Chinese carmakers could capture between 15 and 30 per cent of the European automotive market by 2035, up from roughly 10 per cent this year, analysts at Citi said, with the outcome resting on how far Brussels goes in tightening tariffs and made-in-EU rules.
Current European Union rules would allow Chinese carmakers to reach 30 per cent by 2035 – Citi’s base scenario – while extending existing tariffs on Chinese electric vehicles to plug-in hybrids would cap the market share at 25 per cent, Citi analysts led by Harald Hendrikse said in a note issued on Wednesday.
They said the sharpest curb in their forecasts would come from the “made in Europe” requirement in the EU’s proposed Industrial Accelerator Act, which would reduce Chinese carmakers’ market share to 5 per cent in the next two years and hold it at 15 per cent by 2035.
A comprehensive “made in EU” framework under the act would require Chinese carmakers to assemble locally and use local supply chains, which would significantly reduce “future market share gains as EU local manufacturing offsets China cost advantages”, the analysts said.
They warned that European carmakers were potentially facing 10 years of volume losses and restructuring. In their base case, other Asian carmakers – mainly those from Japan and South Korea – would also see their market share decline from the 20 per cent recorded last year to below 16 per cent by 2035.
Chinese carmakers have seen their share of the European market expand rapidly, led by brands such as BYD and SAIC’s MG, which has alarmed European politicians and, increasingly, European manufacturers.
Data from Schmidt Automotive Research, a consultancy based in Bremen, Germany, showed Chinese carmakers’ market share in 18 countries in western Europe surged to 10 per cent in April – up from 4.9 per cent a year earlier.
China’s global passenger vehicle exports rose 73 per cent year on year to 800,000 in the first five months of the year, HSBC said in a report released in June. In the first half of the year, domestic sales fell 20.2 per cent, according to data from the China Passenger Car Association.
The Citi analysts said they expected the European market – the EU plus the United Kingdom and the four members of the European Free Trade Association: Iceland, Norway, Switzerland and Liechtenstein – to barely grow over the decade, rising from 13.3 million cars last year to 13.8 million in 2035. That meant almost every sale won by Chinese brands would come at an incumbent’s expense.
They said Volkswagen Group brands, excluding Porsche, would see a volume drop of more than 500,000 by 2035 compared with last year, Stellantis more than 300,000 and Renault more than 200,000.
The situation would be slightly better for premium marques like BMW and Mercedes, which would shed roughly 100,000 and 50,000 cars respectively, while Porsche would be the only one to see growth – adding about 3,000.
The premium and luxury segment – where the average price was above €60,000 (US$69,134) – remained relatively well protected from Chinese carmakers despite their rapid expansion in the European market, the analysts said, adding that the buyers of such vehicles were more influenced by residual value, service and brand loyalty.
They added Chinese carmakers’ gains so far had been concentrated in mid-size electric and plug-in hybrid SUVs, rather than in petrol models, hatchbacks or luxury sedans.
