Chinese EV players take fight to legacy European automakers on their home turf

Germany this week played host to one of the world's biggest auto shows — but in the heartland of Europe's auto industry, it was buzzy Chinese electric car companies looking to outshine some of the region's biggest brands on their home turf.

The IAA Mobility conference in Munich was packed full of companies with huge stands showing off their latest cars and technology. Among some of the biggest displays were those from Chinese electric car companies, underscoring their ambitions to expand beyond China.

Europe has become a focal point for the Asian firms. It's a market where the traditional automakers are seen to be lagging in the development of electric vehicles, even as they ramp up releases of new cars. At the same time, Tesla, which was for so long seen as the electric vehicle market leader, has seen sales decline in the region.

Despite Chinese EV makers facing tariffs from the European Union, players from the world's second-largest economy have responded to the ramping up of competition by setting aggressive sales and expansion targets.

"The current growth of Xpeng globally is faster than we have expected," He Xiaopeng, the CEO of Xpeng told CNBC in an interview this week.

Chinese carmakers who spoke to CNBC at the IAA show signaled their ambitious expansion plans.

Xpeng's He said in an interview that the company is looking to launch its mass-market Mona series in Europe next year. In China, Xpeng's Mona cars start at the equivalent of just under $17,000. Bringing this to Europe would add some serious price competition.

Meanwhile, Guangzhou Automobile Group (GAC) is targeting rapid growth of its sales in Europe. Wei Haigang, president of GAC International, told CNBC that the company aims to sell around 3,000 cars in Europe this year and at least 50,000 units by 2027. GAC also announced plans to bring two EVs — the Aion V and Aion UT — to Europe. Leapmotor was also in attendance with their own stand.

There are signs that Chinese players have made early in roads into Europe. The market share of Chinese car brands in Europe nearly doubled in the first half of the year versus the same period in 2024, though it still remains low at just over 5%, according to Jato Dynamics.

"The significant presence of Chinese electric vehicle (EV) makers at the IAA Mobility, signals their growing ambitions and confidence in the European market," Murtuza Ali, senior analyst at Counterpoint Research, told CNBC.

Many of the Chinese car firms have positioned themselves as technology companies, much like Tesla, and their cars highlight that.

Many of the electric vehicles have big screens equipped with flashy interfaces and voice assistants. And in a bid to lure buyers, some companies have included additional gadgets.

For example, GAC's Aion V sported a refrigerator as well as a massage function as part of the seating.

This is one way that the Chinese players sought to differentiate themselves from legacy brands.

"The chances of success for Chinese automakers are strong, especially as they have an edge in terms of affordability, battery technology, and production scale," Counterpoint's Ali said.

Legacy carmakers sought to flex their own muscles at the IAA with Volskwagen, BMW and Mercedes having among the biggest stands at the show. Mercedes in particular had advertising displayed all across the front entrance of the event.

BMW, like the Chinese players, had a big focus on technology by talking up its so-called "superbrain architecture," which replaces hardware with a centralized computer system. BMW, which introduced the iX3 at the event, and chipmaker Qualcomm also announced assisted driving software that the two companies co-developed.

Volkswagen and French auto firm Renault also showed off some new electric cars.

Regardless of the product blitz, there are still concerns that European companies are not moving fast enough. BMW's new iX3 is based on the electric vehicle platform it first debuted two years ago. Meanwhile, Chinese EV makers have been quick in bringing out and launching newer models.

"A commitment to legacy structures and incrementalism has slowed its ability to build and leverage a robust EV ecosystem, leaving it behind fast moving rivals," Tammy Madsen, professor of management at the Leavey School of Business at Santa Clara University, said of BMW.

While European autos have a strong brand history and their CEOs acknowledged and welcomed the competition this week in interviews with CNBC, the Chinese are not letting up.

"Europe's automakers still hold significant brand value and legacy. The challenge for them lies in achieving production at scale and adopting new technologies faster," Counterpoint's Ali said.

"The Chinese surely are not waiting for anyone to catch-up and are making significant gains."