Chinese suppliers and manufacturers are more visible at this year’s Frankfurt motor show, capitalising on their strong position in electric technologies as European carmakers are forced to curb pollution.
As the need for cost-cutting in the industry becomes more urgent, the number of exhibitors at the prestigious show has fallen to 800 in 2019 from 994 in 2017. However, Chinese carmakers and suppliers now make up the biggest foreign contingent, with 79 companies, up from 73. Several major European and Japanese carmakers, including Fiat, Alfa Romeo, Nissan and Toyota, have skipped this year’s show.
Europe's carmakers face multibillion-euro investments to develop electric and autonomous cars, forcing them to rely on Chinese companies for key technologies such as lithium ion battery cell production, an area where Asian suppliers dominate.
German firms are striking major deals with Chinese suppliers to help them meet stringent EU anti-pollution rules, which were introduced in the wake of Volkswagen's 2015 emissions cheating scandal.
"All carmakers face the challenge that they will have to fulfil fleet consumption targets," Matthias Zentgraf, regional president for Europe at China's Contemporary Amperex Technology (CATL), told Reuters.
Zentgraf said he expected further supply deals to be struck in Europe this year following agreements with BMW and Volkswagen.
Daimler on Wednesday said it had chosen China-backed Farasis Energy to supply battery cells for its Mercedes-Benz electrification push.
Farasis is building a €600 million ($663 million) factory in east Germany, close to where Chinese rival CATL is erecting a €1.8 billion battery plant. Other companies intend to continue this inward investment, among them SVOLT Energy Technology, which was carved out of China's Great Wall Motor Company. It told Reuters of plans to start building battery cells in Europe at a new €2 billion plant in 2023.
Chinese companies are also giving Europe more attention in the wake of the US-China trade war, which has put up barriers to the US market.
"We put Europe up in priority," said Daniel Kirchert, chief executive of Chinese electric car maker Byton.
Byton has taken its prototype vehicles on road shows in Europe and received expressions of interest from 20,000 customers, he said. In electric vehicle hot spots, such as Norway and the Netherlands, "we see a very positive response".
However, electric cars made up only 1.5% of global sales last year, or 1.26 million of the 86 million passenger vehicles sold, according to JATO Dynamics.
If carmakers fail to meet the 2021 target of a 40% cut in emissions, they could face a combined €33 billion in fines, analysts at Evercore ISI have estimated. They also estimate it will cost the automotive industry an aggregate €15.3 billion to comply with new EU regulations, assuming a €60 cost per gram to reduce CO2 emissions for premium carmakers and €40 euros per gram of CO2 reduction for volume manufacturers.