Chery's European Leap, China's Fleet Surge to Meet Skyrocketing EV Demand

Chery Automobile Co. is making significant strides by launching operations in Spain, aiming to capture Europe's nascent electric vehicle (EV) market. This move coincides with China's aggressive expansion of its car-carrying fleet to accommodate an unprecedented surge in global EV exports, positioning the nation as a burgeoning powerhouse in the international automotive industry.

Chery Expands into Europe: A Strategic Move into Spain's Emerging EV Market

Chery, a Chinese automaker, plans to manufacture vehicles in Spain. The EV market in Spain is only 12%, half that of Portugal and France. This would be Chery's first manufacturing facility in Europe.

It's all part of the Chinese company's ambitious goal to establish three brands in Europe and debut three new models for each brand by 2026—but, regrettably, Chery wants to bring ICE vehicles alongside its low-cost EVs, including a luxury gas-burning SUV brand that it already sells in China.

The manufacturer intends to debut its first EV in Germany in the first half of this year: the Omoda 5 EV, which will start at €37,000 (about $39,750).

According to Reuters, Spain's Industry Ministry stated that the arrangement would be confirmed in the coming days, with Chery expecting to begin production in Barcelona. Given the delayed adoption of electric vehicles in Spain, Chery intends to produce combustion engines, hybrids, and electric vehicles there.

Automotive News Europe stated that the talks are centered on Chery building its cars at the former Nissan facility, which closed in 2021 and laid off 1,600 people, with the goal of resuming at least some of that employment.

It is unclear whether Spain provided special public aid to sweeten the agreement. Still, Catalonia's regional government is sending a senior business figure to China this week to speak with Chery executives.

According to Automotive News Europe, Spain will also issue two tenders this year for EV companies to request €1.7 billion in loans and grants for EV production as part of the PERTE incentive system based on European pandemic relief money.

The former Nissan plant was largely given over to Silence, a Spanish electric motorcycle business, and local engineering organizations QEV and EV Motors, who hoped to turn it into an EV manufacturing hub. According to insiders, EV Motors has full corporate control of the hub and is in talks with Chery. EV Motors also intends to develop EV trucks and vans under its Ebro brand alongside Chery.

Chery was allegedly in talks with Italy—another European country where EVs have a minuscule market share—about opening a plant in March, but insiders claim those talks fell through. The company is now focusing on Spain.

China's Maritime Ambitions: Expanding the Car-Carrying Fleet to Fuel Global EV Exports

Chinese automakers want to export hundreds of thousands of electric vehicles worldwide, but they'll need many more car-carrying vessels. Demand is so great that the country is on track to have the world's fourth-largest fleet in a few years, with new trade routes being developed just for Chinese vehicles.

China currently boasts the world's eighth-largest shipping fleet, with 33 car-carrying ships, according to statistics from shipping experts Veson Nautical, as reported by Reuters. In comparison, Japan leads the list with 284 ships, followed by Norway with 102. South Korea ranks third with 72 registered ships, followed by the Isle of Man, which has 61.

However, the current state of affairs is rapidly changing, with Chinese corporations placing 47 ships on order, accounting for 25% of all orders worldwide. Customers purchasing the ships include SAIC Motor, Chery, and BYD and shipping giants COSCO and China Merchants acting "on behalf of Chinese automakers," Reuters writes.

"After this armada is delivered to China, the Chinese-controlled car carrier fleet will jump from 2.4% to 8.7%," Veson analyst Andrea de Luca told Reuters. "We expect to see new trade routes established almost exclusively for Chinese OEMs."

China has already surpassed Japan as the world's largest auto exporter, with BYD alone exporting over 240,000 vehicles last year, accounting for almost 8% of its global sales. This year, it expects to ship up to 400,000 EVs. The EV behemoth already has one purpose-built ship capable of carrying 7,000 EVs and intends to add seven more in the next two years.

Tesla and Volkswagen have also increased their exports from China, utilizing the country's cheaper supply network.

Cars are often carried by sea aboard roll-on/roll-off (RORO) ships, which allow vehicles to be driven directly onto the ship rather than needing a crane. However, these ships have been in short supply in recent years, with older boats retiring and new ship orders declining due to the 2008 financial crisis and the industry's transition to less polluting fuels, according to MIT Technology Review.

Nissan and Toyota have fleets of RORO ships capable of transporting tens of thousands of automobiles. Still, China's domestic car-carrier vessels account for only 2.8% of global shipping capacity, leaving Chinese automakers with few vehicle export options.

As a result, access to RORO ships has become extremely expensive, with daily charter rates reaching $115,000 per day. This is more than seven times greater than the price in 2019. As a result, firms have decided to buy the ship themselves.

Photo: Roger Wo from Shanghai, China, CC BY 2., via Wikimedia Commons