Turning the wheel: China’s bold inroads into European and global automotive

Delayed by the pandemic, Chinese OEMs are now accelerating plans to re-enter the European market — after a failed attempt around 2017.

While it’s clear they’ve learned from experience and now approach with an attractive brand strategy adapted to the non-Chinese vehicle buyer, they still face historic biases — the ‘Made in China’ label still being perceived as synonymous with poor quality, and the state’s relative political isolation among them. For example, in a recent GfK study, we found consumers held a favorable view of a vehicle, but perceptions changed when the country of origin was known and factored in. We cover this topic extensively in our article Dragon on wheels: How Chinese car brands are disrupting the EV landscape. 

Despite signs of rigorous strategic preparation, the road ahead for Chinese automakers is as challenging as it is promising. In theory, it can be done. Chinese OEMs have demonstrated recent, remarkable success in other categories, such as Small Domestic Appliances — where, in just under five years, they have come to dominate the robot vacuum cleaner segment.

Have Chinese car brands done enough to be successful the second time around? What about barriers that are outside their control? Rooted in findings surfaced by a study conducted with a representative sample of Belgian consumers, we delve into the nuanced dynamics that influence this ambitious plan’s success or failure, and its impact on the global industry.

Chinese automakers’ initial entry into the European market experienced a significant number of setbacks. But what were the reasons for these challenges? Our study surfaced four key factors: cultural bias, misinformation, existing consumer loyalty to established brands, and after-sales service concerns.

Pervasive Sino-skepticism coupled with a lack of information seems to fuel consumer assumptions around Chinese vehicles that brands must work doubly hard to dispel. To succeed, consumers must be convinced of facts that are currently being outshined by the reputation of their home country: that they have 5-star safety ratings, are proven reliable, and offer comparable quality to established European brands. They also need to actively detach themselves from the perceived reputation of China as a nation-state.

With its rich automobile legacy, Europe is home to generations of consumers who have grown up with loyalty to specific brands. Switching to an unfamiliar brand, especially when investing in an asset as valuable as a vehicle, becomes daunting for many.

China’s perceived negative reputation, and the lingering consumer belief that Chinese products are of low quality, make it even less likely that European consumers will switch from their current brand to a new Chinese option. In fact, 51% of surveyed consumers shared there is no chance they will buy a Chinese vehicle in the future. However, the GfK 2023 Future of Mobility Report finds that consumer would consider switching brands if the new one offers more cutting-edge technology — creating a bright future for Chinese automakers who can change these perceptions about their vehicles.

Further, 70% also expressed loyalty to their dealership. Clearly, after-sales service and personalized relationships matter significantly — arguably more than the brands they represent. Here again, however, consumers are far from unanimous — with younger generations feeling significantly different about the relative importance of a relationship with their dealership.

An underdeveloped dealership network — or the perception thereof — amplifies consumers’ uncertainty regarding the quality of after-sales service and presents a logistical challenge for Chinese new market entrants.

Our research suggests misinformation is rife around Chinese brands in general. For example, consumers often think their model options are more restricted than they actually are. Clearly, regardless of the actual state of their dealership and after-sales service network, Chinese brands must work on both the reality — establishing a tangible presence — and consumer perception — reassuring them it’s there.

The rise of Chinese tech giants gives automakers a template for market entry and expansion. The rapid acceptance of Chinese brands in other sectors, such as social media platforms and Consumer Technology and Durables, hints at changing perceptions.

Recent models cater more diligently to European taste and requirements, showcasing a growing understanding of the local consumer. Our research finds Chinese vehicles described in very positive terms when consumers were unaware of their country of origin. Significantly, many even believed the vehicle to be German — a favored country of origin.

The prejudices that consumers seem to have about Chinese vehicles — that they are designed differently to European ones and don’t look good — disappear when evaluated under a blind test, where 85% of respondents mistook a Chinese model for a European, North American, Japanese, or South Korean one.

This reveals two key points. First, Chinese automakers are closely matching European design tastes — so well that people often can’t tell them apart from their favorite brands. Second, consumer opinions remain heavily influenced by concerns about China as a nation-state and outdated beliefs on manufacturing quality. These, more than an actual misalignment with consumer needs, are the main obstacles facing Chinese automakers.

China’s leadership in EVs, particularly in providing affordable options with innovative solutions like replaceable batteries, positions them ahead of the game as eco-dedicated, but cash-strapped consumers move towards greener alternatives. While 47% of consumers cite electric, hybrid, or hybrid plug-ins as their preferred engine type for their next purchase — notably as company vehicles rather than private ones — 87% wouldn’t buy one.

Established brands lose a significant opportunity to convert the 1 in 4 consumers who have considered an EV purchase, mainly due to their high prices, and limited driving range. Chinese brands can make a significant impact in this segment, addressing the main barriers to purchase by offering cheaper EV models with replacement batteries that lessen the need for frequent charging points, extend driving range, and make charging more efficient.

With state-of-the-art technology embedded in their vehicles, Chinese brands are visibly comfortable with (and experienced at) embracing the future — enhancing their image, user experience, and safety at the same time.

However, here again, the biggest obstacle they face in gaining market share is consumer perception — with only 11% believing Chinese vehicles are technologically advanced (compared to 34% for German vehicles, and 23% for Japanese vehicles). But word is getting out: a small group of survey respondents (approximately 15%) knew more about Chinese vehicles than average. This group readily associated them with EV offerings and cutting-edge technology, and also more readily and accurately recognized Chinese models in blinded tests.

Safety ratings are a hallmark of quality in the automotive sector, and critical to earning — and maintaining — consumer trust. Chinese brands often exceed expectations in this area, with a notable few even securing the coveted 5-star safety rating. These accomplishments challenge preconceptions about Chinese manufacturing quality and demonstrate a commitment to consumer well-being.

Once again, consumers’ negative sentiments can’t withstand blind testing. When assuming that a blinded promotional photo of a Chinese vehicle was a German one, 91% of respondents believed it was safe, and 88% believed it was reliable. For respondents who correctly identified the vehicle as Chinese this dropped to 73% and 68% respectively.

With advanced safety features being almost 9x more important than other considerations when buying a car, addressing consumer perceptions is critical to the success of Chinese brands. And perceptions are shifting. Already, despite negative views, only a small minority (13%) of surveyed consumers expect a decrease in market share for Chinese brands — and of the 44% who expect an increase, 20% attribute this success to their complying with European safety standards.

The Chinese automotive industry is at an inflection point: at the brink of potentially reshaping the global market. As underscored by our study, brand success or failure depends on multifaceted and deeply interwoven perceptions and local market dynamics — their biggest obstacle is seemingly consumer prejudice and misinformation.

Affordability and technological innovation are clearly strong suits for Chinese automotive brands, particularly in the EV segment. But an undercurrent of skepticism remains — rooted in concerns over quality, safety standards, and post-sales support. How these brands navigate this nuanced landscape will dictate both whether they succeed or fail, and the shape of the automotive industry at large.

The fact that Chinese brands have demonstrated the capacity to learn from previous attempts at market entry, and the depth of change that their new strategy highlights, points to their best chance of success.

Get in-depth, actionable insights about the complex landscape being navigated by Chinese automakers and how it may impact your business — in all of your key markets. Learn how legacy brands could react and which sectors may be affected, to equip yourself for this transformative era in the automotive industry.