by Nick Carey

PARIS (Reuters) – The Paris Motor Show, which opens this Monday in Paris, will be the scene of a face-to-face confrontation between Chinese and European manufacturers, against a backdrop of high tensions, while the European Union is preparing to impose heavy customs duties on electric vehicles produced in China and as the industry suffers from weak demand.

The 2024 edition of the main European motor show takes place at a pivotal moment: European manufacturers, in difficulty, must prove that they can compete with their Chinese competitors, who aim to anchor their presence in a competitive market.

“It’s China versus Europe, and this is the ring they’ve chosen to fight in,” said Phil Dunne, chief executive of strategy consultancy Stax. “The Europeans say it’s their territory, the Chinese want to claim their position,” he added.

Nine Chinese brands, including BYD and Leapmotor, plan to unveil new models in Paris, according to the event’s general director, Serge Gachot. The same number of Chinese brands were present at the 2022 edition, almost half of the brands represented at the show.

A sign of the determination of European manufacturers to defend their territory, only around a fifth of the brands present this year in Paris are Chinese.

Earlier this month, the European Commission said it had decided to maintain its plan for customs taxes of up to 45% on imports of electric vehicles manufactured in China, a measure Brussels said was intended to counter public aid. deemed unfair that Beijing provides to Chinese manufacturers. The Chinese government denies any unfair competition and has warned of retaliatory measures.

AMBITIONS

Although they criticized the EU decision, Chinese manufacturers continue to move forward with their expansion plans in Europe, indicating that they plan to increase their prices if necessary to compensate for the imposition of customs duties additional.

“The power of the ambition of Chinese electric (manufacturers) will be on full display this week in Paris,” predicted Andy Palmer, founder of the consulting firm Palmer Automotive.

This 2024 edition of the Paris Motor Show marks the launch of GAC’s European ambitions, declared Sunday the general director of GAC International, Wei Heigang.

“We are the new kid, we need to understand the European market even better,” he said in an interview, adding that he wanted to solidify the GAC brand before its first electric model intended for sale outside China, Aion V, be exhibited massively next year. Producing vehicles in Europe could be a way for Chinese manufacturers to avoid EU taxes.

Wei Heigang said GAC is “actively exploring this possibility,” stressing that the group is a strong supporter of local production.

So far, Chinese electric vehicle manufacturers charge slightly less for their models than their European competitors, giving themselves an advantage in the market. This could also allow them to compensate for the lower margins achieved in China.

As Japanese and South Korean manufacturers have done in the past, Chinese groups are promoting so-called standard models with better equipment and more options.

NOTORIE DEFICIT

The fact remains that Chinese manufacturers of electric vehicles are currently struggling to gain notoriety in Europe, as shown by the example of BYD, although already present in most countries on the continent and sponsor during the past summer of the Championship. of European football.

BYD wants to get noticed at the Paris show, during which it will unveil its Sea Lion 07 electric SUV.

Dongfeng, Seres and FAW, which arrived later on this market, will also present new models with the hope that their sales abroad will compensate for their difficulties in China, where a price war is raging.

Sales of passenger vehicles in China increased in September by 4.3% year-on-year, ending five consecutive months of decline thanks to new government aid. In Europe, sales fell in August to a three-year low.

Further darkening the picture, Bercy announced Thursday that France would reduce next year the support envelope for the purchase of electric vehicles, following in the footsteps of Germany which ended last year to his helpers.

“ALARM SIGNALS”

For Chinese manufacturers, establishing themselves successfully in Europe has become all the more necessary as they have been excluded from the American market.

US President Joe Biden’s administration has imposed 100% tariffs on electric vehicles produced in China and in September proposed banning Chinese software and equipment for connected vehicles.

For their part, European manufacturers are looking gloomy. Volkswagen, Mercedes-Benz and BMW warned on results, largely because of their weakness in the Chinese market. Stellantis lowered its forecast, citing inventory issues in its U.S. operations.

European manufacturers are struggling to compete with Chinese groups, which produce at lower costs and develop new electric models in barely two years – at least twice as fast as traditional Western groups. There are “strong warning signs” for European manufacturers, Phil Dunne said. “They admitted they needed to do something radical, and they only have two or three years to do that.”

(Nick Carey, with Gilles Guillaume; Jean Terzian)

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