Chinese OEMs expanding into new markets
A Global China
Collectively, Chinese OEMs have expanded their global footprint worldwide – with their reach encompassing both developing and developed countries. In 2022 alone, the export volume of Chinese OEMs exceeded 2.5 million – marking a significant increase from the 2021 figure. In the near future, OEMs from the region will look to expand their presence into a greater number of countries while achieving higher export volumes. For many, Western Europe is becoming a key area for expansion – with the proportion of total Chinese OEMs export volume increasing from 10% in 2019, to 24% in 2021. Although the market share is still small, many Chinese OEMs are targeting the European market as their primary one in the future.
This Insight profiles two Chinese automakers - Nio and BYD - while exploring their domestic successes and expansion activities to date, as well as their future plans to reach globalization.
One Chinese OEM targeting Western Europe is Nio – an EV start-up headquartered in Shanghai. In its home market, the OEM quickly began operations in 2016 - following investments from several large firms, including domestic technology giants Tencent and Lenovo. Since then, it has developed electric sedans, SUVs, and crossovers, alongside dedicated ADAS, autonomy, and AI technologies for these vehicles. However, the automaker is most well-known for its battery-swapping service.
Developed as a quicker alternative to EV charging, the OEM’s Nio Power Swap stations can replace a depleted EV battery with a brand new one in around five minutes. Exclusive to Nio customers and offered in a Battery-as-a-Service model, the stations have become a part of the OEM’s identity and will play a key role in its expansion to Europe. The rollout of a battery swapping station network for Europe was announced as part of its larger Norway Strategy in May 2021 which marked the first step in Nio’s expansion outside of China. The strategy also encompassed the first international launches of its flagship ES8 SUV (known as the EL7 in Europe) and ET7 sedan, new sales and service networks for Norway, and a Nio House showroom in Oslo. Ahead of the SUV’s launch in the country, Nio received a five-star safety rating for it from the Euro NCAP – supporting its plans for the country and the wider Europe region.
In late 2022 these plans were revealed at a European Launch Event, where Nio announced the expansion of its products and services to Germany, Denmark, Sweden, and the Netherlands. It announced that the EL7 and ET7 would be offered in the countries through its Nio Subscription leasing model from January 2023, as well as the market launch of its ET5 mid-size sedan in March 2023. In the near future, the brand is looking to greatly expand its European network of battery swapping stations – aiming to roll out 120 over the course of 2023. It likewise plans to offer a network of Nio Houses in the region, with new locations planned for Hamburg, Frankfurt, Düsseldorf, Amsterdam, Rotterdam, Copenhagen, Stockholm, and Gothenburg. Beyond this plan, Nio is looking to integrate itself further in the European auto market through the introduction of two new brands codenamed Alps and Firefly – with both expected to offer vehicles tailored for European consumers. It is, likewise, investigating potential expansion plans for the U.S. – where it has already established a corporate presence – though regulations in the region are currently preventing it from a full market entry. As it continues to expand, the OEM will develop its R&D capabilities to support new innovations, such as its sub-brands, and its ultimate goal to establish a presence in 25 different countries and regions globally by 2025.
Launched as a subsidiary of the BYD Company in 2003, BYD Auto had more time to find its footing domestically. The OEM, however, followed a similar strategy to Nio as it began to expand beyond China. Ahead of this expansion, BYD built its brand with a diverse range of models tailored to many consumer needs – offering a choice between ICE and new energy powertrains in consumer SUVs, sedans, and city cars as well as a series of all-electric commercial vehicles. Having leveraged its experiences with new energy vehicles and EV batteries, it quickly became one of the largest EV manufacturers in the China region.
BYD Auto’s continued focus on EVs would prove useful in May 2020 – when the OEM began its expansion outside China. Its first overseas country was Norway, where it planned to launch its Tang EV later in the year alongside a selection of electric commercial vehicles – including a van, yard tractor, and two trucks. Shortly after this announcement, BYD Auto secured a partnership with RSA – a distributor who would represent it in sales, service, and parts for the EVs it would soon launch in the country. This collaborative approach would soon extend to its commercial vehicle business through a similar partnership with Bluekens EV to offer sales and aftersales services for its range of all-electric trucks and vans in the Netherlands.
After developing a strong consumer footprint in Norway, even exceeding its own sales expectations, BYD revealed the next phase of its Europe expansion at the 2022 Paris Motor Show. In addition to an upgraded version of the Tang, and the market launch of its Han EV, BYD Auto also revealed the Atto 3 – an all-new compact e-SUV. While scaling its line-up of EVs offered in Norway, the OEM also used the Paris Motor Show to confirm its entry into new European markets – including the Netherlands, Sweden, Germany, and Denmark – through a series of new partnerships with dealers located in these countries. The OEM’s activity at the motor show was greatly supported by its Q3 2022 sales, which showed that it exceeded Tesla’s Q3 sales and had become the best-selling EV manufacturer globally.
In the future, BYD Auto will continue to leverage its collaborative approach as it expands further along Europe. In bringing sales to the UK, for example, the OEM announced new partnerships with five separate dealers to sell its Atto 3 model in locations across the country – including Pendragon, Arnold Clark Automobiles, Lookers Motor Group, and LSH Auto Holdings. Having secured these partnerships, it is now looking to begin UK sales before the end of Q1 2023. While securing further partnerships to sell its EVs in Ireland, Finland, and Iceland, BYD Auto is also planning an expansion route for its passenger vehicle operations into the U.S., where it has already seen success in its commercial vehicle operations, particularly in its buses.
The expert view
“Thanks to the EV transition, Chinese OEMs managed to quickly shift the balance in their favour domestically, where international OEMs had dominated up until recently. Now, a renewed confidence is evident both in China and in their bold expansion plans. They approach new developed markets with clear strategies and strong offerings that might give competitors more than a few headaches” says Riccardo Del Bello, Research Analyst at SBD Automotive.
The road to globalization
These examples provide insight into just two of the many pathways Chinese OEMs can take as they pursue new markets. Some, like Nio, have chosen to focus on markets aligned with their products and services, while others have used their brand and capabilities as a launchpad to build a presence in smaller markets and larger regions alike. Ultimately, any route to expansion will pose a variety of notable achievements and new obstacles to the OEM planning it. As such, any automaker, start-up, or new player in China’s automotive ecosystem looking to bring their sales overseas must ensure their strategy to do so accounts for both without compromising on globalization as an end goal.
Nio and BYD are just two of many OEMs profiled in A Global China – a new report which details the challenges and opportunities faced by domestic Chinese OEMs looking to expand their foothold internationally, while providing an analytical deep dive into the competition hotspots they are currently targeting. Here, the report provides a thorough evaluation of the CASES offering from Chinese OEMs, how it compares to that of incumbents, and where it poses a threat to them.
Throughout A Global China, SBD Automotive’s experts provide detailed insights into the key factors motivating these OEMs to enter new markets while highlighting the regulatory, commercial, and technological challenges posed by these markets.