Can European carmakers stop China’s electric behemoth BYD?

The maiden voyage of the BYD Explorer No 1 was far from plain sailing.

The ship, 2.5 times the length of a football pitch and carrying more than 5,000 electric vehicles made in China, was forced to divert around the Cape of Good Hope to avoid the Red Sea, adding 10 days to its journey, captain Sabev Bozhidar told the Financial Times. 

Its eventual arrival in the German port of Bremerhaven on Sunday marked a new chapter in the ambitions of China’s EV specialists to crack open the lucrative European car market.

“The demand is increasing . . . our Google searches have overtaken Tesla . . . we are going to achieve a lot of things in the European market,” said Michael Shu, managing director of BYD Europe. 

But the bloc’s carmakers are determined to fight back. More than 600 miles from Bremen, hours after the BYD ship docked, Renault boss Luca de Meo used the Geneva Motor Show to unveil a series of cars he believes will help the French manufacturer hold its ground against Asian rivals. 

These included the Renault 5, a £25,000 EV that will pave the way for cheaper models and the Dacia Spring, the first EV from the group’s budget brand.

The Spring, which is made in China, will have a starting price of less than €20,000 the company has said, with some reports putting it as low as £15,000 in the UK. 

Renault had also begun talks with Volkswagen about collaborating on a low-cost EV project, De Meo said. 

Meanwhile, Renault’s arch-rival Stellantis, which owns brands including Peugeot and Fiat, hopes to offer an electric model in Europe that would cost less than €20,000, according to European operations boss Uwe Hochgeschurtz, by cutting costs from its new electric Citroën e-C3, which sells for £23,000. 

“It depends on what you put into the car, we have the platform for this . . . we adapt the range, we adapt the battery,” Hochgeschurtz said. “It is possible.” 

The fight for the cheap end of the EV market is crucial. Small cars are best-sellers in Europe, yet several manufacturers have discontinued them as the rising costs of meeting emissions rules has made them unprofitable to produce at an affordable price. 

“Everyone” was getting out of the market for small combustion engine cars because “nobody is able to produce [them] profitably”, De Meo said. “Polo is out, Fiesta is out, everyone is out.” 

The Renault 5 is the company’s first cheaper EV, but Renault is planning a cost reduction of up to 40 per cent in subsequent versions later this decade. 

And while the Dacia Spring will be imported from China, Renault’s own-brand models will be made at home. 

“What was very challenging for the team was that I decided to do the thing in France,” De Meo said. “Everyone was telling me that I was completely nuts.” 

However, because EVs had fewer parts than combustion engine cars, fewer workers were required and the impact of France’s high wages would be lower, he said, adding that about 80 per cent of the supply chain would be within 300km, cutting logistics costs. 

But at the moment, the company’s Dacia brand is at the head of the pack. 

When designing cheaper models, the brand often begins with a Renault vehicle and removes everything not deemed essential.

“We have nothing superfluous in it,” said Denis le Vot, the brand’s chief executive. “We don’t have 22 screens, we don’t have electric seats, and [this approach] resonates more and more, because some people are saying: don’t spend your money on useless things. We don’t put chrome in the car. Why? Because it is shiny and useless. We just take it totally out.”

Across the hall from Renault and Dacia’s displays at the motor show is BYD’s stand, showing a range of models that are priced at similar levels to the electric models made by the incumbents they are hoping to beat. 

Although the company began selling in the region only a little over a year ago, it is already making inroads. 

The BYD Seal, a large saloon costing about £45,000, already outsells the equivalent Tesla Model 3 in some markets such as Ireland and Austria, Shu said.

But the company also has a close eye on other markets. “Lots of customers or partners are asking for a smaller car, because European people like smaller cars,” said Shu, who added that a “new model, lower than €30,000 is coming . . . next year”.

Getting below €20,000 is harder, he added, because of regulations, particularly on crash safety. The company hopes the BYD Explorer will help with this.

The ship, which was launched from China amid a riot of fireworks and dragon dances, has been engineered to be as cost-effective as possible. BYD said that among other things, special paint on its hull cuts down water drag, reducing fuel consumption. It also cuts expensive waiting times for space on other car carriers — which is in short supply — Shu said, adding it was “for sure” a cheaper option.

A bigger fleet is planned. Wang Chuanfu, chair and chief executive of BYD, told a conference in Shenzhen this month that the company would “deploy seven car carriers in the coming two years to ease the shortage of shipping capacity for automobile exports and deliver more . . . vehicles” to the global market, according to several Chinese media reports. 

As they strive to cut costs, European carmakers feel they are insufficiently supported by governments, whose decarbonisation policies have forced them to develop the battery vehicles at which China excels. 

“Europe’s industrial strategy is totally missing,” said De Meo, who also heads the European carmakers’ association, ACEA. “We need to be listened to by politicians, we are the people who are putting the money in and risking the investments.” 

A European Commission investigation of Chinese imports may lead to higher tariffs on cars coming in. But European carmakers say this may not be enough.

According to Hochgeschurtz, the Chinese “can reduce the price much lower than you even think in your wildest dreams”. Many brands sell similar EVs in China for roughly half the price they were advertising in Europe, he added. They can absorb higher tariffs, cut prices and still make high profits.

“Prices in China are very low, so [Europe] is paradise for them.”