has not yet been made, it is certain that with the second factory on the agenda, Chery's strategy and pace of expanding into the European market continue to accelerate.

In the long run, building factories in Europe has become a consensus among domestic mainstream car companies, and the pace of Chinese car companies entering Europe in large numbers to pursue local production is unstoppable.On September 12th, during the Frankfurt Auto Show, Li Chuanhai, Vice President of Geely Auto Group, revealed that the company is scouting for factory locations in Europe but has not yet fully committed to establishing a production base there. In August of this year, it was reported that the Italian government was in the final stages of talks with Dongfeng Motor Group regarding the establishment of a factory in Italy. A person in charge of Dongfeng Motor Group stated that Dongfeng is beginning to engage with the Italian government on investment and factory setup. BYD has started to build an assembly plant in Szeged, Hungary, which will be BYD's first assembly plant in Europe.

The establishment of factories has successively entered the negotiation phase and has been accelerating continuously this year, with frequent news of negotiations and progress. Localization of production has become the main strategy for Chinese car companies to expand in Europe. In the counter-offensive against the European market, amidst the tariff puzzle, it is also a bet that Chinese car companies are making for themselves under the ambition of expansion.

The game is still ongoing. Some industry insiders have indicated that accelerating the establishment of localized production networks in the European market by independent brands is beneficial for better understanding the target market, reducing transportation costs, and bypassing tariff barriers, among other issues. At the same time, developing local suppliers can improve response speed and flexibility, making local production and operations more stable and strengthening the ability to respond to risks overseas. Under the pressure of high tariffs, for traditional mainstream car companies with relatively abundant funds such as BYD, Chery, and Geely, being the first to build factories in Europe to support brand development will win more chips for themselves in fierce competition.

However, it should be noted that the high tariff barrier of the European Union at present has also added some uncertainty to the expansion of Chinese car companies in Europe. The collective move of Chinese car companies towards Europe and the large-scale investment in Europe is not a one-time solution and still has to face the risk of changes in the situation at any time.

Barriers and games will continue, and the road to Europe is still unclear. In the limited time of transformation, seizing the market through localized layout, mixed with the greater ambition of Chinese car companies to expand in Europe.

"Leveraging" tactics to establish brand awareness

Facing the challenge of global car giants such as Volkswagen and BMW, Chinese car brands are exploring the European market. How to complete the construction of brand strength and enter the market with "value" rather than "price" is particularly crucial.

The "pioneer" SAIC Group has opened up the European market by acquiring the overseas car brand MG, exploring a feasible path for current car "going abroad." Compared with domestic brands "going out," making good use of existing overseas brands and launching exclusive overseas brands is a new path.

Chery, which occupies a "half of the country" in the overseas market, has placed more chips on exclusive overseas brands. Recently, it revealed that it will invest tens of billions of euros to ensure that its brands Omoda and Jaecoo in the European market win the favor of local consumers within three years.From January to August of this year, the global sales of the Omoda and Jaecoo models have approached 150,000 units. Following their launch in Spain, Italy, Poland, and the United Kingdom, Chery Automobile plans to introduce these two brands to more countries in the coming months.

Kevin Cheng, CEO of Omoda and Jaecoo Italy, stated that the brands are benchmarking themselves against established European market players such as Kia, Hyundai, Nissan, and Volkswagen. While it took Kia nearly two decades to build a strong brand image in Europe, Chery aims to achieve this in just three years.

In the context of the current stalemate in the electrification transformation of the European market, Chery is adopting the same "parallel fuel and electricity" and "promoting electricity with fuel" strategy as in the domestic market, which sets the pace for Chery.

In the domestic market, the "fuel and electricity synergy" has become the main product rhythm. The all-new Tiggo 8 PLUS has recently been launched simultaneously with both fuel and C-DM plug-in hybrid versions, with an official指导价 ranging from 109,900 to 159,900 yuan, aiming for dual growth in both fuel and new energy markets.

The overseas market rhythm is slower than the domestic market, but new energy is still clearly seen as the main direction for future product development. It is reported that in the initial stage, the Omoda and Jaecoo brands will focus on fuel-powered models, and after gradually entering more markets, they will release hybrid and pure electric models.

Focusing on new energy vehicle companies, in the past, without the vast overseas base of SAIC and Chery, it is currently not possible to use fuel vehicles for transitional iteration, making it difficult to support exclusive overseas brands. More new energy vehicle companies have chosen a more direct and effective "leveraging" approach, opting for cooperation, entrustment, or joint ventures in brand and product development to reduce the significant risks associated with heavy asset investment and to seek rapid market penetration in Europe.

BYD started with the sales system and reached an agreement with one of Europe's largest dealer groups, Hedin Electric Mobility GmbH, at the end of August. This agreement gives BYD more initiative in its European business and helps it to expand rapidly in the EU and UK markets. It is expected that by the end of next year, the number of BYD's sales and service outlets in the UK will increase from 60 to 120.

Leap Motor plans to rely on Stellantis' vast marketing network to launch several new models to the European market by 2027; Xiaopeng Motors is seeking business expansion in the software field with the global automotive giant Volkswagen, with cooperation expanding to a global vehicle platform, leveraging Volkswagen's presence in the European market to highlight its intelligent advantages.

According to the plan, in the next 10 years, at least half of Xiaopeng's sales will come from overseas markets. "Starting from Europe, oriented by technology, to bring China's intelligence to the world," this is the expectation of Xiaopeng Motors' Chairman He Xiaopeng.

The European electrification transformation has sounded the alarm, with high tariff barriers in front of us. Facing the "headwinds" towards Europe, Chinese car companies seeking opportunities in the pressure must go to Europe.Please provide the text you would like me to translate into English.