Tag Archives: BYD

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Volkswagen ID.7 Vizzion is 57.4% cheaper in China than in EU

The new electric sedan Volkswagen ID.7 Vizzion is coming to the Chinese market, and the most attention is attracted by the price of the car, which is 57.4 percent cheaper than in Germany. Why is this so, whether and in what way the Chinese authorities help manufacturers to be more competitive on the market?

The Chinese authorities subsidize domestic car manufacturers in various ways, through loans from state-owned banks, capital reserves from state investment funds or lower electricity fees. A few years ago, the Chinese government gave about one billion euros to Nio to save it from bankruptcy. However, it was not just financial support, because with that money the government bought a 24 percent stake in the company. After that, there was another financial injection from an unnamed state banking house in the amount of 1.5 billion euros. Now the government is helping Nio with 32,000 euros per car.

In order to be more competitive in China, VW reduced car prices last month, which turned out to be good, when it comes to sales. However, growth was achieved primarily through the sale of low-cost cars such as the Lavida sedan (13,345 euros), putting VW in second place with 1.56 million vehicles sold. BYD was first with 1.79 million vehicles sold, and Toyota was third with 1.24 million cars.

What may worry VW and its Chinese partners is the problem of low demand for their battery vehicles, as the company is sold 92,332 units. Compared to the biggest competitor, BYD (893,754 vehicles), the problem seems even bigger. Also, Tesla managed to sell five times more electric vehicles (433,729).

Another reason why cars made in China are cheaper compared to the rest of the world is cheap labor. A manufacturing worker there earns about a third of what an American or European auto worker earns annually. Also, Reuters recently wrote about an unnamed employee of the Changan Automobile Factory in Che-fei, who experienced a reduction in income and left his job in July, because his salary in May and June was only four thousand yuan a month (about 512 euros ), instead of 900 euros as he expected.

How the rest of the world, primarily Europe and the USA, will react to the increasing pressure that Chinese manufacturers are putting on the global market remains to be seen.

Source: VW, Reuters, NYT

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Volkswagen ID.7 Vizzion is 57.4% cheaper in China than in EU
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How China Subsidizes Electric Car Manufacturers?

Last month, the EU launched an investigation into the privileged position of electric cars made in China due to subsidies. This does not only apply to Chinese manufacturers, but to all electric cars produced in China that are exported to the European market. Following this case, the New York Times revealed that China subsidizes the Nio with 32,000 euros per car.

In 2020, Nio was facing bankruptcy. The Chinese government gave about one billion euros to save the company, but it was not just financial support, because with that money the government bought a 24 percent stake in the company. After that, there was another financial injection from an unnamed state banking house in the amount of 1.5 billion euros.

In addition to government support, Chinese car manufacturers have another big advantage in terms of low prices compared to manufacturers from Europe and the US, and that is the lower cost of labor. A manufacturing worker there earns about a third of what an American or European auto worker earns annually. Also, Reuters recently wrote about an unnamed employee of the Changan Automobile Factory in Che-fei, who experienced a reduction in income and left his job in July, because his salary in May and June was only four thousand yuan a month (about 512 euros), instead of 900 euros as he expected.

When it comes to other electric car manufacturers, BYD is the largest Chinese electric car manufacturer, and in the first six months of this year, it made a profit of 1.35 billion euros. Some data show that the BYD Seal could be produced 35% cheaper than the Volkswagen ID.3, which, thanks to the technology, is another advantage of the Chinese manufacturer.

Source: New York Times

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EU is investigating all car manufacturers for Chinese subsidies

As European Commission President Ursula von der Leyen announced a few days ago, the EU launched an investigation into the privileged position of electric vehicles produced in China due to subsidies. “These can also be vehicles from other manufacturers if they have used subsidies in China,” said Executive Vice President of the European Commission for an Economy Valdis Dombrovskis.

Many electric car manufacturers have plants in China, such as Tesla, Renault, VW, etc. All of them export their cars to the European market, and during the collection of evidence, Tesla was among the companies that were found to have had additional benefits. The goal of the investigation is to determine whether and in what way China subsidized car manufacturers in order to take all necessary countermeasures and equalize the market position for everyone.

Tesla enjoyed a special position in China that other companies did not have. Thanks to the Chinese government, the American company has fully utilized its domestic operations, instead of sharing them with a local joint venture partner as is the case with VW and Audi in China. Tax breaks, loans and other forms of aid have helped make China Tesla’s second most important business market outside the US.

Many will think that China will make a countermeasure against European manufacturers. Well, the chances of that are slim. If we consider that the European electric car market is the second largest in the world, after China, it can be hardly expected that the Chinese government will play against itself.

Other car manufacturers, BMW and Renault, have no comment on the situation.

Source: Reuters