In the last decade, China’s automotive industry has developed at an extraordinary pace. By 2009 it had overtaken the USA as the largest vehicle producer and seller in the world. But in the current and future global climate, such growth will generate problems, with national energy security, environmental damage, long-term climate change and urban congestion. This set of challenges has driven the Chinese government to focus on the development of New Energy Vehicles [NEV] as a national strategy, which is creating an incredibly rich seam of opportunity for both domestic and international manufacturers.
NEVs create a key opportunity
NEVs come in various forms, each using alternative fuel and electrification technologies. Crucially, the development and production of these cars by the domestic makers is not progressing as swiftly as the Chinese government had anticipated, which opens the market for more technically advanced foreign manufacturers. It’s likely that European, American and Japanese brands will spearhead NEV growth in China.
What’s stopping the domestic makers?
A lack of technological advancement – both real and perceived – is one obstacle to domestic NEV development. Chinese automotive companies are still playing catch up with leading foreign makers and there is a degree of consumer resistance too. There is also no industrial standard for charging facilities, battery safety and other vital elements, such as that established at the World Electric Vehicle Conference in 2012. Meanwhile the scarcity of charging facilities in Chinese cities is halting progress and consumer demand. High development costs, linked particularly to power batteries can only impact on pricing and consumers need to find real value in NEVs before they commit. Finally there is a lack of clarity as to what NEVs would work best for China – the options still need to be thoroughly explored, by manufacturers and the market.
Chinese makers are showing real interest
Despite the barriers, Chinese makers are showing real interest, with plenty of projects under development by key manufacturers such as BAIC Group, BYD Auto, CHANGAN, FAW, FOTON and SAIC Motor. BYD has sold more than 1000 units since launching its electric cars in Shanghai this February, and a joint venture between BYD and German maker Daimler is now ready to launch an electric model under the Denza brand name this September.*
Navigating a new road
In a country where foreign manufacturers appear to be more aware of the latest nuances in government policy and significantly more advanced technically, it’s clear that global marques such as Audi, Mercedes-Benz, General Motors, Toyota and others have much to gain, whether through building their models locally or by forging partnerships with Chinese companies.
It is the Chinese government who are driving NEV development in their country, where in Western nations it is the automotive makers who usually play the initiating role. This ‘reverse’ pattern holds obvious advantages for innovative foreign makers. In a young, problematic and dynamic market there are great potential profits to be made if the challenges can be met and overcome.
A perfect example of NEV potential is the all-electric i3 from BMW – already a sales success in Europe and USA markets and now due for launch across China in the next couple of months. The German automotive brand understands well the ‘sleeping giant’ nature of the Chinese market and is ready to exploit it.
*Source: South China Morning Post Jul 8th 2014
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