China’s BYD Taps Germany’s Football Fever to Get Edge on VW

(Bloomberg) -- Even as Germany’s national football team scrapped its way to victory in Dortmund on Saturday, a game of geoeconomic chess was taking place on the sidelines, with stakes that go beyond the European Championship.

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While fans across the country cheered the 2-0 win over Denmark for a spot in the quarterfinals, China’s BYD Co. was looking to land a marketing blow on Volkswagen AG on its home turf — and deepen Germany’s exposure to China in the process.

With the Wolfsburg-based giant struggling to get its electric-car strategy on track, the Chinese brand is piling on the pressure as a sponsor of the Euro tournament. As well as providing a shuttle service with about 300 cars, BYD is stationing vehicles in fan zones to showcase features like in-car karaoke, and offering ticket giveaways via social media.

“BYD’s sponsoring makes the brand more known in Europe and loads it with emotion,” said Marko Sarstedt, head of the marketing department at Ludwig-Maximilians-University Munich. “It’s a risk for Volkswagen’s EV strategy leaving the playing field to BYD.”

Like other Chinese carmakers, BYD desperately wants to break through in Europe. Beijing had fanned the flames of expansion with generous subsidies on everything from cheap land to buying incentives and cars rolling off those assembly lines are now seeking a home.

With political tensions high with US, Europe is the most lucrative outlet available, but even there, headwinds are intensifying. The European Union is set to start imposing tariffs on Chinese-made electric vehicles next week. BYD vehicles though are set to get off relatively light with a 17.4% levy.

Despite the threat posed by China’s automakers, Germany is trying to prevent or at least soften the EU’s tariffs, reflecting the deep links between the two economies. Manufacturers like VW, BMW AG and Mercedes-Benz Group AG rely on China for the largest chunk of their sales, and some ship EV models made there to Europe.

Economy Minister Robert Habeck traveled to China last week to discuss the issue, and Beijing has dangled perks such as lowering its own 15% tariff on large-engine cars in return for Germany’s help in scrapping the EV levies, people familiar with the discussions have said.

So far, China’s push into Europe has been more of a trickle than a landslide. The most successful company by sales is SAIC Motor Corp. The Shanghai-based owner of the British MG brand sold about 97,000 cars from January through May in Europe, according to data from the European Automobile Manufacturers’ Association. That’s less than a fifth of the VW brand’s sales across the region, where 5.6 million sold in total.

Despite overtaking VW in China last year, BYD is struggling to gain traction in Europe. In the first five months of 2024, the brand sold a little over 13,000 vehicles, according to data from Jato Dynamics. But it has scored points with its marketing push.

At the fan zone in Berlin near the Brandenburg Gate, BYD lured passersby to check out two all-electric compact sedans and one plug-in hybrid SUV with two foosball tables. The models on display included a battery-powered Dolphin hatchback, which starts at €33,000 and boasts a range of up to 427 kilometers (265 miles) — compared with the €37,000 VW ID.3, which can drive 388 km on a charge.

In Europe, 36% of car buyers aware of Chinese brands would consider buying a BYD model, according to an April survey of around 2,000 respondents by management consulting firm Horváth. Six months earlier, it was 10%.

“This is already a sign of the European Championship effect,” said Georg Mrusek, an automotive expert at Horváth. “We see a rising openness toward Chinese manufacturers in Europe.”

Customer acceptance remains a key hurdle as China’s full-bore shift into next-generation autos pays off in terms of technology. For the past two years, Chinese manufacturers have pulled ahead of German rivals in terms of installing innovations — like a rotatable 15.6-inch touchscreen in the BYD Seal — according to a study by the Center of Automotive Management.

“We see a tectonic shift in the power balance toward Chinese manufacturers,” said Stefan Bratzel, director of the Bergisch Gladbach, Germany-based research group. “It’s a big challenge for Germany’s carmakers, which need to justify their higher sticker prices with at least as much innovation.”

BYD though has a long ways to go to counter Volkswagen’s market power in Europe. The Shenzhen-based company lists just 27 dealers in Germany compared with hundreds selling VW cars. And the challenge of overcoming cultural affinity was evident at BYD’s display near the Reichstag in Berlin.

“Every new brand has teething problems such as software glitches or recalls and first has to prove itself,” said Koray Özbagci, a 28-year-old German social sciences student, while sitting in a Seal sedan and testing its infotainment system.

Volkswagen has been noticeable by its absence. At the last European Championship in 2021, the German brand was one of the main sponsors and used the month-long tournament to promote the launch of the ID line of electric vehicles. This year, it decided to pull out as a main sponsor to save costs, leaving the field to its Chinese rival.

“BYD sponsoring Euro2024 on our home turf is normal competition,” a Volkswagen spokesman said. “We take that in stride,” he added, noting that the brand is still active via its support for five national teams, including Germany.

Even so, VW’s electric-car strategy remains a work in progress and the intensifying competition from BYD adds urgency. The ID line suffered software bugs and has struggled to gain a wide following from consumers.

The German automaker’s latest push came on Tuesday, when the German car giant announced plans to plow as much as $5 billion into a tie-up with US EV maker Rivian Automotive Inc. The deal came just about a year after a similar deal with China’s Xpeng Inc. Both are part of efforts to fix in-house software unit Cariad, whose problems have delayed lucrative new vehicles like the electric Porsche Macan.

Even though VW’s issues create an opening for BYD, football marketing is far from a surefire way to win over fans and the Chinese brand’s efforts have shown it still has a lot to learn about wooing European consumers.

In ads on stadium billboards, the company boasts it’s the number one producer of “NEVs.” It stands for New Electric Vehicles and is a common acronym in China. “Nobody in Europe knows what this stands for,” said Daniel Kirchert, the head of e-mobility consultancy Noyo and a former BMW executive.

The confusion prompted BYD to respond via a social media post on Friday, saying: “The question on everyone’s mind, answered.”

(Updates with Saturday’s result from first paragraph.)

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