Chinese automakers see Europe as key to survival amid home slump
A record 20 Chinese car brands at the Paris show highlight the pressure on the crowded sector as domestic sales fall. Analysts say success in Europe, the most profitable open market, may determine which automakers survive consolidation.
A record 20 Chinese car brands are vying for attention at this week's Paris car show, reflecting a stark reality: as a slowdown at home pushes China's overcrowded auto industry to consolidate, success in Europe could help determine which carmakers survive, industry executives and analysts say.
With the US market largely closed to Chinese automakers, Europe is by far the most profitable market still open to them, but also one of the toughest to crack. Brands including BYD, Chery and SAIC's MG have already established a foothold, while newer entrants are racing to build dealer networks, parts operations and brand recognition.
"If they drop exports in Europe, they die," said Francois Roudier, secretary general of the International Organization of Motor Vehicle Manufacturers (OICA). The pressure stems from China itself, where more than 100 automakers compete and state support has delayed long-expected consolidation. New car sales in China fell 20 per cent in the first half of this year, and Omdia analyst Chris Liu said automakers launched an average of three new models a day in 2026. "This is the worst possible year to launch a new vehicle in China," Liu said. Consultancy AlixPartners predicts sales will not return to 2025 levels until after 2030.
The downturn is increasing pressure to find growth abroad. Roudier said a new EU-China deal to halve imports of Chinese hybrid cars would intensify competition at home. "Now you have to eat your neighbour," he said.
Beijing has begun tentative steps towards consolidation, analysts say. A merger deal last month involving Toyota's two Chinese joint-venture partners, under which state-owned FAW will become Guangzhou Automobile Group's second-largest shareholder, is widely viewed as an early test case. "This is probably one of the most complex mergers to manage," said Pedro Pacheco, vice president of research at Gartner. In a September road map, China's industry ministry said it would "encourage industry consolidation". Pacheco said Beijing was likely to pursue mergers carefully, adding: "They don't want to convey the image externally that there's a sense of urgency or desperation."
Industry experts expect consolidation to reduce the sector to a handful of globally competitive manufacturers. "Our assumption is those remaining automakers will have sales of between 5 million and 6 million cars," said an executive at a major Chinese automaker, speaking on condition of anonymity.
Analysts say overseas performance, particularly in Europe, is likely to become an increasingly important measure of which automakers can thrive independently. "China's government will definitely evaluate overseas sales performance, in particular Europe," Omdia's Liu said. Barriers to entry are rising: the best dealer locations are taken, while new entrants must invest heavily in parts warehouses, repair networks and after-sales support. Automakers must also focus on resale values in a market where more than half of new vehicles are leased.
Changan, which launched European sales last year, expects to have 650 dealerships across Europe by next year. "We don't make fast food," said Vice President Mi Mengdong. Philip Nothard, insight director at Cox Automotive, said BYD, Chery and MG had been willing to spend heavily to establish themselves, leaving less room for later arrivals. "We'll see a big four or five, then others who will come and go," he predicted.