The Chinese new energy vehicle giant will unveil the latest version of its Han electric sedan at the Beijing Auto Show on April 26, 2024.
CNBC | Evelyn Cheng
BEIJING – If Chinese automakers, including state-owned auto giant GAC Group, want to survive, they can’t afford to take it easy in the country’s electric car boom.
The introduction of battery- and hybrid-powered cars has surged in China, but the rush of new models has fueled a forced price war Tesla also to reduce prices. While Chinese automakers are also looking for growth abroad, other countries are increasingly concerned about the impact of cars on the domestic auto industry and require investment in local production. In China’s already competitive electric vehicle market, it is now a matter of survival of the fittest.
“The pace of elimination will only increase,” Feng Xingya, president of GAC, told reporters on the sidelines of the Beijing auto show in late April. That’s according to a CNBC translation of his Mandarin-language remarks.
GAC cut prices on its cars a week before May 1, China’s labor holiday, Feng said, noting that the price war contributed to the first-quarter sales slump. The automaker’s first-quarter operating income fell year-over-year for the first time since 2020, according to Wind Information.
To remain competitive, Feng says GAC partners with technology companies like Huawei while also working on internal research and development. The automaker is a joint venture partner of Honda and Toyota in China and has an electric car brand called Aion.
“If your product isn’t good in the short term, consumers won’t buy it,” Feng said. “You have to use the best technology and the best products to meet consumer needs. In the long term you have to have a decisive competitive advantage.”
Expansion outside of China
Like other automakers in China, GAC is turning overseas. Domestic sales of new energy vehicles, which include pure battery-powered and hybrid-powered cars, slowed their growth pace in March compared to December, according to data from the China Passenger Car Association.
Last year, GAC overhauled its overseas strategy with an ultimate goal of selling 1 million cars abroad – electric, hybrid and fuel-powered, said Wei Haigang, general manager of GAC International, in an interview with CNBC last week.
The company still has a long way to go. Last year it only exported about 50,000 cars, Wei said. But he said the goal is to double that number to at least 100,000 vehicles this year and reach 500,000 units by 2030 – with sales targets and strategies for different regions of the world, starting with the Middle East and Mexico.
“We are now making every effort to accelerate our overseas expansion,” he said in Mandarin, translated by CNBC.
China’s car sales abroad surged last year, putting the country on a par with Japan as the world’s largest car exporter. The EU and US announced investigations into Chinese-made electric vehicles last year in a bid to encourage consumers to switch away from fuel-powered cars.
Factories are going global
Part of GAC’s international strategy is to localize production, Wei said, noting that the company uses various approaches such as joint ventures and technology partnerships. He said GAC opened a factory in Malaysia in April and plans to open another in Thailand in June, with Egypt, Brazil and Turkey also being considered.
GAC plans to set up eight subsidiaries this year, including in Amsterdam, Wei said. But the U.S. is not part of the company’s near-term overseas expansion plans, he said.
The difference today is that excess capacity now comes with vehicles that are very competitive
Stephen Dyer
AlixPartners, co-head of Greater China Business
U.S. and European officials in recent months have stressed the need to address China’s “overcapacity,” which can be broadly defined as state-backed production of goods that exceeds demand. China has dismissed such concerns, with its commerce ministry claiming that new energy faces a capacity shortage from a global perspective.
“There has always been excess capacity in the Chinese auto industry,” said Stephen Dyer, co-head of the Greater China business at consultancy AlixPartners and head of its automotive and industrial business in Asia.
“The difference today is that excess capacity now comes with vehicles that are very competitive,” he told CNBC on the sidelines of the auto show. “In our EV survey, I was surprised that approximately 73% of U.S. consumers could identify at least one Chinese EV brand. And Europe was close behind.”
Dyer expects this will boost demand for Chinese electric cars abroad. This was the result of the survey by AlixPartners BYD had the highest brand awareness in the US and major European countries, followed by Nio And jump motor.
BYD exported 242,000 cars last year and is also building factories abroad. The company’s sales are roughly divided between hybrid and battery-powered vehicles. BYD no longer sells traditional fuel-powered passenger vehicles.
Tech competition
In addition to price, this year’s auto show in Beijing reflected how companies – Chinese and foreign – compete on technologies such as driver assistance software.
Chinese consumers place nearly twice as much value on tech features compared to U.S. consumers, Dyer said, citing the AlixPartners survey.
He pointed out that Chinese startups are so aggressive that a car may be sold with new technology even if the software still has problems. “They know they can use over-the-air updates to quickly fix bugs or add features when needed,” Dyer said.
Interest in technology doesn’t mean consumers will only buy battery-powered cars. Dyer said consumers are still concerned about range in the short term – meaning hybrid vehicles are not only in demand, but are often used without recharging the battery.
Even Volkswagen is entering the “Smart Tech” race. The German auto giant unveiled its joint venture with Shanghai state-owned SAIC Motor at the auto show and worked with the automotive division of Chinese drone company DJI to develop a driver assistance system for the newly launched Tiguan L Pro.
The first version of the SUV is fuel-powered, with the company’s slogan being “oil or electric, both are smart,” according to a Chinese translation by CNBC.
Battery manufacturer CATL had a more prominent display stand this year, likely hoping to encourage consumers to buy cars with batteries as competitors’ market share grows, said Zhong Shi, an analyst at the China Automobile Dealers Association.
Automotive chip companies Black Sesame and Horizon Robotics also had booths in the main exhibition hall.
What customers want
Lotus Technology, a British high-end car brand acquired by Geelyfound in a survey of its customers that their biggest wishes were for automatic parking and battery charging, which would allow drivers to stay in the car.
That’s what CFO Alexious Kuen Long Lee said, speaking to CNBC on the sidelines of the Beijing auto show. He pointed out that the company now has robotic battery chargers in Shanghai.
Lotus and Nio also announced a strategic battery swapping and charging partnership last week.
“I think there’s a passing of the baton happening where the Chinese brands are becoming much bigger and stronger, while the foreign brands are still trying to find the best energy path,” said Lee, who has worked in China since 1998. Are they still choosing the PHEV, are they still thinking about BEVs, are they still thinking about internal combustion engine cars? The whole decision-making process becomes so complex, with so much internal resistance, that I think they just don’t do it productively.”
However, he believes Lotus has found the right strategy by expanding its product range and going straight to battery-powered cars. “Lotus today,” he said, “is similar to the position of international brands.” [was] in China, probably in 2000.”
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2024-05-03 10:13:21
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