By Zhang Yan and Victoria Waldersee

MUNICH (Reuters) – German carmakers are determined to tackle the problems they face in producing competitive electric vehicles, an executive at Chinese EV maker Xpeng said on Wednesday, as China’s carmakers put pressure on European rivals in the race to electrify.

German carmakers have shown their “strongest determination ever to change” to try and catch up and address their challenges, Xpeng president Brian Gu said in an interview on the sidelines of Munich’s IAA car show.

Gu was echoing an earlier speech by Hildegard Mueller, president of the German Association of the Automotive Industry (VDA).

Mueller separately told Reuters on Monday that Germany was “losing its competitiveness” and was now in “an acute situation in which investments have to be made”.

The message from Mueller’s comments is “they are feeling a very strong sense of crisis,” Gu said. “I think they also showed the biggest commitment to catch up after they reflected on a bitter experience.”

Mueller’s comments were made as Europe’s car industry scrambles to ramp up production of electric vehicles with the help of partnerships and investments.

Of new EVs sold in Europe in 2023, 8% were made by Chinese brands, up from 6% last year and 4% in 2021, according to autos consultancy Inovev. Globally, China leads EV sales, the latest data from tech industry researcher Counterpoint shows. The U.S. has the fastest growing EV sales with Germany in third place.

Start-ups like Xpeng still need to leverage German automakers’ scale, branding and investments to lower costs and survive in an increasingly crowded market, Gu told Reuters.

Chinese companies including Xpeng, BYD and Leapmotor are seeking the higher margins and faster growth overseas markets can offer, which means they are challenging European companies on their home turf with cheaper models.

“The Chinese companies are flooding into overseas markets like mushrooms, deepening their sense of crisis,” Gu said.

Earlier in the week, Gu said Xpeng plans to expand into more European markets, including Germany, Britain and France in 2024.

German Chancellor Olaf Scholz said EV competition from abroad should be a spur, not a worry for German carmakers.

Xpeng recently struck a deal with Volkswagen to jointly build two new models in China. Others, like LeapMotor are also seeking partnerships to boost sales globally.

“The market is not mature enough and everyone is still exploring a good business model,” Gu said, adding that there are still many ways German and Chinese companies can complement each other with their different strengths.

Boosting sales further requires overcoming obstacles including stereotypes of Chinese manufacturing, import costs, and a less developed EV market.

“We need to seek cooperations in a humble position even if we have grown into giants,” Jia Jianxu, general manager of the joint venture between Chinese state-owned SAIC and Volkswagen, said at an event hosted by Xuanyuan Academy, a Chinese business school for the automotive industry, in Munich on Tuesday.

The number of Chinese companies at Germany’s IAA car show has doubled and China’s largest EV conference, the World New Energy Vehicle Congress, is taking place within the IAA on Wednesday and Thursday, with high-ranking officials including China’s “Father of EVs” Wan Gang attending.

Chinese executives say they are impressed with what Europe’s automakers had to offer.

“I feel a bit anxious after seeing so many new technologies at the IAA for two days,” You Zheng, vice-general manager of China’s Dongfeng Motor, said on the sidelines of the show.

“Europe is actually not pausing in EV transition… we still need to ramp up more efforts to improve our capacities in core technologies.”