The European automotive market has historically been dominated by traditional players, however the growing penetration of Electric Vehicles (EVs), albeit at declining growth rates, has created space for new entrants. The transition from internal combustion engine vehicles to EVs has somewhat leveled the playing field from a technological standpoint. Moreover, Chinese EVs are on the receiving end of government subsidies, have supply chain advantages - notably in battery production - and been exposed to longstanding fierce domestic EV competition. In combination, these factors constitute a competitive edge against the incumbent OEMs in Europe.
However, what ultimately drives the purchasing of cars is how consumers feel and think. And thoughts and feelings are triggered subjectively by individual consumers’ interpretations of brand experiences collected from the past to the present. These feelings and thoughts can be quantified in a “reputation score”. The drivers for reputation are consumers perception of Product & Services, Performance, Leadership, Citizenship, Conduct, Workplace, and Innovation.
In other words, when OEMs battle on attracting and maintaining buyers, the relative reputation is the primary buying influence. According to The RepTrak Company, the automotive industry is the industry with the second highest reputation in Europe. This means that breaking into the industry by a new OEM is relatively challenging in comparison to entries into other industries.
To establish a strong reputation for a new entrant, obviously consumers need to know of the brand in first place. In marketing lingo, awareness is a necessary (but not sufficient) ingredient in a car launch. And awareness of Chinese brands is lacking if applying volume of Google searches as a proxy for awareness.
To add to this, a 2022 survey study by YouGov showed that only 14% of German consumers were aware of BYD, the world’s second-largest EV maker after Tesla. Only 17% knew of Nio, 10% of Geely’s Lynk & Co and 8% of XPeng.
Despite a lacking awareness of specific Chinese OEM brands among European consumers, studies suggest a growing willingness to consider Chinese EVs, e.g. 29% in UK and 43% in Spain. Notably, key barriers in the UK included ‘Political matters’ (37%), ‘Build Quality’ (36%) and ‘Lack of familiarity with brands’ (28%). On the positive side, key drivers were ‘Better value for money’ (30%) and ‘Better technology’ (10%). Thus, the challenge facing Chinese EV companies is two-fold. Lack of company awareness, and a negative perception towards their home market China.
To enter a new market, any brand initially faces the significant behavioral challenge of ensuring first purchase. Barriers facing Chinese EVs are made even higher due to the strong reputation of existing competitors. Across Europe renowned local companies like BMW Group, Mercedes-Benz but also Asian companies like Toyota and Honda Motor Company all have strong reputation with European consumers. Accordingly, the entry barriers are more than just price and value. Its about trust and the willingness to try the products. Still, it remains to be seen if there is a segment of consumers seeking in the low to mid-price range which will not be so swayed by traditional brand attributes and attitudes around brands, provided safety is certifiably high.
Launching a car in Europe is a multi-faceted endeavor. Homing in on the marketing and communication challenges and requirements, these are the critical success factors:
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