After years of churning out the world’s most technologically advanced, low-cost electric vehicles, Chinese companies like Geely and Nio are now unleashing a number of premium models that are packed with features and priced significantly lower than those offered by German rivals.
It is a major change for an industry that spent the last three years mired in a bitter electric vehicle price war and poses a huge threat to legacy premium automakers – both in China, the world’s largest auto market – and abroad.
“The price war has turned into a value-for-money war,” said Bo Yu, Greater China country manager at research firm JATO Dynamics.
At this year’s Beijing Auto Show, which kicks off on Friday, the industry is set to debut 181 models and 71 concept cars, including a “flood” of big, premium “9-series” SUVs, according to Cui Dongshu, secretary-general of the China Passenger Car Association (CPCA), an industry group.
The fight for the premium market spells further trouble for German automakers in China. According to data from S&P Global Mobility, German automakers’ cumulative sales in China fell nearly 25% to 3.85 million vehicles from 5.1 million in 2019.
Mercedes-Benz, BMW and Volkswagen units Porsche and Audi all posted sales declines in China in the first quarter.
The upmarket push will also intensify competition overseas. Chinese automakers are increasingly looking to go abroad after the price war left the domestic market flooded with cars.
China’s EV makers have been able to absorb European Union tariffs on Chinese-made electric cars and keep them priced below similar models from European rivals. Chinese hybrids and combustion-engine cars are not subject to EU duties.
“I expect more Chinese companies to double down on premiumisation,” said Stephen Dyer, head of consultancy AlixPartners’ automotive practice in Asia. “To differentiate themselves at home, but also to prepare for going global.”
Car sales in China fell about 18% from a year earlier in the first quarter and are expected to remain flat or down for the foreseeable future.
New king of the road
Geely’s premium brand Zeekr last week unveiled the 8X, a full-size, long-range plug-in hybrid SUV laden with safety, infotainment and tech features.
The 8X can tilt upward before a side collision to protect passengers. If the car is parked in a tight spot, the driver can wave at it and it will drive itself out of the space to allow passengers easy access.
Geely showed a video of the 8X, which starts at under US$53,000, vanquishing both the Porsche Cayenne and the BMW 5M – German premium models starting at around US$135,000 and US$205,000 respectively – in speed trials.
“This is the new king of the road,” Geely Automobile CEO Gan Jiayue told the audience at an event in Ningbo, about 200 km (124 miles) south of Shanghai.
Tu Le, managing director of consultancy Sino Auto Insights, said that by launching large premium SUVs, Chinese automakers are sending “a shot across the bow” of Detroit automakers General Motors, Ford Motor and Stellantis, which have specialised in these highly-profitable models.
At the moment, US customers can’t buy Chinese cars, although many industry watchers expect that to change eventually.
“Detroit’s cash cow is no longer safe,” he said.