Auto File: Europe or bust

NVIDIA

Tue 16:00

By Nick Carey
Oct 20 (Reuters) - Greetings from London!  I’m back home this week after a hectic visit to Paris last week and finally catching up on sleep.  
But much of what we'll be digging into in depth in this edition of Auto File came together while we were running around at the show between meetings and trying to navigate our way around French President Emmanuel Macron’s vast security detail! 
We’ll look at how Europe has become a lifeline for Chinese automakers as a Darwinian period of consolidation comes for the world’s largest, and overcrowded, car market.  
Also, more of China’s premium car brands are making a play for Europe where they will compete with experienced and heritage-rich local brands BMW, Porsche, Audi and Mercedes. 
Before we get to all that, just a quick note to let you know that the next edition of Auto File will come to you from our Detroit bureau chief Mike Colias, who will attend the Reuters Events Automotive USA conference — which will feature speakers from Volkswagen, Honda, Bosch, Nvidia and many others.   
As the conference runs for a couple of days, next week’s Auto File will come to you on Thursday instead of Tuesday, filled with exclusive content and Mike’s expert insights from the sidelines.   
Which brings us to today’s Auto File…   
China’s automakers must make it in Europe  
Tesla shows off its tech 
Volkswagen’s poor start with Xpeng 
       
MAKE OR BREAK IN EUROPE 
It was no accident that a record 20 Chinese car brands showed up at the Paris car show last week.  
Europe is the largest, most profitable market open to Chinese automakers. With the US market closed to them, it is crucial to growth for ambitious new players with global aspirations. 
The continent is also a vital lifeline for China’s automakers under immense pressure at home.  
You can read all about it here. 
China’s market is overcrowded with over 100 automakers, and consolidation has been widely expected for years. 
The prospects for consolidation have always been complicated by the web of state ownership. The national government owns several automakers, whereas others are controlled by provincial or even city governments.  
CONSOLIDATION COMING 
But the Chinese government made a start last month with a merger deal involving Toyota's two Chinese joint-venture partners, under which state-owned FAW will become GAC’s second-largest shareholder. 
Analysts say the deal ​is particularly complex because FAW is owned by China's central government while GAC is controlled by Guangdong province. Toyota's involvement adds a foreign private-sector partner to the equation. 
Now that it has begun, over the next few years Beijing is expected to gradually push consolidation of the country’s auto industry until only a handful of giants remain.   
With China’s car market down significantly this year and unlikely to recover for years to come, that means outside growth will be vital to surviving the consolidation process. 
Making it in Europe has thus become even more important. European Union officials are still debating which countries in Europe should qualify for its ‘Made in Europe’ EV local content rules designed to force Chinese automakers to make cars in the bloc. 
But several Chinese car companies are already moving at speed to produce cars in the EU long before any local content rules take effect. You can read all about that here. 
With little to no access to the US market, Europe is where Chinese automakers can get margins. So those that make it here are more likely to take over rivals rather than fall victim to consolidation. 
PREMIUM PUSH 
And of course, part of the latest Chinese push into Europe includes a clutch of premium brands eager to pitch their cars to well-heeled European car buyers.  
What they are pushing are tech-laden models as they try to redefine luxury. 
You can read all about it here. 
To put it mildly, this will be an uphill climb for the premium newcomers.  
Unlike China, where consumers favour tech over established brands, hitherto heritage has been key to success in Europe. Mercedes, BMW, Porsche and Audi all lean on it heavily. 
This is not to say that brands like Aito — whose promotional video at the Paris car show featured an SUV driving with a tower of full champagne glasses on the hood without spilling a drop — cannot crack Europe’s premium car market. 
Chinese EV brand Xpeng launched in Europe in 2020 and is expected to sell around 50,000 cars on the continent this year.  
But as one Xpeng executive told Reuters in Paris, getting this far has taken a lot of persistence. 
     
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Challenges ahead for UAW’s Fain  
Europe’s EV sales jump 70% in September 
     
TESLA'S SHOW 
Tesla unveiled its long-awaited redesign of its Roadster sports car model and put on quite a show.  
The two-seater EV, ‌developed in collaboration with CEO Elon Musk's rocket company SpaceX, drove upside down on a ramp using a suction system, turned in the air and landed using built-in thrusters.  
Later in the event it used the thrusters to jump over a truck and other vehicles, twisting in the air during the maneuver. 
You can read all about it here. 
Musk said the car would go into production in 2028, which based on past experience with Tesla and its slipping production timelines (see the Tesla Semi) seems like a stretch at best.  
But even if the car never goes into production, the Roadster is a great marketing tool.  
Like Xpeng’s flying car, it showcases Tesla’s continued ability to innovate in an industry where that now counts more than ever. 
And the Roadster’s tech gimmicks are seen by some as a teaser for a possible merger between Tesla and SpaceX. 
     
VW'S WEAK XPENG DEBUT
Volkswagen bought into Chinese EV maker Xpeng in 2023 to help Europe’s largest automaker stem its sales slide in China with cars designed specifically for the local market.  
The German automaker’s new EVs would be developed at a speed to match its growing Chinese rivals. 
As Reuters reporters Ju-min Park and Christina Amann report, three years later, the alliance’s first product instead exemplifies why Volkswagen’s sales have slumped in the world’s largest car market.  
You can read all about it here. 
The ID. UNYX 08 electric SUV sold an average of 267 vehicles a month between its April launch and August, a fraction of ​the 3,622 monthly sales Volkswagen initially aimed to achieve this year, according to company planning documents. 
The SUV highlights a persistent problem in Volkswagen's China strategy. Volkswagen recognized China’s shift toward higher-end technology and sought local partners to catch up. Yet the German automaker struggled to turn those bets into commercial success. 
Problems with the UNYX 08 began with the vehicle itself. The car launched with a price tag of about $34,260. But similarly ​priced Chinese rivals like Xiaomi’s YU7 and Zeekr's 7X offer more-sophisticated features and have been far more popular with China’s car buyers.  
     
FAST LAPS   
​France and Germany struck a deal to soften proposed EU car emissions rules ​and open the door for Britain to be treated as a trusted partner under the bloc's ‘Made in Europe’ rules. 
Vietnamese electric-vehicle maker VinFast reported an ‌85.5% jump in second-quarter revenue, as a one-off $1.18 billion gain from transferring manufacturing assets cut its net loss but its operating loss almost tripled. 
Volvo Cars is expanding its partnership with Nvidia to develop a new generation ​of driver-assistance and automated-driving technology, ‌as carmakers race to bring increasingly advanced hands-free driving features to market. 
China's Geely said that vehicles from its brand ​portfolio will feature Google's ⁠in-car services, ​including Gemini, ​Play and Maps, in overseas markets. 
California said nearly 12,000 residents have bought EVs since August using rebates under a ​new $270 million program funded by the state and automakers. 
Chery said it would launch its iCAUR brand in the UK market, its fifth brand for British car buyers after success with Omoda, Jaecoo, Chery and Lepas made it the country’s second-largest seller after Volkswagen so far this year.  
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(Editing by Emelia Sithole-Matarise)