Global automakers face electric shock in China -

Global automakers face electric shock in China –

BEIJING (Reuters) – If global automakers think they can extend their dominance in China into the electric age, they may be in for a shock.

Combustion-era kings such as General Motors and Volkswagen are trailing domestic players in the booming electric vehicle (EV) market in China, a country essential to financing and developing their electric and self-driving ambitions.

For Beijing office worker Tiana Cheng, the main dilemma when she was buying a 180,000 yuan (US$27,000) crossover was whether she should go buy a BYD instead, or a Neo. Never thought seriously about outboards.

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“If I had been buying a petrol car, I would have thought of foreign brands,” the 29-year-old said as she headed home from work. “But I wanted an EV, and other than Tesla, I’ve seen quite a few foreign brands that properly apply advanced smart technology.”

Buoyed by demand from consumers like Cheng, sales of electric vehicles have surged in China’s $500 billion auto market, the largest in the world.

In the first four months of 2022, the number of new-energy passenger cars — pure electric vehicles and plug-in hybrids — more than doubled from the previous year to 1.49 million, according to data from the China Association of Automobile Manufacturers.

Cleaner technologies accounted for 23% of the passenger car market in China, with overall car sales down 12%, reflecting a sharp drop in demand for gasoline cars.

No foreign brands are among the top 10 automakers in the New Energy Vehicle (NEV) sector this year, with the notable exception of leading electric vehicle company Tesla in third place, according to data from the China Passenger Car Association.

All the rest are Chinese brands, from BYD and Wuling to Chery and Xpeng. China’s leader, BYD, sold about 390,000 electric cars in the country this year, more than three times what global leader Tesla sold there. The highest-ranking traditional automaker is Volkswagen’s venture with the FAW Group, in 15th place for electric vehicle sales.

Cheng said the marques are out there, whether it’s a Buick Villette 7 or a Volkswagen identity. A series, it failed to provide what it was looking for: an EV capable of giving it the “comfort” of having a smartphone-like experience in its car.

“Foreign brands are very far from my life and my lifestyle, and it does everything for me from opening windows to playing music,” said Cheng, whose digital assistant handles communications with apps like Alipay and Taobao, while her car software provides more than air updates.

It is completely a reflection. Global brands have dominated China since the 1990s, typically collectively winning 60-70% of passenger car sales in recent years. In the first four months of 2022, they accounted for 52%, with their monthly share in April at 43%.

Indicating the scale of the challenge facing traditional automakers, Nissan CEO Makoto Uchida told Reuters that some brands “may disappear within three to five years” in China.

“Local brands are getting stronger,” said Uchida, who was previously Nissan’s president in China, adding that the quality of electric vehicles from Chinese manufacturers has improved rapidly, with progress being made within months.

“There will be a lot of transformation in China, and we need to monitor the situation carefully,” the CEO said, adding that automakers have to be smart in designing, developing and launching new models.

“In these aspects, if we are slow, we will be left behind.”

“original high tech”

Bill Russo, a former Chrysler CEO who now heads the Shanghai-based consultancy Automobility, said global brands need to turn things around quickly because they control less than 20% of China’s only auto market.

“Chinese brands are winning the race toward electric cars,” Russo said, adding that consumers’ shift to cars that are essentially smartphones on four wheels seemed irreversible and that traditional automakers were having trouble keeping up.

“I think it’s a secular shift toward high-tech,” he said of consumers’ demand for a “user-centric digital service experience” with a focus on interface, connectivity, and applications.

‘Traditional companies are not high-tech citizens.’

The Volkswagen Group (VOWG_p.DE) brands, including Volkswagen, Audi, Bentley, Lamborghini, Porsche and Skoda, have led the market for most of the past two decades, along with General Motors (GM.N) marques such as Buick, Chevrolet and Cadillac.

The two global groups had combined auto market shares of about 13% and 12%, respectively, in China last year, according to LMC Automotive. Detroit giant General Motors also has a 44% stake in the locally controlled SAIC-GM-Wuling Auto (SGMW) venture, and includes its sales in group numbers, though SGMW doesn’t make US brands, only Wuling and Baojun cars.

GM is now focused on winning over younger buyers in big cities that until now have largely ignored its models, according to two people familiar with the automaker’s business in China.

The group announced plans for Electric to spend more than $35 billion globally by 2025, including more than 30 new electric vehicles, more than 20 of which are in China, beginning this year with the launch of the all-electric Cadillac Lyric crossover.

The two sources said the launch of the Lyriq will be followed by an electric Buick SUV and a smaller electric sports crossover, both of which are also planned for early this year.

Buicks sales are down 32% over the past five years to 828,600 vehicles in 2021, while Chevrolet more than halved to 269,000 vehicles, according to LMC Automotive.

GM told Reuters it aims to install a production capacity of one million electric vehicles annually by 2025 in China, adding that demand for the Buick Villette NEV family and the Chevrolet Menlo EV “growth significantly” in 2021 and the first three months of this year.

It said it is deploying smart technologies including hands-free driver assistance on the highways, “flight-level” cybersecurity and software updates over the air.

Reuters graphics

Autobahn speed?

Volkswagen, which will spend about $55 billion globally on electric vehicles by 2026, has launched its new generation of ID cards. A chain in China early last year but missed its target of selling 80,000 to 100,000 cars last year. Aiming to sell 160,000 to 200,000 Iraqi dinars. This year’s cars, though, were sold only 33,300 as of April.

A major concern for foreign brands, according to a person close to GM as well as a Volkswagen insider, is that their new electric vehicles are being built more for the US and European markets, with a greater focus on performance and durability.

“Autobahn speeds?,” said the source close to GM, who is familiar with the company’s product plans and product development processes.

Volkswagen said demand for the NEV in China is strongly linked to the “smart car” theme, adding that it has been investing in domestic research and development, particularly in software.

“Our strategy will enable us to achieve our ambitious goals in China. By 2030, we also want to be the market leader in e-cars, thus ensuring that Volkswagen remains number one in China in the future,” she added.

The challenge for global brands is to find a formula to win over consumers in major cities with disposable income, such as Cheng in Beijing and Li Huayuan, a civil engineer from Shanghai.

Li only thought coldly about the Japanese and German brands when he bought his BYD electric car last year for 290,000 yuan including insurance.

“It seems to me that Tesla is the only one that stands out when it comes to the American brands,” he said from his BYD parked car in Mianyang, Sichuan Province, where he works on a project. ‘Other brands don’t seem competitive to me.’

(dollar = 6.6499 Chinese yuan)

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(Norihiko Shirozu reports) Additional reporting by Zoe Zhang in Shanghai, Kevin Kruelecki in Singapore and David Dolan in Tokyo. Edited by Praveen Shar

Our criteria: Thomson Reuters Trust Principles.

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