The global automotive industry is regaining momentum after a series of challenging years. While global sales have dropped due to supply issues, and consumers have postponed purchases due to inflation and rising prices, it’s poised to reach 69 million sales in 2023. Automotive industry trends indicate transformative change on the horizon, with electric vehicles (EVs) leading the charge.
Our research indicates that battery-electric and plug-in hybrid vehicles made up a notable 13% of global vehicle sales in 2022, a jump of 62% from the preceding year. As the EV revolution accelerates, a question looms large: Are all EVs created equal in the eyes of consumers?
Chinese EV brands, for example, are making significant inroads — despite market entry plans initially being delayed by the COVID-19 pandemic. And they have a compelling offer: boasting advanced battery technologies and competitive prices. However, there’s more to consumer preference than meets the eye. Beyond the technical specifications and price points, factors such as brand heritage, country of origin, and cultural nuances play a crucial role. Delving into these aspects uncovers a dynamic landscape of opportunity and barriers. Understanding these issues requires exploring the broader spectrum of EV adoption before unpacking how Chinese brands can position their products to appeal to global consumers.
“Over the past decade, the automotive market has faced unprecedented challenges. Electrification, driven in part by government mandates, has reshaped the industry, positioning new entrants like Tesla’s Model Y to lead global sales by 2023. Simultaneously, rising inflation and interest rates are diminishing the appeal of new cars and leasing, while the second-hand market sees record prices due to COVID-19-induced manufacturing shortages.
In this intriguing landscape, Chinese automotive brands, having honed their design expertise for years and excelling in battery electric vehicle (BEV) engineering, are poised to capitalize across the spectrum, from premium to entry-level markets, and potentially even compete favorably in the used-car segment. Importantly, consumer choices are no longer tied to a vehicle’s country of origin, as evidenced by the success of established brands manufacturing cars in China and the enduring popularity of Korean cars since the 1990s.
Chinese manufacturers possess the elements necessary for a significant global automotive debut. However, it’s imperative to acknowledge that these are consumer-driven brands, each forging its distinctive identity and market equity.”
François Le Gunéhec, International Key Account Manager Automotive, GfK
The road ahead: navigating the rise of Chinese EV car brands
The global shift to EVs is happening at very different speeds depending on the individual automotive market trends. These regional differences are further impacted by factors such as Chinese brands striking deals with companies and rental agencies — which may boost sales, and brand exposure, despite private consumers remaining reluctant.
A recent GfK study, for example, found that 13% of Belgian consumers prefer EVs (with 31% stating a preference in a single region!). However, this number drops significantly when singling out private consumers — in effect, most consumers are happy to drive an EV, as long as it’s a company vehicle.
While sustainability and environmental concerns contribute, the push towards EVs is largely driven by consumers’ aspirational concerns. On a more functional level, when making a purchase decision — price, warranty, after-sales service, and advanced safety features are top priorities, with alternative engine types ranking 13th in importance for surveyed Belgian consumers. As EVs become more widespread and as global sentiments evolve with increasing emphasis on sustainability, these priorities might undergo a shift. Yet, for EV brands, understanding and catering to these current consumer priorities are key to success in the electric vehicle market.
At the same time, EV brands must also overcome general barriers to EV adoption. Topping the list is the price — this is the most important factor for all buyers, though it is of less concern for premium buyers and people using company cars. Following closely, are challenges tied to vehicle operation and maintenance. Concerns about limited driving range, the sparse distribution of charging stations, extended charging durations, and the lifespan and subsequent replacement costs of batteries act as deterrents. These barriers indicate a deeper need for infrastructural and technological solutions to boost consumer confidence in EVs.
How Chinese EV OEMs address barriers to adoption
Chinese electric vehicle brands have been carving out a reputation for affordability, creating an appeal for a wider segment of consumers. Their competitive pricing not only ensures accessibility for many but also offers a compelling alternative to pricier options from established brands. As the price remains a top barrier to EV adoption, this affordability can give Chinese brands a competitive edge.
This may be set to change in the EU, for instance, with the recent announcement of an official probe into the cheaper vehicles flooding the market.
