Strategy Espresso: Europe and the China Dragon – a fiercer fight

Research evidence excerpt

Strategy Espresso: Europe and the China Dragon – a fiercer fight

Goldman Sachs Strategy Espresso

Q&A on Europe Equity & the China Dragon – A fiercer fight

1. Is China continuing to take share in Europe, and in third markets? Yes, most

certainly. China exports to Europe have been growing at a double digit annual pace in

recent months, and China has been increasing share in third markets too. China now

accounts for 23% of EU imports (Exhibit 1) and the share of China in Europe’s exports

has fallen sharply since 2020. In other words, China is buying less from Europe but selling

more into Europe, representing a competitive threat to European manufacturing

companies. We have seen several companies warn or lower guidance over China

competition in recent weeks, including Signify and BMW.

n Autos: The figures are stark, our analysts report that Chinese domestic brands

gained over 400 bps of Europe market share in the year to end May (their overall

share of the European market is now 6-7%), corresponding to a roughly 400bps

share loss from mass-market brands in Europe. They argue that this share gain trend

appears to be accelerating, with every mass-market brand losing ground except

Tesla. Relative to the mass market, the European premium brands have proven more

resilient but even these are losing share.

n Chemicals: Our analyst recently downgraded several names arguing that China’s

export-oriented pivot over the course of the Middle East conflict has effectively

extinguished any short-lived hopes of a revival in European competitiveness. With

other Asian countries suffering feedstock supply issues and domestic Chinese

demand remaining low, excess capacity is forcing product out of China with chemical