Chinese automakers line up for ‘phenomenal opportunity’ in the UK

ORA Good Car GT electric vehicle on display at the 43rd Bangkok International Motor Show – NurPhoto

Few cars are as famous as the Fiesta, Ford’s cheap, reliable car that taught millions of Britons to drive.

But after sales of 4.8 million in the UK alone, the American carmaker has canceled the model. Production ends this year, almost 50 years after the debut.

The pullout creates a gap at the bottom end of the market as more automakers abandon lower-cost models in favor of more expensive — and more profitable — SUVs. Yet nature abhors a vacuum and new manufacturers are already lining up to take the place of the old guard. The vast majority come from the same country: China.

Up to 30 new electric vehicle brands are eyeing the UK car market, according to an industry report from The Telegraph, most of them Chinese.

Challengers have designs at the cheaper end of the market, preparing to sell mass-market battery-powered cars to Britain.

Companies such as BYD and Ora, which already have agreements with UK dealers, will be joined by a slew of other car manufacturers, including Chery, Dongfeng and Haval. They are big brands in China, but virtually unknown to UK buyers.

Ford Fiesta - John Keeble/Getty Images Europe

Ford Fiesta – John Keeble/Getty Images Europe

“I’ve read about the Chinese being very, very excited about the British market,” says Mark Raban, the boss of Lookers, one of the UK’s top car dealers.

Lookers will soon begin selling cars from BYD, which is backed by billionaire American investor Warren Buffett. The company only started making cars in 2003, but already has a 17 percent market share of electric vehicle sales in China.

In addition to the cars themselves, BYD also makes the batteries that go into them. This will become increasingly important as rising demand for batteries around the world puts pressure on supply.

“I think we’re going to see very, very competitive pricing,” says Raban.

China’s car market is the largest in the world, but sales growth is slowing in line with the broader economy. As a result, domestic automakers are now looking to export.

Britain is an obvious target: the UK has recently reclaimed its place as the second largest European market after Germany, and the Chinese car industry is already well connected here.

MG, for example, is now one of the fastest growing car brands in the UK, surpassing Citroën, Honda, Renault and Skoda. Although a British brand, MG has been Chinese owned since 2005.

As The Telegraph revealed last month, MG plans to further expand electric car sales in the UK as it sees “a significant opportunity” in the country.

MG - Chiradech Chotchuang/Alamy Stock Photo

MG – Chiradech Chotchuang/Alamy Stock Photo

China’s Geely is also preparing to invest more in the London Electric Vehicle Company, which makes electrified London black cabs and battery-powered vans. Geely hopes to transform the company into a “high volume” electric vehicle manufacturer, Reuters reported.

Electric van sales have already proved popular with customers, according to recently filed accounts from the Warwickshire company.

Promised investments like this raise hopes that Chinese pressure on the car market could help Britain reach its target of 2 million cars a year.

To do this, it needs new factories, likely owned by companies that don’t yet produce here, the industry lobby group says.

If China wants to sell here, can it also bring jobs and production lines, and bring affordable car production back to Britain?

Prof David Bailey, a car industry expert at the University of Birmingham, is sceptical.

“I think they might go to Central Europe where labor costs are low. You know, what is the UK doing to be an attractive place to settle?”

The US has built a tax bonanza worth hundreds of billions of dollars that is currently sucking up investments in green vehicles and has already lured startups like electric van maker, Arrival, away. The EU is considering a similar arrangement.

“We’re sandwiched between these two really big blocks that are putting a lot of effort into making this happen,” Bailey says.

However, for Lookers’ Raban, the arrival of a wave of affordable Chinese cars is a “phenomenal opportunity” for his company.

New brands could take 10% of the UK EV market by 2025 and 18% by 2030, industry researchers estimate.

Chinese manufacturers are played into the hands by the fact that others are cutting back while they want to expand.

Jim FarleyRebecca Cook/Reuters

Jim FarleyRebecca Cook/Reuters

Last week it emerged that Ford will cut 3,200 jobs across Europe as it shifts its focus from cheaper petrol cars to more lucrative electric cars.

Major automakers are abandoning lower-cost models to sell bigger SUV-style engines and higher-spec cars to make the most of limited parts stocks.

Ford is targeting models such as the £50,000 electric Mustang. It joins brands such as BMW and Mercedes who have both openly said that cheaper cars are no longer for them.

Not everyone has abandoned the entry-level car: Nissan has increased production of its Qashqai by 16.5 percent.

However, Nissan’s Qashqai starts at £26,000, quite a change from the £16,000 a Fiesta could be bought for just before the pandemic.

By starting at the bottom of the market, Chinese manufacturers are taking a leaf out of Nissan’s book. When the Japanese company entered the UK, it first did so under the guise of its mass-market Datsun, which undermined the competition. Over time, it moved up the ladder to introduce higher-spec, more expensive models.

For companies like Ford, the move to the crowded, more expensive part of the market, displaced by cost-cutting Chinese brands, may not end well, says Prof. David Bailey, an auto industry expert at the University of Birmingham.

“There’s no guarantee that anyone will survive,” he says. “And they are the ones who can move quickly and efficiently to electric vehicles and reduce their costs; they will be the ones who survive.”

Whatever the outcome, Chinese challengers will soon go on sale along with European, American and Japanese models. And for buyers looking for an affordable everyday car, these may increasingly be the only options.

Ford is targeting models such as the £50,000 electric Mustang. It joins brands such as BMW and Mercedes who have both openly said cheaper cars are no longer for them, although Ford points out that despite the Fiesta’s declining sales, it was still a top-10 car last year and will be joined by the Puma and Kuga in the bestseller list.

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