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Chinese brands including BYD, Leapmotor to unveil new

models

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European automakers out in force to defend home turf

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EU planning tariffs on Chinese-made EVs amid weak market

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GAC says show marks launch of its European expansion

By Nick Carey

PARIS, Oct 14 (Reuters) - Chinese and European

automakers are going head-to-head at the Paris car show on

Monday, with tensions running high as the EU gears up to impose

hefty import tariffs on Chinese-made electric vehicles and the

industry struggles with weak demand.

This year's event - the largest car show in Europe - comes

at a pivotal time. Struggling European automakers need to prove

they are still in the game, while Chinese rivals are aiming to

get a foothold in a competitive market.

"This is China versus Europe and this is the ring they've

chosen to fight in," said Phil Dunne, a managing director at

strategy consultancy Stax. "The Europeans are saying this is our

territory and the Chinese are coming to stake their claim."

Nine Chinese brands including BYD and Leapmotor

will be unveiling their latest models at this year's event,

according to Paris auto show CEO Serge Gachot. That is the same

as in 2022 when they made up almost half the brands present.

This year, they will only account for about a fifth of the

brands thanks to a much stronger showing from Europe's auto

industry - a sign of its determination to defend its home turf.

Earlier this month, EU member states narrowly backed import

duties on Chinese-made EVs of up to 45%, meant to counter what

the European Commission says are unfair subsidies from Beijing

to Chinese manufacturers. Beijing denies unfair competition and

has threatened counter-measures.

While Chinese automakers have criticised the EU's move, they

are pressing ahead with European expansion plans and so far none

has said it will raise prices to cover the duties.

"The power of Chinese EV ambition will be on full display in

Paris this week," predicted Andy Palmer, founder of consultancy

Palmer Automotive.

For GAC, this year's show marks the launch

of its European ambitions, Wei Heigang, general manager for GAC

International, said in an interview on Sunday.

"We are a new kid in town, so we still have to get to

understand more about the European market," he said. He wants to

boost the company's brand before its Aion V, its first major EV

for sale out of China, hits showrooms in big volumes next year.

Making cars in the region would be one way of avoiding

the duties.

"In the long term, we are a deep believer that local

production is really one of the keys, so we very actively

exploring this possibility," Heigang said.

Chinese EV makers like BYD have so far priced their vehicles

slightly below their European rivals, giving them an advantage.

That will also help offset lower margins at home. Like Japanese

and South Korean automakers before them, they are also touting

better equipment and offering more features as standard.

Yet even BYD, which already sells EVs across much of Europe

and sponsored the European soccer championships this summer,

still has relatively low brand recognition, so will hope to make

a splash with the electric Sea Lion 07 SUV it is due to launch.

Newer Chinese entrants like Dongfeng, Seres

and FAW will also be showing off new

models as they seek overseas EV sales to offset a weak home

market and a vicious price war there.

China's passenger vehicle

sales

rose 4.3% in September from a year earlier, snapping five

months of decline with a boost from a government subsidy to

encourage trade-ins as part of a broader stimulus package.

Europe's sales hit a three-year low in August.

In another blow for the EV market, the French government

said on Thursday it would reduce its support for EV buyers,

joining Germany which ended its subsidy scheme late last year.

'ALARM BELLS'

Chinese automakers also need to do well in Europe because

they have been shut out of the U.S. market.

The Biden administration has imposed a 100% tariff on

Chinese-made EVs and last month proposed banning key Chinese

software and hardware in connected vehicles.

Europe's automakers, meanwhile, have hit a rough patch, with

Volkswagen, Mercedes-Benz and BMW

all issuing profit warnings largely because of the

weak Chinese market. Stellantis ( STLA ) slashed its earnings

forecast because of inventory problems at its U.S. business.

Volkswagen is also locked in a battle with powerful unions

over cost cuts that could see it close German factories for the

first time in its history and cut thousands of jobs.

The Europeans are struggling to compete with Chinese rivals'

lower costs and their ability to develop new EVs in just two

years, at least twice as fast as traditional Western automakers.

"The Europeans have massive alarm bells ringing," Stax's

Dunne said. "They have recognised they need to do something

pretty radical and they only have a couple of years to do it."