Production and Cost Advantages
Chinese electric vehicle (EV) makers, including BYD and Chery, are ramping up production in the European Union to avoid tariffs. Although they currently hold an edge, their long-term position will depend on EU regulations. Producing the BYD Seal sedan in Eastern Europe adds about $500 per car in labor costs, while a German factory would quadruple that figure. Additionally, international suppliers add $4,000 to the cost of this model.
Competitive Edge Through Technology
China’s early focus on electric vehicles allows it to manufacture EV platforms and electronics more cheaply. Companies like BYD also develop batteries and components in-house. Their research and development (R&D) investments yield significant returns. In 2024, Geely Auto and BYD launched multiple models, investing 4.4% and 6.6% of revenue in R&D, respectively. In contrast, Tesla spent 5.1% but introduced only one new model in 2023.
European Production Costs and Market Impact
UBS analyst Paul Gong estimates that producing a BYD car in Europe would cost approximately 25,000 euros ($27,120), which is 25% more than in China. However, this is still about 10,000 euros cheaper than similar European models. Seal sedans exported from China to Europe sell for around 45,000 euros, allowing BYD to earn a substantial profit and undercut EU rivals on price.
Potential Regulatory Challenges
There are no real-world examples yet, as Chinese automakers have not started European production lines. However, Volvo Cars’ experience offers insights. Volvo, controlled by China’s Geely group, launched the EX30, a pure electric compact SUV, achieving a gross margin of 15-20%. This contributed to Volvo’s highest-ever gross margin for battery-electric vehicles in the second quarter.
Despite these advantages, potential EU regulations on sourcing and foreign subsidies could disrupt supplies of batteries and parts. While Chinese EV makers are formidable competitors, they must navigate regulatory challenges to maintain their edge in the European market.
Source：chinadaily.com.cn
