MG Of China Likely To Keep European EV Lead By 2030, Despite BYD

MG is leading China’s long electric car march into Europe, and will probably retain leadership through 2030, despite a big challenge from BYD, according to analysts.

MG’s success has been helped by the public perception its vehicles are directly linked with the legendary British brand. SAIC bought the name in 2007, the year it also started making vehicles in China badged as MGs. But high quality and attractive products like the MG4 Xpower and the new MG3 mean it will generate real power in the marketplace. And MG’s planned Cyberster roadster will stir memories of the old British marque’s glory days.

SAIC is the State Administration for Industry and Commerce, a Chinese government entity.

Last year China sold just over 350,000 sedans and SUVs in Europe, mainly electric ones, according to French auto consultants Inovev. SAIC’s MG led the way with 239,000 mainly EVs, about double 2022’s total. BYD was well behind with 16,000 but has big ambitions.

At the Geneva Auto Show, MG said it plans to increase sales to over 300,000 in Europe this year, as it launched its new MG3 hybrid small car. The MG3 will compete with the likes of the Toyota Yaris hybrid and Renault Clio E-tech. An ominous warning sign for Europe’s premium brands, SAIC’s premium brand IM (intelligent mobility) unveiled the L6 at Geneva, which should go on sale in Europe next year with a solid-state battery offering a range of just under 500 miles, allegedly.

MG, and Chinese manufacturers like BYD, Great Wall Motors, Dongfeng, Geely’s Polestar and Chery make many top-class EVs, which, according to investment bank UBS, often have at least a 30% price advantage over Europeans.

But there are still some sizeable hurdles to jump. Currently, the transport of SUVs and sedans to Europe has been slowed by troubles in the Red Sea, which means ships have to take a longer route to Europe around southern Africa adding much time and expense. There’s a shortage of car transporters which will take years rather than months to fix.

There’s also the worry that faced with an existential threat to its own industry, the European Union will impose tariffs to curb Chinese EV sales. That’s unlikely because China might respond with harsh measures which Germany would find unacceptable. The EU is expected to announce the results of its probe into China’s EV subsidy policies in May, and import tariffs could jump to 25% from the current 10%.

Fears of EU tariff retaliation have already prompted BYD to plan a factory in Hungary. Experts expect MG and other Chinese manufacturers to do the same in Europe.

JATO Dynamics Global Analyst Felipe Munoz expects Chinese automakers will start producing locally to better comply with regulations and avoid penalties.

“The EU commission will need to come up with a solution that does not hurt the German interests in China, and that protects the French and Italian brands, the most exposed to an eventual Chinese “invasion”. This is because I believe the Chinese makers will continue flooding the market in all segments: from A to F (entry-level city cars to top luxury); especially if the local production continues to be expensive and unprofitable to produce small cars. Who will supply them?” Munoz said.

Reports from the U.S. that the Biden Administration might impose more restrictions on Chinese auto imports because they could pose national security risks might give the EU ideas. The worry is that modern vehicles, and especially incoming autonomous EVs with their cameras and sensors, generate a huge amount of data which could be useful to an enemy. They could also, in theory, be piloted or disabled remotely. Currently high tariffs and rules of origin on batteries disable China imports.

Given that these problems are likely to be solved in Europe sooner or later, MG will be one of the rising stars, says Munoz.

“I think MG has finally understood the European public and this is just the start. The MG4 is probably the first modern product of an offensive that will include much more appealing and affordable alternative-fuelled vehicles,” Munoz said in an email response to questions.

The MG4 competes with the likes of the Volkswagen ID.3 and the Cupra Born.

“We have to remember that the MG ZS and HS are quite old now. They should be working on their successors, and they should not take time to arrive. This is why by 2030, if the regulation on the imports of Chinese cars does not change, they could be easily among the top 10 in Europe, and the leader among all Chinese brands,” Munoz said.

Jamel Taganza, vice-president of French auto consultancy Inovev, said he expects MG sales to hit 400,000 by 2030, while Chinese brands will account for nearly 8% of the European market at about 1.1 million. Taganza also expects MG’s model range to include entry-level city cars to top-of-the-range models. MG already has a technical center in Europe and might well decide to build a factory too.

As European rules on CO2 emission tighten on the way to outlawing the sale of new combustion vehicles by 2035, local manufacturers face a harsh dilemma. Such an implied mass market for EVs will demand light inexpensive town cars that are already on sale in China, but which Europeans don’t seem inclined, or able, to produce profitably.

“With the mass market switch to electric cars, Europe may be tempted to let the Chinese carmakers dominate the affordable EV segment and leave the higher segments to them. But that would be a dangerous bet to make,” Taganza said responding to email questions.

The EU has placed its auto industry between a rock and a hard place. No new ICE cars will be allowed after 2035, apart from a trickle using “e-fuel”. The trouble is, Chinese automakers are about 5 years ahead of Europe’s so if the targets remain, it is a great opportunity for them. European manufacturers are currently suffering a profit squeeze because of this.

The next phase of the market presents a much harder problem. For European EV sales to grow from the current approximately 2 million to the targeted 9 million plus by 2030 means a mass market must be established requiring entry-level prices of say €10,000 ($10,900). Europeans currently have no candidate in this sector. In China this sector is already booming, with little urban runabouts like the BYD Seagull and Wuling Bingo already selling more than 500,000 a year between them, according to Inovev. Prices start at around $5,000.

Alarm bells are belatedly ringing in Europe, and at the Geneva Auto Show last week Renault CEO Luca de Meo renewed his plea for a radical, pan-continental governmental solution along the lines of a new European Airbus to ward off disaster.

If that doesn’t work the EU may have to climb down and dilute its CO2 regime, or watch its flagship auto industry whither and die.

Meanwhile, Renault announced at the show it is in small, city-car partnership talks with Volkswagen and other potential manufacturers, which it declined to name.