Chinese automakers must adapt quickly or lose out in the face of the electric vehicle boom

BEIJING — China’s automakers, including state-owned auto giant GAC Group, cannot afford to go easy on the country’s electric car boom if they want to survive.

Adoption of battery and hybrid cars has increased in China, but a wave of new models has fueled a price war that has been forced You’re here to also lower its prices. As Chinese automakers also look overseas for growth, other countries are increasingly wary of the cars’ impact on domestic auto industries, requiring investment in local production. It’s now about survival of the fittest in China’s already competitive electric vehicle market.

“The elimination speed will only accelerate,” Feng Xingya, general manager 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 remarks.

GAC cut prices of its cars a week before China’s Labor Day on May 1, Feng said, noting that the price war contributed to its first-quarter sales slump. The automaker’s operating revenue fell year-over-year in the first quarter for the first time since 2020, according to Wind Information.

To stay competitive, Feng said GAC partners with technology companies such as Huawei, while working on research and development in-house. The automaker is the joint venture partner of Honda and Toyota in China and has an electric car brand called Aion.

“In the short term, if your product is not good, consumers will not buy it,” Feng said. “You need to use the best technology and products to satisfy consumer needs. In the long term, you need to have a critical competitive advantage.”

Like other automakers in China, GAC is also looking overseas. Domestic sales of new energy vehicles, which include battery-only cars and hybrid cars, slowed their growth rate in March compared with December, according to data from the China Passenger Car Association.

Last year, GAC revamped its overseas strategy with the ultimate goal of selling 1 million cars overseas – electric, hybrid and gasoline, said Wei Haigang, general manager of international sales and marketing business. GAC automotive services, to CNBC in an interview last week.

The company still has a long way to go. Last year, it exported only about 50,000 cars, Wei said. But he said the aim was to double that figure to at least 100,000 vehicles this year and reach 500,000 units by 2030 – with sales targets and strategies for different regions around the world, starting through the Middle East and Mexico.

“We are now making every effort to accelerate our overseas expansion,” he said in Mandarin, translated by CNBC.

Overseas sales of Chinese cars surged last year, putting the country on par with Japan as the world’s largest car exporter. The EU and the United States announced investigations into Chinese-made electric vehicles last year, part of efforts to encourage consumers to abandon gasoline-powered cars.

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 planned to open another in Thailand in June, with Egypt, Brazil and Turkey also under consideration.

GAC plans to set up eight branches this year, including in Amsterdam, Wei said. But the United States is not part of the company’s near-term overseas expansion plans, he said.

U.S. and European officials have stressed in recent months the need to address China’s “overcapacity,” which can be loosely defined as state-backed production of goods that exceeds demand. China has pushed back on these concerns and its Commerce Ministry has said that, from a global perspective, new energy faces a capacity shortage.

“There has always been overcapacity in the Chinese auto industry,” said Stephen Dyer, co-head of the Greater China business at consultancy AlixPartners and leader in Asia for its automotive and industrial businesses.

“The difference today is that overcapacity has been accompanied by very competitive vehicles,” he told CNBC on the sidelines of the auto show. “So in our electric vehicle survey, I was surprised to find that about 73% of U.S. consumers could recognize at least one Chinese electric vehicle brand. And Europe was close behind.”

Dyer expects this to boost overseas demand for Chinese electric cars. The AlixPartners investigation revealed that BYD had the highest brand awareness in the United States and major European countries, followed by Nio And Jump motor.

BYD exported 242,000 cars last year and is also building factories overseas. The company’s sales are roughly split between hybrid and battery-powered vehicles. BYD no longer sells traditional fuel-powered passenger cars.

Besides price, this year’s Beijing auto show reflected how companies – Chinese and foreign – compete on technologies such as driver assistance software.

Chinese consumers place almost twice as much importance on technology features as American consumers, Dyer said, citing the AlixPartners survey.

He highlighted how Chinese startups are so aggressive that a car can 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 as needed,” Dyer said.

Interest in technology doesn’t mean consumers are moving toward battery-only cars. Dyer said that in the short term, consumers are still concerned about range, meaning hybrids are not only in high demand, but often used without recharging the battery.

Even Volkswagen launches into the race for “intelligent technologies”. The German auto giant unveiled at the auto show its joint venture with Shanghai state-owned SAIC Motor, which has teamed up with the automotive unit of Chinese drone company DJI to create a system driving assistance for the new Tiguan L Pro.

The initial version of the SUV is fuel-powered, for which the company’s slogan is: “oil or electric, both are smart,” according to a CNBC translation from Chinese.

Battery manufacturer CATL held a larger exhibition stand this year, probably hoping to encourage consumers to buy cars equipped with its batteries as its competitors’ market share increases, said Zhong Shi, an analyst at the China Automobile Dealers Association.

Automotive chip companies Black Sesame and Horizon Robotics also had booths inside the main exhibit hall.

Lotus Technology, a premium British automotive brand acquired by Geelyfound in a survey of its customers that their top requests were for automatic parking and battery charging, which would allow drivers to stay in the car.

This was stated by CFO Alexious Kuen Long Lee, who spoke 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 partnership on battery swapping and charging last week.

“I think there is a passing of the baton where Chinese brands are becoming much bigger and stronger, and foreign brands are still trying to decide which is the best energy path,” said Lee, who has been working in China for 1998. “Are they still deciding on PHEV, are they still thinking about BEV, are they still thinking about internal combustion cars? The whole decision-making process becomes so complex, with so much resistance internally , that I think they’re just not doing it productively?

But he believes Lotus has found the right strategy by expanding its product range and moving straight to battery-powered cars. “Lotus today,” he said, “is similar to the position of international brands in China, probably in 2000.”