Going Global: China‘s Expansion into Europe

Research evidence excerpt

Going Global: China‘s Expansion into Europe

Global InsightM

Executive Summary

Consensus expectations remain too optimistic. We see >10% downside risk for European

OEM earnings expectations as Chinese players accelerate expansion into Europe amid

weak domestic demand. We think consensus assumptions of flat or growing volumes

appear optimistic given Chinese OEMs’ localised production efforts, highly competitive

product, tactical go-to-market strategy and rapid progress in dealerships, fleet sales, and

financing offerings.

China is targeting all of Europe's key market segments. Chinese OEMs' entry into

Europe is focused on affordable entry-level vehicles, the large and profitable SUV

segment, and both BEV and HEV powertrains, widening Chinese OEMs’ addressable

market. Renault is most exposed to entry-level competition, while Volkswagen, Mercedes-

Benz and BMW face greater SUV exposure. Chinese OEMs have made major progress in

the UK, Italy and Spain in recent years, with Chinese share up 7–10 percentage points over

2020–25. Germany and France remain more resilient for now, but we suspect pressure

may also start to build up here in the years to come.

Mass market OEMs more exposed, already reflected in our estimates. In our analysis,

Volkswagen stands out as having the largest exposure to mass market SUVs – placing it in

direct competition with Chinese OEMs in a key market segment. Whilst the company has

successfully defended, and even grown share so far, we think the breadth of models

available at lower price points ultimately drives demand towards Chinese OEMs. Renault

is the only major OEM with meaningful exposure to the entry-level segment. Chinese

OEMs are much more focused on this segment than the wider market, putting Renault in