Why do Chinese cars cost so much more in Europe?

Cars in China are almost obscenely cheap; the same model over here costs up to double as much for the same specification. Almost two-thirds of Chinese automotive exports to the UK are electric cars, and despite their well-known price premium over ICE cars, the same EVs are being sold in China at prices below that of petrol and diesel models here. Examples include the new BYD Dolphin, a small hatchback costing from the equivalent of £13,158 in China. However, once shipped over to the UK, it starts at £30,195 – similar to the Spanish-built Vauxhall Corsa Electric. It's the same with Great Wall Motor's Ora Funky Cat hatchback – known as the Good Cat in China. There it costs from £12,142 to £16,423 for the top-spec model with the longest range. Here it starts at £31,995. It goes on. The Maxus T90 EV pick-up truck is £33,769 in its top spec in China, or £59,940 here. Even the MG 4 EV hatchback, Britain’s second best-selling EV after the Tesla Model Y and notably good value compared with its competition, sells from £15,743 in China but £26,995 here. The price jump extends to global brands exporting select models made in China to the UK. For example, the BMW iX3 SUV costs from £45,609 in China but from £64,165 here. The Honda e:Ny1 small SUV meanwhile costs from £44,995 here compared with £22,500 in China. They even get more kit there. The price advantage that has led to Chinese brands decimating the market for global brands there hasn’t translated to the UK and Europe, depriving them of a big selling point as they try to overcome low brand awareness. With the exception of MG, sales are still low. Ora, for example, has sold just 459 Funky Cats to the end of August in the UK, and BYD has clocked up 212 sales of the Atto 3 compact SUV over the same timeframe. What are Chinese cars more expensive in the UK? Given all the concern about Chinese encroaching on the European brands over here, the threat will be much reduced if they can’t compete on price. A recent teardown of the BYD Seal saloon overseen by the bank UBS by its analysts totted up a list of the biggest costs faced by the Chinese as they import into Europe. From its selling price in China of €26,572 (£22,970), shipping added €2,000 euros, 10% import tariffs €3040, sales distribution €1500 and the difference in VAT €2230. So that car is now up to €35,342 (£30,552). The fact that the Seal sells from £45,695 in the UK indicates that BYD is reluctant to position its cars as a cheap alternative, with the company telling Autocar back in April it wanted to exploit a "brand premium" to price at a higher level. If BYD – China’s biggest-selling car company - wanted to go aggressive on price, it still could without harming the bottom line too much. But there’s also a danger it could be accused of dumping cheap cars on us and threatened with higher tariffs. Why aren't Chinese cars as cheap in Europe? Among the Chinese brands, BYD is one of the best on electric car costs, due partially to its strategy of making a lot of the parts itself, including the battery. The UBS teardown of the Seal concluded the car had 15% lower costs than a Tesla Model 3 made in Shanghai, and over 35% lower costs than a Volkswagen ID 3 made in Germany. It also calculated that if BYD decided to locate production in a cheaper part of Europe, for example Romania, the same car would only add another €1000 more to build with the removal of tariffs and shipping costs. Other export costs highlighted by Great Wall in a statement to Autocar include changes to satisfy local homologation requirements, for example crash and active safety. For the UK, the cars also have to be built in right-hand-drive. It’s also more expensive when you’re just starting up. In China, Great Wall’s size generates economies of scale not just in production but also distribution to dealers. “In a smaller or less established international markets, the lower sales volume may restrict those economies of scale,” the company said. It also flagged up exchange rates, as a weak pound is currently pushing up UK prices of imported cars. Shipping presents another sizable bill. “It’s one of the biggest costs right now,” MG UK commercial director Guy Pigounakis told Autocar recently. Such is the demand for the roll-on-roll-off transporters that makers usually use to ship vehicles that MG this year will transport between 25,000 and 28,000 cars to the UK by shipping container, a far more pricey option, Pigounakis said. “Battery prices seem to have stabilised but shipping costs are still absurd,” he added. However, MG parent SAIC has commissioned ships of its own as it expands its export business (SAIC is by far China’s biggest automotive exporter). Then there’s the fact that China’s own car market is superheated right now, leading to discounts and financial pain for those who aren’t on top of the costs. At one point this year, MG was discounting the 4 in showrooms in China as low as £13,000 – below the level at which MG UK was buying the car itself. Take Chinese manufacturing out of the equation and the price difference equalises. For example, Geely builds its new Polestar 3 large SUV in the US and sells it for £79,800 in the UK – a little over £1000 more than the equivalent car in China. The China-built Polestar 2, however, sells from the equivalent of £33,762 there, compared with £44,950 here. As the European Union looks to calculate whether to impose extra tariffs on Chinese-built cars, the reality of the geographical and regulatory gulfs between the two countries neutralises a lot of the cost advantages that the Chinese have in their own country through supply-chain efficiency and battery-material monopoly. When all the additional export costs are factored in, the playing field becomes levelled if the Chinese want a decent profit margin. As they become part of the automotive landscape here, the next step is to localise manufacturing, as MG has said it wants to do with the 4. When it comes to the volume car industry, nothing really beats building where you sell.