As new EV competitors push into Europe’s mass market segment, how much market share will they be able to take? Analysts are keeping a close eye on the next 24 months for significant indicators of the potential risks that incumbent European automakers may face and the extent to which their market share could be at stake.
The annual sales of new cars in Europe far surpass $100 billion. With the increasing adoption of battery electric vehicles (BEVs) in Europe, the market will witness a steady flow of highly competitive offerings from established companies as well as new players. This heightened competition in the BEV mass market sector is expected to reduce the price premiums of BEVs in the market over the next ten years.
Tesla (NASDAQ:TSLA) is the largest and most prominent new entrant into the European mass-market segment. Hyundai-Kia has proven that consumers are willing to step out of their comfort zones and try out new BEVs. As Chinese brands set their sights on the mass market, conservative projections indicate that Chinese OEMs will likely maintain a market share below 5% by 2030. However, in an accelerated scenario, where both Tesla and Chinese brands capture significant market share, incumbents could lose up to 20%.
Bernstein analysts wrote in a note, “Our analysis suggests that Chinese OEMs can build compelling 'value-for-money' EV products, especially in the mass-market segments. Quality and brand recognition may remain a concern, but subscription and short-term lease programs (such as those used by Geely-owned Lynk&Co) could overcome any initial prejudice while Chinese OEMs may surprise on reliability. New powertrain and ADAS technologies could also provide sufficient impetus for consumers to shake themselves out of the comfort-zone provided by familiar European brands.”
To even come close to Tesla's rapid growth trajectory, Chinese brands will need to more than triple their volumes within the next three years. MG, as a Chinese-owned European brand with minimal European presence, holds a favorable position, while BYD (SZ:002594), Lynk&Co, Haval, and Great Wall are strong contenders.
The analysts anticipate that these OEMs will also express interest in establishing local European production before 2025. To begin full-scale production before the decade ends, a suitable site must be selected by 2025. Any delays in these plans would indicate that Tesla is the exception that confirms the rule.