In China, global automakers lagging behind expanding EV market

Global automakers may be in for a rude awakening if they believe they can prolong their supremacy in China into the electric future.

General Motors and Volkswagen, the kings of the combustion age, are lagging behind local companies in China’s expanding electric vehicle (EV) market, a nation that is critical to funding and advancing their electric and autonomous goals.

When Beijing office worker Tianna Cheng went to buy a 180,000-yuan ($27,000) Xpeng electric crossover, her major concern was whether she should get a BYD or a Nio instead; she did not really consider foreign brands.

“I may have explored international brands if I were buying a gasoline car,” the 29-year-old stated as she drove home from work. “However, I desired an EV, and aside from Tesla, I found few foreign companies correctly implementing modern smart technology.”

Electric car sales in China’s nearly $500 billion auto market, the world’s largest, are soaring because to customer demand like Cheng’s.

According to statistics from the China Association of Automobile Manufacturers, the number of new energy passenger vehicles – pure EVs and plug-in hybrids – more than quadrupled from a year ago to 1.49 million automobiles in the first four months of 2022.

Cleaner technologies accounted for 23% of China’s passenger car market, despite a 12% drop in overall vehicle sales, owing to a sharp drop in demand for gasoline automobiles.

According to statistics from the China Passenger Car Association, there are no foreign brands among the top 10 automakers in the new energy vehicle (NEV) market this year, with the significant exception of U.S. electric pioneer Tesla in third position.

From BYD and Wuling through Chery and Xpeng, the remainder are Chinese brands. BYD, China’s market leader, has sold about 390,000 electric vehicles in the nation this year, more than three times the number sold by worldwide leader Tesla. In terms of EV sales, the top-ranked traditional carmaker is Volkswagen’s joint venture with FAW Group, which is placed 15th.

Cheng said that foreign brands, such as Buick’s Velite 7 and Volkswagen’s ID. series, failed to deliver what she was hoping for: an EV that could give her the “comfort” of a smartphone-like experience in her car.

Cheng’s digital assistant manages connections to applications like Alipay and Taobao and “does everything for me from opening the windows to putting on music,” while her auto software delivers over-the-air upgrades.

It’s a complete 180-degree turn. Since the 1990s, global brands have dominated in China, with a combined 60-70 percent share of passenger vehicle sales in recent years. They took 52 percent in the first four months of 2022, with a monthly share of 43 percent in April.

Nissan CEO Makoto Uchida recently informed the media that some brands “may perish in three to five years” in China, indicating the magnitude of the problem facing established manufacturers.

“Local brands are growing stronger,” said Uchida, who was previously Nissan’s China chief, adding that the quality of EVs from Chinese manufacturers has increased dramatically in recent months.

“There will be a lot of transition in China, and we need to keep a close eye on the situation,” the CEO said, adding that carmakers must be quick to design, develop, and market new models.

“If we were sluggish in those areas, we would be left behind.”

Bill Russo, a former Chrysler executive who now runs the Shanghai-based consultancy Automobility, believes global brands must act swiftly since they control less than 20% of China’s only growing vehicle industry.

“Chinese manufacturers are winning the EV race,” said Russo, who added that consumers’ migration to vehicles that are effectively smartphones on four wheels seemed irreversible and that traditional carmakers were struggling to stay up.

Consumer desire for a “user-centric digital services experience” with an emphasis on interface, connection, and applications, he added, “is a secular movement toward hi-tech.”

Volkswagen Group (VOWG p.DE) brands such as Volkswagen, Audi, Bentley, Lamborghini, Porsche, and Skoda, as well as General Motors (GM.N) brands such as Buick, Chevrolet, and Cadillac, have dominated the market for much of the last two decades.

According to LMC Automotive, the two multinational organizations had total vehicle market shares of about 13 percent and 12 percent in China last year. GM also has a 44 percent share in the locally controlled SAIC-GM-Wuling Auto (SGMW) joint venture and counts its sales in group figures, despite the fact that SGMW solely makes Wuling and Baojun automobiles.

According to two sources familiar with GM’s Chinese operations, the carmaker is now focusing on attracting younger consumers in larger cities who have previously mostly ignored its vehicles.

The company has declared plans to invest more than $35 billion in electrification by 2025, with more than 30 new EVs, including more than 20 in China, beginning this year with the introduction of the all-electric Cadillac Lyriq crossover SUV.

According to the two sources, the Lyriq will be followed by an electric Buick SUV and a smaller, sportier electric crossover, all of which are expected to debut this year.

According to LMC Automotive, Buick sales have dropped 32% in the previous five years to 828,600 vehicles in 2021, while Chevrolet sales have dropped more than half to 269,000 vehicles.

GM informed the media that it plans to build 1 million electric vehicles per year in China by 2025, and that demand for the Buick Velite NEV family and Chevrolet Menlo EV “both surged dramatically” in 2021 and the first three months of this year.

It stated it was installing smart technology on roads, including as hands-free driving assistance, “aviation-grade” cyber security, and over-the-air software upgrades.

Volkswagen, which plans to invest $55 billion on electric vehicles globally by 2026, debuted its new ID. series in China early last year but fell short of its objective of selling 80,000 to 100,000 vehicles. It hopes to sell 160,000 to 200,000 ID. automobiles this year, despite only selling 33,300 so yet.

According to one of the persons close to GM and a Volkswagen insider, a big issue for international companies is that their new EVs are being developed more with the American and European markets in mind, with a stronger focus on performance and durability.

“What are the top speeds on the autobahn? On most days, traffic in China’s major cities is so clogged that drivers can’t go faster than 60 km/h “GM’s product planning and development procedures are well-known, according to a source close to the carmaker.

NEV demand in China is firmly tied to the “smart vehicle” concept, according to Volkswagen, which is investing in local R&D, particularly in software.

“Our plan will allow us to meet our lofty goals in China. We also intend to be the market leader in e-vehicles by 2030, ensuring Volkswagen’s position as China’s number one in the future “It was also mentioned.

Global businesses face a problem in winning over consumers in major cities with discretionary incomes, such as Cheng in Beijing and Li Huayuan, a civil engineer from Shanghai.

When Li bought his BYD electric vehicle for 290,000 yuan plus insurance last year, he only explored Japanese and German brands half-heartedly.

“When it comes to American companies, it seems to me that only Tesla stands out,” he remarked from his parked BYD car in Mianyang, Sichuan province, where he’s working on a project. “To me, the other brands don’t even appear to be competitive.”

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