GAC Confident of Expansion in Europe Pitching Sub-$45,000 Luxury BEVs

China’s fifth-largest automaker, the state-owned Guangzhou Automobile Group (GAC Group), begins its major assault on the European markets seemingly unfazed by the punitive European Union tariffs on its products.

Its charm offensive with journalists at the Paris auto show includes a city drive with its latest European-focused battery-electric Aion V luxury compact SUV.

Company product specialists with us on the drive suggest the vehicle will be priced to rival the Volkswagen ID.4 and the Kia Niro.

So, despite currently being hit, on top of the standard third-country 10% tariff, by the top new tariff rate of 35.3% because GAC has not yet cooperated with the European Commission’s investigation into unfair Chinese-state subsidies, the automaker is confident it will be able to sell the car for less than €40,000 ($43,474).

While sitting down to talk to WardsAuto, GAC’s vice-president for R&D, Zhang Fan, admits the company’s business strategy and response to tariffs is not his area of expertise.

However, that stated, he spells out how the Chinese government had been chiefly responsible for the country’s accelerated switch from internal-combustion products to BEVs.

Fan explains: “The transition from gasoline to BEV was, in the beginning, driven by the government so it was a policy-driven market.

“All the BEV automakers know that you couldn’t make the cars at a profit but the government published a policy that you could earn points or extra benefits (subsidies) making the OEM interested in investing more into BEV products and, therefore, even helping the production of their gasoline products.”

He says the acceptance of the new powertrain technology was so rapid in China that now it’s less of a market push than a consumer pull for cheap BEVs.

Fan adds: “Then there is also a turning point when customers started to realize the benefit of driving BEV and then the market is turning from a policy-driven to a customer-driven one. This has already happened in China.”

It has to be noted at this point that, according to Reuters’ financial sources, of the myriad of companies now building BEVs in China, only BYD and Xpeng are not losing money. It begs the question how all the others are still trading, as in Nio’s case, for more than a decade.

Nevertheless, Fan believes his experience of working in Europe’s automotive industry does help his company bring products that should appeal to EU consumers.

He says: “I used to work for a European OEM, Mercedes-Benz, from 2003 to 2011, so I got to understand the European automotive industry and also the market. Now working for GAC in China for the last 13 years I understand more the trend of how the automotive industry is evolving. When I joined the automotive industry in China, it had been left behind and was learning to catch up.

“The whole competitive market was still mostly in the gasoline car and the focus was mainly on how to make a decent car. Then, just over a decade ago, the whole situation changed completely because of the introduction of new technologies and also because the Chinese automotive industry was trying to embed those technologies into products.”

He recognizes that the acceptance of BEVs in Europe is not the same as in China but thinks the current slowdown in uptake is a temporary situation that will change.

Fan says: “From my view, the European consumer enjoys the automotive sensation in a more traditional way. There are a lot of people, for example, still driving manual (transmission) cars. They enjoy the sound and vibration coming from an internal-combustion engine.

“However, I came to see that a lot of young people were not the same and didn’t like those experiences and didn’t even buy cars. They were more into video games and smartphones.

“They looked on cars as being too much hassle in their lives and they just want an easy life and the automotive industry is reflecting this transition.”

Fan says these younger buyers will, ultimately, drive the penetration of BEVs into the markets.

He adds: “The BEV cars become much easier to drive, quieter and easier to both make and maintain. Autonomous driving technology, too, is gradually becoming embedded into the Chinese cars. You can now leave the car to drive for, say, 40 minutes and you can put your feet up and only touch the steering wheel from time-to-time.

“So, once you get used to the BEV driving experience it’s hard to go back to the gasoline driving experience and the autonomous driving experience does the same thing.”

The focus on the future of young consumers wanting to spend more time and effort on a virtual digital life than driving a car in the real one, does evoke visions of Disney’s "Wall-E" future when the remnants of humanity on a spaceship have to rely on robots to do everything for them!

Yet, Fan does offer some hope for the dying breed who still want to engage with the driving experience. He explains: “Now is the time we should define a car as a tool or a toy. As a tool that solves the immediate problem of transport where BEVs are the best solution. For driving pleasure, yes, you go for the traditional, even classic, vehicles.”

In this way, he also sees that battery-swap technology could have a future for niche sports products to allow consumers to hold onto them indefinitely.

Fan says: “As to battery swap, we are in the early days of seeing which way to go and we are looking at the technology and this has already been embedded in the current IRS (model) we are producing in China. That car has been used a lot as a taxi, so this is quite a practical solution for those users.

“Which one of these battery technologies will be the best, we don’t know, so the better way is to try all of them.”