This story first appeared in China Report, MIT Technology Review’s newsletter on technology in China.Registerto receive it in your inbox every Tuesday.
These days, few Chinese technology sectors have received as much fame and attention as electric vehicles. As domestic adoption of electric vehicles increases aggressively each year, China’s electric vehicle makers are the stars of auto shows from Shanghai to Munich, and they are hatching big plans to replicate their success far from home. (In February, I wrote about how Chinese electric vehicles came to dominate.)
But those global ambitions hit a roadblock this month when European Commission President Ursula von der Leyen made a high-profile announcement launching an investigation into whether Chinese-made electric vehicles benefited from government subsidies. excessive.
As I wrote in an article published yesterday, the upcoming investigation will examine whether the Chinese government has provided too many subsidies to its automakers and therefore given them an unfair advantage on the global stage. If the investigation finds evidence for this claim, which experts say is very likely, it could lead to increased import duties on Chinese-made electric vehicles, likely making them less competitive in markets. Europeans.
“In my opinion, this announcement is only the first in a series of measures that Europe will consider taking in order to protect its local industry,” says Felipe Muñoz, principal analyst at the consultancy specializing in the automotive industry. based in London, JATO Dynamics.
The survey comes at a time when European automakers feel increasingly threatened by Chinese brands, which offer competitive models at least $10,000 cheaper than their European rivals. Many of the Chinese brands causing concern are well-known names in China, such as established giant BYD and promising startup Nio.
But there’s one name you might not expect.
“The real game changer is not Nio. It’s not BYD,” says Muñoz. “The big product, which represents around 80% of sales of Chinese brands in Europe, is MG.”
Um, what is MG? To be honest, I hadn’t even heard of this brand before this conversation, let alone had any idea of its success.
I have since learned that MG was established in the UK in the 1920s, taking its name from an Oxford shopping center called Morris Garages. It remained a British luxury sports car brand for over 80 years until its owner went bankrupt in 2005. It was then bought by a small Chinese company called Nanjing Auto, and then by SAIC Motor, the most major Chinese automobile manufacturer. Since then, all MG cars have been designed and manufactured in China. It produces both gasoline cars and electric vehicles, but plans to go all-electric by 2027.
I suspect I never paid attention to the name because, as a Chinese brand, MG is doing rather poorly in its domestic market, even though all of its cars are made domestically and market demand is large. In China, its annual sales in 2022 were less than what BYD can sell in a month.
But in reporting this story, I learned that MG has had the best-selling Chinese EV model in Europe for months; its growth trend is only surpassed by that of Tesla.
The affordable options offered by MG have become a threat to many mainstream vehicle brands in Europe. “MG is changing the electric vehicle game with the MG4 and MG ZS EV,” says Muñoz, referring to a small family car model and an SUV launched by MG last year, “because these cars are really competitive , particularly the MG4, which is already outperforming cars like the Volkswagen ID3. (For comparison, the price of an MG4 starts at €28,590 in Germany, while the comparable Volkswagen ID3 starts at €39,995.)
To be clear, what has elevated the MG4 above other Chinese EV models is not its quality or affordability, which Chinese companies have already mastered well. The key is branding.
“The biggest disadvantage of Chinese cars is that they have very low brand awareness (in Europe). They can only count on low prices,” explains Zhang Xiang, an analyst in the Chinese automotive sector. Although they are well-known in China, brands like BYD and Nio are rarely known to an ordinary European car buyer.
And the flip side of not knowing MG is a Chinese brand is that it is still perceived by many Western consumers as a British luxury brand, even though it has been entirely Chinese for over a decade . “Classic cars, very old-school,” is what came to my British colleague’s mind when asked about his perception of MG. And no, he didn’t know it had become a Chinese company. MG has therefore avoided the stereotype that all products made in China are of poor quality.
Well I can’t really say that is the solution for Chinese brands trying to break into the European market. It’s not like everyone can just acquire a bankrupt European brand to overhaul their image.
But MG’s success reminds other Chinese companies that mastering the technology and manufacturing of a product is only the first step to success overseas; Changing the global perception of Chinese-made cars is a more difficult task. Muñoz says Chinese brands need to look to the Korean automakers of the 1990s or the Japanese automakers of the 1970s for lessons on how to build trust and recognition in a new market.
Obviously, it took them a while. I think this is a reality check, both for Chinese companies and for the observers who encourage them. It’s a triumph for them to make a good EV product that sells well in China, but that doesn’t automatically translate into success with a completely different set of consumers.
And this challenge could increase with the new investigation and corresponding policy discussions. “The long-term effect is that… (Chinese brands) could possibly generate a more negative perception from consumers, because they become a ‘problem’ for Europe,” explains Muñoz. Build trust among consumers when the general political discourse is working against you? Good luck with that.
Would you consider buying an electric vehicle made in China if it were available where you live? For what? Let me know by writing to firstname.lastname@example.org.
Catching up with China
1. If you Googled “tank man,” the famous 1989 Tiananmen Square protester, last week, the first result was an AI-generated selfie. (404 Media)
2. During the opening ceremony of the 2023 Asian Games, hosted in Hangzhou, real fireworks were completely replaced by those generated by augmented reality. (Associated Press)
3. TikTok is creating an e-commerce center in Seattle to compete directly with Amazon on American soil. (Information $)
4. Ultra-wealthy Chinese Generation Z heirs who were educated in the West are increasingly returning to China and betting on the potential of their home country. (Bloomberg$)
5. A major Chinese university has just removed the mandatory English test that all students had to pass to graduate. This reflects the decline in the importance of language in China. (South China Morning Post$)
6. Only two pages of Walter Isaacson’s 600-page biography of Elon Musk concern his relations with China, where more than half of Tesla cars are produced. (Rest of the world)
Lost in translation
Do you want to buy a smartphone as an accessory for your car? Nio, the Chinese electric vehicle startup, is betting so. On September 21, Nio officially launched its first smartphone, which will be closely linked to the functions of its cars. Priced between RMB 6,499 and RMB 7,499 ($890 to $1,025), it costs about the same as an iPhone 15, putting it in the small luxury smartphone sector in China. And the company plans to launch a new model every year, similar to Apple’s approach.
Who is the target customer? According to Chinese publication Shijie, Nio CEO William Li says it’s Nio car owners: “If we can sell 5 million Nio cars, have half the owners buy Nio phones and get a new phone every three years, then it will be profitable. .” The Nio phone would replace traditional car keys and remotely control various vehicle functions. However, some consumers question the need for a dedicated smartphone when a mobile application could do the same. While many Chinese EV brands have found a fervent following among their customers, Nio is about to find out if their loyalty is strong enough to warrant a $900 accessory.
One more thing
It’s the Mid-Autumn Festival again this Friday, and I’ve already stocked up on mooncakes, those decadent and unhealthy treats filled with lotus seeds, red beans and salted egg yolk, reserved for this celebration. But until this visual Washington Post article, I didn’t know that mooncakes have also been used to spread political rebellion, from ancient China to Hong Kong in the 2010s. Well, I’ll devour mooncakes moon with more respect this year.