On 29th May 2024, Chinese automobile maker Great Wall Motor (GWM) announced that its European headquarter, Great Wall Motor Deutschland GmbH (GWMD), will be closed down on 31st August 2024 and around 100 employees will lose their jobs. GWM will also relocate its warehouse for parts in the EU from Nuremberg, Germany to Amsterdam, Netherlands.

GWM’s road to Europe

This is not the first time that GWM closed its Munich office. In 2017, GWM established a technology centre in Munich. However, this office failed to promote GWM’s brands in Europe. What’s worse, the COVID-19 outbreak caused global supply chain disruption and economic stagnation. As a result, GWM closed the technology centre in 2021. But several months later, opened its European headquarter in Munich with plans to bring its brands to the EU market. So far, GWM’s NEVs have entered the UK, Ireland, Sweden, Germany, and Israel. According to GWM, sales and services to these markets will continue after the closure of its Munich headquarter but further expansions will be halted.

Main cause: the potential EU tariff increase

In October 2023, the EU officially opened an investigation into suspected Chinese subsidies to its electric vehicle makers and will decide whether tariff should be raised to balance off the effect on the EU OEMs. Starting from 6th March 2024, the EU has required all China-made NEVs to be registered in preparation for the potential tariff increase, which is rumoured to be around 20-40%. If the result of the investigation is negative, OEMs and dealers could make a loss on every China-imported BEV sold. As a result, Chinese OEMs, such as GWM, are facing unprecedented challenges in the European market and must adjust their EU business strategy accordingly.

Several sources have cited cultural barriers as another cause of GWM’s two closures in Munich. GWM has a strong Chinese corporate culture and is unable to adapt to the European work culture. Serious culture clashes have reportedly led to employee dissatisfaction and high turnover.

SVOLT is also slowing down its EU expansion

SVOLT, formerly GWM’s EV battery business unit, announced that it no longer planned to build a battery cell plant in Brandenburg, Germany, citing “highly volatile automotive market”, “lack of planning and legal certainty for the construction of production facilities” and the loss of a major customer. There is no change to its Überherrn module and pack plant, which is still waiting approval from the responsible ministry.

SVOLT is also reassessing its EU strategy. Famous for its EV battery products, SVOLT now considers bringing its energy storage solution (ESS) to the EU market. For the EU market, increasing sales of both EV batteries and ESS products will be the focus of SVOLT in the next few years.

Rho’s Evaluation

The expansion of Chinese OEMs into Europe is often presented as a certainty by some, however, this back-tracking by Great Wall Motors is evidence of how tricky it can be to bring a business to Europe and become an automatic success. GWM was a relatively early mover bringing its EVs to Europe only shortly after they were released in China. However, with European deliveries in 2023 well below 10,000 units, it is  hard to imagine upper management has been happy with the progress so far spearheaded by the Munich HQ.

Potential tariffs will only make life harder for OEMs like GWM looking at Europe so this may well be an early exit to prevent further pain later.

The language used by SVOLT in its press release announcing this news clearly showed its disappointment with many of the factors contributing to a slower market environment in Europe. Particularly the often-slow bureaucracy, disjointed support and rhetoric questioning the certainty of legislation already in place. All of these factors can easily come together and heap negative pressure on battery manufacturers looking to set up future facilities like SVOLT. The loss of a customer is expected to be due to an OEM plan pulling back on EV rollout plans, as has been seen across the industry in recent months, with outside investments such as these the first casualties. Ultimately this slows the rate Europe can feasibly transition over the longer term.

Image credit: Adobe Stock

Sources: thepaper