“As the EU intensifies its anti-subsidy investigation, an air of uncertainty hangs over the electric vehicle landscape, particularly in terms of pricing dynamics. This regulatory scrutiny creates ambiguity around state-supported incentives and market conditions, potentially disrupting the status quo. For Chinese EV brands, this uncertainty poses both challenges and opportunities as they navigate evolving market dynamics to remain competitive. The investigation’s outcome could further reinforce mistrust towards China and increase consumer sentiment that Chinese cars do not belong in the European market. Conversely, Chinese EV brands may accelerate their global ascent and intensify their expansion strategy.”
Bert Lijnen, Consultant Automotive & Mobility, Consumer & Marketing Intelligence, GfK
However, overcoming EV adoption barriers is not just about competitive pricing; it’s also about technological advancement. Chinese manufacturers have played a pivotal role in the evolution of rechargeable battery technologies, laying the groundwork for the EVs we see today. Yet, despite these significant contributions, Chinese vehicles often fly under the radar, remaining uncredited for their innovation. Strong marketing is needed for these brands to assert their rightful place in the history and development of EV technology, ensuring global consumers recognize their capabilities.
However, Chinese EV cars face a unique set of challenges when it comes to perception. The data on car market trends paints a vivid picture: a notable portion of Belgian consumers, for instance, hold reservations about Chinese vehicles — though attitudes vary across countries depending on established Sino-regional relations. In Belgium, skepticism of China emerges as a key barrier, with 47% of consumers expressing distrust towards the country in general. Furthermore, 37% of buyers feel that China produces low-quality vehicles.
In a world where brand association is key, 30% of consumers participating in our study did not know any Chinese brands, while a mere 15% make the connection between China and the electric car market. This gap in recognition underscores the need for Chinese auto companies to ramp up their branding efforts.
Yet, it’s not just about building awareness and mental availability. It’s also about altering perceptions. With 37% of surveyed consumers associating Chinese vehicles with low quality, Chinese EV car brands have their work cut out. As they tread the path of offering competitive pricing, they must simultaneously reassure consumers that affordable doesn’t equate to compromising on quality. Through a balanced marketing approach that underscores both value for money and unwavering quality standards, Chinese EV brands can effectively change the narrative and solidify their place in the global EV arena.
The localization problem
As every market has different preferences, localization is another issue Chinese auto companies must contend with. Having embraced a brand strategy that is adapted to the European vehicle buyer, Chinese brands like Aiways, BYD, and NIO have found huge success by embracing a localized strategy. To succeed in the European vehicle market, EV brands — established players and new entrants alike — must prioritize:
- Vehicle Safety — in compliance with European safety standards. This is especially crucial for Chinese OEMs, given the negative connotation of the “Made in China” label.
- Design — by offering vehicles that have a European design and look similar to the popular models of established brands.
- Usership Business Models — developing a “mobility-as-a-service” or subscription model, and building relationships with rental agencies and companies, will appeal to a new breed of consumers who want to use or share an EV but don’t want to fully own one.
- Partnerships — While e-commerce remains marginal for new vehicles, partnering with importers and established dealership networks is critical to meeting consumers where and when they want along their purchase journey.
The future of Chinese EVs
The automotive industry is seeing a notable influence from Chinese EV vehicle brands. As affordability and innovation become central offerings from these brands, the challenge remains in navigating global perceptions, building trust, and implementing effective and localized brand strategies.
The growing presence of Chinese vehicle brands in Europe is evident. Yet, the sustainability of this growth and the readiness of consumers to fully accept Chinese vehicles, given concerns about safety standards, quality, and dealership networks, is still up for debate.
Discover how Chinese automakers are making bold strides into the European market, overcoming challenges, and reshaping the global automotive industry – uncover the nuanced dynamics in the next insights article in this series.
Want to learn more about the future of Chinese EVs?
The GfK SinoMobility Compass Reports provide comprehensive insights into the trajectory of Chinese EVs in Europe and the world at large. These personalized studies shed light on whether the current growth of Chinese brands in your region of interest will persist, how traditional brands should respond, and which brands might be most affected.
