The survival of Chinese automakers depends on conquering the European market

The record-breaking attendance of 20 Chinese brands at the Paris Auto Show, in a situation where the stagnation of China's domestic market has increased the pressure to merge and reduce the number of car manufacturers, shows that success in the European market can become a decisive factor in the survival of car companies in this country. The post survival of Chinese automakers depends on conquering the European market appeared first on Safir Arjan.

According to Ambassador Arjan, considering that the American market is largely closed to Chinese automakers, Europe is the most profitable market that remains open to them, although penetrating it is one of the most difficult challenges.

Chinese brands, including BYD, Chery and MG, have already established their foothold in Europe. Meanwhile, new entrants are rapidly trying to expand their network of dealers, parts supply centers and brand recognition in this block.

"If they stop exporting to Europe, they will be destroyed," said Francois Rodier, secretary-general of the International Organization of Automobile Manufacturers (OICA). The main pressure comes from within China, where the world's largest auto market is extremely saturated.

More than 100 car manufacturers compete with each other in China. The support of the central government and the provincial and city governments to domestic companies has helped the continuation of the activities of the country's car manufacturers and has delayed the process of mergers and withdrawal of companies from the market, which was expected for a long time, which could lead to the loss of a significant number of jobs. However, the drop in car sales has increased the probability of these developments.

New car sales in China decreased by 20% in the first half of this year. Chris Liu, an analyst at Omdia, said: Chinese automakers, who expected the market to continue growing, have launched an average of three new models per day in 2026. "This is the worst possible year to launch a new car in China," Liu said.

It is expected that the market will improve slowly. Consulting company AlixPartners predicts that the sales of new cars in China will not return to the level of 2025 until after 2030.

A sluggish domestic market has increased pressure on automakers to find growth opportunities abroad, particularly in Europe.

Rodieh said: The new agreement between the European Union and China to reduce the import of Chinese hybrid cars to this bloc by half will only intensify the competition between car manufacturers in the Chinese domestic market.

Auto industry executives and analysts say Beijing has taken cautious steps to begin a long-anticipated consolidation process in the industry.

Last month's merger agreement between Toyota's two Chinese joint venture partners, under which state-owned FAW (FAW) will become the second-largest shareholder of Guangzhou Automobile Group (GAC), is seen by many experts as an early example of how mergers are possible in the industry.

"This is probably one of the most complex mergers to manage," said Pedro Pacheco, vice president of research at Gartner.

China's Ministry of Industry announced in September that it will support integration in the industry, in a road map it published in September for the country to become one of the world's leading automotive powers by 2030.

Industry experts expect the merger process to eventually reduce the number of automakers operating in China's crowded market to a limited number of companies capable of competing globally.

Europe; Competitive power measurement field

Automakers' performance in foreign markets, particularly Europe, is likely to become a more important measure of which companies can continue to operate independently, analysts say.

"The Chinese government will definitely evaluate the sales performance abroad, especially in Europe," said Liu from Omedia Institute. These conditions are in favor of companies that entered the European market earlier; including BYD and Chery, which are rapidly increasing their market share in this block.

At the same time, entering the European market has become more difficult. The best opportunities to establish dealerships are largely reserved for established companies, and new entrants must invest heavily in spare parts warehouses, repair networks, and after-sales services to meet the expectations of European customers.

Automakers must also pay attention to the resale value of their cars, which is very important in a market where more than half of new cars are leased. This way of selling is still not very common in China.

Such investments require a lot of time and money. For example, Great Wall Motor faced problems in its first attempt to establish its position in Europe, and now it is trying to return to this market.

Changan, which has started selling its cars in Europe since last year, started expanding its dealership network before entering this market and expects to have 650 dealerships across Europe by next year.

According to a Reuters report, Philippe Notard, director of the analysis and review department of the car dealership services company "Cox Automotive" (Cox Automotive), said: BYD, Chery and MG are willing to bear heavy costs to stabilize their position in Europe, which leaves less space for newcomers to gain a significant share of the market.

"Eventually we will have four or five major Chinese automakers, and other companies will come and go," he predicted.