Blow for Europe as Chinese EV makers fan competition with new deals

As the Year of the Snake kicks off, Chinese car manufacturers have begun launching a number of aggressive promotions to boost flagging deliveries over the Lunar New Year holidays. These incentives have the potential to intensify electric vehicle (EV) competition both in China as well as Europe. 

With demand for big ticket purchases falling in China, there have been increasing concerns about Chinese car companies’ ability to offload their inventories. This is mainly as consumers continue to deal with higher costs of living and economic uncertainty. 

As part of a Lunar New Year holiday promotion, Tesla launched a five-year 0% interest financing plan and 8,000 yuan (€1,061.0) insurance subsidy for the Model 3, which is its cheapest car.

This means that for customers who put down a 34% down payment of approximately $11,000 (€10,670.9) in February, as well as opt for the financing plan, the Model 3’s basic version is likely to be almost $1,000 (€970.1) cheaper than its current price. However, buyers who pay less than this amount for a down payment will have to pay interest. 

Tesla also started the same financing plan for its latest Model Y in China back in January. Model Y deliveries are expected to start from March this year in China. 

Another Chinese electric vehicle (EV) startup Xpeng Motors, more commonly known as Xpeng, has scrapped its down payment for its five-year 0% interest financing plan for four models. Previously in December, the company had already removed the down payment on the G6 SUV, which is one of these four models. 

Similarly, Nio, another EV company, also revealed its own zero interest five-year financing plan for February, in contrast with the three-year plan it had introduced in January. This move was following the company’s January sales plunging severely. 

Seasonal fluctuations in demand have further impacted a number of Chinese EV makers. As such, these promotions are seen as a way for companies to boost sales and encourage customer interest, without actually cutting car prices. 

The Chinese government introduced a subsidy of 81 billion yuan (€10.7bn) in January to boost sales of home appliances, electric cars and smartphones over the Lunar New Year holiday as well. 

How will these incentives impact the European EV sector?

Although the Chinese EV market is slowing down at the moment, it is still considerably more competitive than the European one, with a number of new entrants every year. Support in acquiring lithium batteries, which are key for electric vehicles, as well as other generous government subsidies have accelerated China’s shift to EVs. 

Several Chinese EV companies have branched out abroad and have already made their mark in  European markets. They offer cheaper products, with better designs and a range of features. As such, these new incentives are likely to make it even harder for European EV makers to compete with Chinese rivals, even if they are only temporary.

Although the EU has imposed higher import tariffs on Chinese EVs imported into the bloc, fuelled by rising concerns of unfair government subsidies, many EVs have pivoted to focus on hybrid vehicles as a way to continue growing their European market share. As a result, the EU’s current tariffs may not be as impactful as previously anticipated.