The Paris Motor Show on Monday set the stage for fierce competition between Chinese and European automakers, as they clashed against the backdrop of growing tensions over the European Union’s (EU) proposed import tariffs on Chinese-made electric vehicles (EVs). As the largest car exhibition in Europe, the show marked a critical moment for both regions: European automakers are striving to maintain their dominance in the increasingly competitive EV market, while Chinese manufacturers are eager to expand their foothold in Europe. However, the looming threat of hefty EU tariffs has cast a shadow over both sides, with industry leaders raising concerns about the broader economic implications.
This year’s Paris Motor Show, often regarded as the benchmark for the European auto industry, arrived at a pivotal time. With weakening demand for new vehicles and growing challenges from foreign competition, European automakers find themselves under significant pressure. Their ability to innovate and remain competitive in the face of aggressive Chinese expansion plans will shape the future of the industry.
The stakes are particularly high for European brands, which are grappling with rising costs, sluggish economic growth, and increasing pressure to transition to electric mobility. For Chinese automakers, the show presents an opportunity to accelerate their push into Europe, a market that has long been dominated by German giants like Volkswagen, Mercedes-Benz, and BMW.
Earlier in October, EU member states narrowly voted in favor of imposing import tariffs of up to 45% on Chinese-made electric vehicles. This move, which Brussels argues is a necessary response to what it claims are unfair subsidies provided by Beijing to its manufacturers, is aimed at leveling the playing field for European automakers. However, this decision has been met with strong resistance from both Chinese manufacturers and some industry experts in Europe.
Chinese automakers have strongly denied any claims of unfair competition. They argue that the EU’s tariffs could severely impact consumers, raising the price of affordable electric vehicles and limiting options for middle- and lower-income buyers. Stella Li, executive vice president of BYD, China’s largest EV maker, voiced her concerns at the show, stating, “Who pays the bill? Consumers. So this makes people very concerned. It will stop poorer people from buying.”
On the European side, there are also warnings that the tariffs may backfire. Stellantis CEO Carlos Tavares pointed out that rather than slowing down Chinese imports, these tariffs could push Chinese automakers to build production plants in Europe, exacerbating the region’s existing overcapacity problem. “We will see Chinese brands establish manufacturing here, adding to overcapacity and leading some local manufacturers to close factories,” Tavares warned, highlighting the potential for job losses and factory closures in an already struggling industry.
The Paris Motor Show showcased the growing clout of Chinese automakers in the global auto market. Nine Chinese brands, including BYD and Leapmotor, unveiled their latest models at this year’s event. Although Chinese brands accounted for only about a fifth of the total brands present, compared to almost half in 2022, their presence was nonetheless formidable. These brands are making a concerted effort to break into the European market, with a combination of lower prices and cutting-edge technology.
BYD, in particular, has positioned itself as one of the leading players in this race. Known for its affordable electric vehicles and a strong emphasis on features, the company has expanded rapidly across Europe, with models like the Sea Lion 07 SUV designed to attract European buyers. Despite this growth, BYD and other Chinese brands face a significant hurdle: low brand recognition. BYD’s sponsorship of the European soccer championships this summer was an attempt to boost its brand profile, but more is needed for it to compete on equal footing with established European brands.
Other Chinese entrants, such as Dongfeng, Seres, and FAW, are also vying for a slice of the European market. These companies, like BYD, have been impacted by weak domestic sales in China, exacerbated by a price war in the home market. Their overseas expansion plans are thus not only about capturing new markets but also mitigating losses at home.
Leapmotor’s CEO, Tianshu Xin, spoke confidently about the future of Chinese EVs in Europe. He predicted that the gap between electric vehicles and gasoline-powered cars would continue to shrink over the next few years. “My personal view is we will achieve price parity in Europe in 2-3 years. Everybody, if you want to compete, you need to work hard towards that goal,” Xin said, signaling a strong commitment to European expansion.
For Europe’s established automakers, the challenges posed by their Chinese rivals have sparked a sense of urgency. Volkswagen, Mercedes-Benz, BMW, and Stellantis are all facing their own set of problems, ranging from profit warnings due to weak sales in China to domestic struggles like overcapacity and labor disputes. As the traditional powerhouses of the European automotive sector, they are finding it increasingly difficult to keep pace with the lower-cost and faster production cycles of Chinese manufacturers.
One key issue for European automakers is their slower development timeline for new electric vehicles. While Chinese manufacturers can develop and bring new EV models to market within two years, European brands often take twice as long. This discrepancy, coupled with higher production costs in Europe, puts local automakers at a significant disadvantage in a market where speed and affordability are critical.
Patrick Dunne, an industry expert at Stax, summed up the situation for European manufacturers, stating, “The Europeans have massive alarm bells ringing. They have recognized they need to do something pretty radical, and they only have a couple of years to do it.”
Weak demand for vehicles across Europe is compounding the challenges faced by the continent’s automakers. In August, European car sales hit a three-year low, as economic headwinds and inflation dampened consumer demand. The market’s struggles have been exacerbated by government decisions to roll back subsidies for electric vehicles. France, for instance, announced last week that it would reduce its financial support for EV buyers, while Germany had already ended its EV subsidy program in late 2023.
In contrast, China’s vehicle market saw a modest rebound in September, with passenger vehicle sales rising 4.3% year-on-year, driven by government stimulus measures. This uptick came after five months of decline, offering some relief to Chinese manufacturers.
European automakers, however, are facing tougher conditions. Volkswagen, Mercedes-Benz, and BMW have all issued profit warnings this year, primarily due to the slump in the Chinese market. Stellantis, meanwhile, slashed its earnings forecast due to inventory problems at its U.S. operations. CEO Carlos Tavares has refused to rule out the possibility of job cuts or even brand sell-offs as the company looks to streamline its operations and adapt to the challenges of the current market. “We will need to make big efforts,” he said, adding that the future of certain brands would depend on customer demand.
The financial struggles of Europe’s automakers are also fueling tensions with labor unions. Volkswagen, in particular, is locked in a battle with its unions over cost-cutting measures, including the possible closure of factories in Germany and the elimination of thousands of jobs.
The competition between Chinese and European automakers at the Paris Motor Show highlights the broader battle for dominance in the global EV market. With Chinese manufacturers gaining ground in Europe, the industry is at a crossroads. European automakers must not only defend their home turf but also adapt to the rapidly changing landscape of electric mobility.
The introduction of tariffs on Chinese EVs is a clear attempt by the EU to protect its domestic industry, but it risks setting off a series of unintended consequences. If Chinese automakers follow through with plans to build plants in Europe, local manufacturers could face even stiffer competition on their own soil. At the same time, European consumers may find themselves caught in the crossfire, with higher prices and fewer affordable options.
As the Paris Motor Show comes to a close, one thing is clear: the future of the automotive industry is being shaped by the intense rivalry between Chinese and European automakers. Whether through innovation, cost-cutting, or strategic expansion, both sides are racing to secure their place in the electric vehicle revolution.
