Automakers in Europe and their already-stretched suppliers have been facing a tough year as they try to cut costs for electric models to counter cheaper Chinese rivals which are bombarding their home turf with cheaper vehicles. It is difficult for the automakers to squeeze more out of suppliers who have already started laying off workers as many smaller companies are hard hit by supply chain issues during the pandemic.
As the Geneva car show takes place this week, after a four-year hiatus due to the pandemic, it will be a spectacle to behold. It will make the stark difference between Europe’s legacy automakers and more EV-focused Chinese manufacturers ample clear in the exhibits. The only major companies holding media events are France’s Renault, China’s SAIC and BYD – two of a number of the country’s automakers that have set their sights on Europe. “They really are like chalk and cheese,” Nick Parker, a partner and managing director at consulting firm AlixPartners, said to Reuters about the legacy European automakers and their Chinese rivals.
While Renault is launching its electric R5, SAIC-owned MG will unveil its M3 hybrid car. Meanwhile, BYD’s Seal sedan has been shortlisted for the Car of the Year award. If it wins, it would be the first Chinese model to get the prestigious award, further enhancing BYD’s positioning in the global market after it replaced Tesla’s as the world’s largest EV maker.
One of the major differences between the European automakers and their Chinese counterparts is dependency. While the European automakers are reliant on external suppliers with separate supply chains for fossil-fuel and electric, the Chinese rivals are highly vertically integrated, producing almost everything in-house and keeping costs down.
In Britain, BYD’s electric Dolphin hatchback starts at 25,490 pounds (USD 32,300), which is about 27% less than Volkswagen’s equivalent ID.3 model. To chase the Chinese rivals, European automakers’ profit margins would become “heavily challenged” moving forward because there is only so much they can squeeze out of external suppliers, AlixPartners’ Parker added. The challenge has become more difficult by a slower-than-expected shift to EVs.