BYD reigns in Spain, plus China’s race to the bottom

By Nick Carey, European Autos Correspondent

Greetings from London!

After many years of riding high, Porsche has hit what could only charitably be called a rough patch.

Late on Friday, Porsche once again had to pull back from its electric vehicle rollout in a move that will hit parent company Volkswagen to the tune of $6 billion. Shareholders were unimpressed.

Some of what ails Porsche is out of its control and can’t be helped, such as Trump’s U.S. tariffs.

Porsche, however, has scored a series of own goals. It has launched EV models that Chinese consumers have shunned in favor of electric cars like the Xiaomi SU7 that sell for a fraction of the cost.

Meanwhile, Americans and Europeans don’t want electric Porsches either.

Porsche has plenty of brand equity and has made a ton of money over the years, so this is an expensive hole the German automaker could dig itself out of.

But expect calls to ramp up – fast - for Oliver Blume to quit being CEO of both Volkswagen and Porsche and get this mess cleaned up.

Which brings us to today’s Auto File…

• BYD makes inroads in Spain

• China’s auto tailspin

• Tariff pressure on U.S. auto prices

Spaniards say “si” to BYD

Spain has long been a laggard in Europe’s shift to EVs and plug-in hybrids but is catching up fast this year, thanks to government subsidies.

But as my Reuters colleagues Alessandro Parodi, Javi West Larrañaga and Albert Gea report, the beneficiaries of that shift are not homegrown European automakers but their Chinese rivals, in particular, BYD.

You can read more about it here.

BYD's share of Spain's EV market, including fully-electric models and plug-in hybrids (PHEVs), climbed to more than 10% in Spain in July despite EU tariffs on Chinese-made EVs. That's more than double its European average and three times Tesla's 3.3% share.

This comes as BYD has nearly quadrupled its Spanish sales network to almost 100 dealers this year, while traditional European automakers have cut back. Seat, once a national Spanish automotive champion, is no longer seen as local as it is owned by Volkswagen.

Stepping into that vacuum with cheaper plug-ins and EVs has been a winning strategy for BYD, so it will be interesting to see how legacy automakers respond.

Recommended reading:

• A new U.S. auto safety boss

• Buffett exits BYD

• Nvidia weighs Wayve investment

China’s car trouble

It is well known throughout the auto industry that the price war that raged in China is bad for business and bad for profits.

But Reuters colleagues in China have spelled out just how much trouble the country’s auto industry is in through a jaw-dropping special report that is a cracking read. You can check it out here.

By prioritizing production over demand, China’s government has led to overinvestment and huge amounts of excess capacity. The country now produces so many vehicles that you can buy a new car for a fraction of its official price tag.

Reuters visited a car showroom on the outskirts of Chengdu with around 5,000 vehicles in stock. Locally made Audis were 50% off. A seven-seater SUV from China’s FAW was about $22,300, more than 60% below its sticker price.

This is a symptom of a vastly oversupplied market – pointing to a potential shakeout mirroring turmoil in China’s property market and solar industry, according to many industry figures and analysts.

China’s bumpy car ride is clearly about to get a lot wilder.

U.S. pricing pressure

Automakers have absorbed billions in added costs since U.S. President Donald Trump’s tariffs took effect in April.

Experts predicted price hikes would have hit by now, but automakers have chosen to eat added costs rather than pass them on to consumers and lose market share.

But as my Reuters colleague Nora Eckert reports, that may be about to change. You can read all about it here.

Now that it appears many of Trump’s tariffs are likely to stick, carmakers are under growing pressure to raise prices.

General Motors has said it will face up to $5 billion in gross tariff-related costs this year, while Ford expects a $3 billion gross hit.

Facing that cost pressure, carmakers are likely to raise prices later this year to protect their bottom lines, even though that could dampen demand and lead to an overall drop in U.S. vehicle sales.

JLR’s painful cyberattack

Jaguar Land Rover was already having a challenging year thanks to tariffs – which led it to pause U.S. vehicle shipments in April - before a crippling cyberattack shut down its three UK factories earlier this month.

As Reuters colleague Sarah Young reports, JLR has now been forced to extend the closure of its plants until October 1. You can read about it here.

Owned by India's Tata Motors, JLR’s three UK factories produce about 1,000 cars per day, so the shutdown is costing it tens of millions of pounds while its 33,000 staff stay at home.

The automakers’ suppliers are also struggling.

Once JLR does get its factories up and running, the luxury automaker is going to have to do extensive damage control as its reputation has taken a serious dent.

Fast Laps

Ford will cut up to 1,000 jobs in electric car production in the German city of Cologne due to weak demand for its EVs.

Tesla has reached confidential deals to resolve two lawsuits over deaths in two separate California crashes in 2019 involving the company's Autopilot advanced-driver-assistance software.

China's Chery aims to price its shares at HK$30.75 ($3.96) each to raise $1.2 billion in a Hong Kong initial public offering, sources told Reuters.

Nissan is studying the cost competitiveness of Chinese suppliers and exploring ways to apply their practices globally, as it aims to cut variable costs by 250 billion yen ($1.71 billion) in a broad efficiency drive.

Panasonic aims to develop a new higher-capacity battery in about two years, potentially extending the driving range of EVs in a groundbreaking advance for the Tesla supplier.

Stellantis has unveiled an EV prototype featuring a faster-charging, lighter and more affordable battery that eliminates the need for a separate inverter and charger.

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