Is China Poised to Become the World’s Automotive Superpower?
That’s exactly the plan if Beijing gets its way.
A few years ago, a couple of automakers from China brought samples of their wares to the North American Auto Show in Detroit to assess reactions of the press and public. My reaction, along with fellow critics, was that the world’s major automakers had little to worry about. The products looked like what the industry produced in the mid 1970 era, complete with marginal quality and lackluster design.
Fast forward to this year’s Shanghai Auto Show, along with other major shows in New York and Geneva, and the cars from Chinese automakers displayed state-of art technology in stunning fashion. That seemed curious since China still labels itself a “developing country” with the World Trade Organization, but hardly a surprise to automotive analysts or nearly anyone following current events. Still, the alacrity of China’s progress is remarkable.
All the world’s automakers are pursuing electric power, a goal driven by governments far more than the market demand. From a product standpoint, the feasibility has quickly become reality with producers, principally Tesla among a few others, creating perfectly drivable vehicles that travel reasonable distances before recharging. The cost premium however, especially if government subsidies are absent, are a hurdle to wider acceptance and recharging infrastructure is still developing.
In the United States, most electric vehicle (EV) sales have been concentrated on the West Coast (especially California) and the Northeast where government policies have put a thumb on the scale. In fact, our Golden State’s rather priggish Chair of the Air Resources Board announced that she would ban vehicles that burned petroleum-based fuel if the Trump administration had the temerity to relax federal standards.
European Union countries have imposed similar carrot (incentives) and stick (penalties) rules on motorists. Driving an EV in many major cities is far cheaper than one fueled with fossils. But in China, where a few Beijing rulers can decide what will power the population’s transportation, the move toward electric power and technology has been dramatic. For example, in addition to subsidies that are as high as $10,000, Beijing receives 3-million applications a month for just 3,000 vehicle licenses available, but new electric vehicles are exempt. Now that’s incentive!
SERES SF 5
BIAC Arcfox GT
BIAC Arcfox GT
BIAC Arcfox GT
For decades, if an automaker wanted to sell its vehicles in China, it had two choices. Either pay stiff tariffs and suffer low volume or create a joint venture with an existing Chinese manufacturer. Since the market was quickly developing and the potential so large, virtually every car company found a dance partner. Government owned Beijing Automotive Industry Holding Company (BAIC) is a perfect illustration, producing its own vehicle lineup along with Mercedes-Benz and Hyundai- branded cars.
An example of BAIC’s quick learning curve from its joint venture partners was on display at major auto shows in the sculptured form of its Arcfox GT, an electric supercar that claims up to 1,600 HP. While there’s little volume in this two-passenger micro segment, it’s an interesting gauntlet for BAIC to toss down. And the state-owned Beijing firm has clout, building nearly 3-million vehicles a year.
Although China still has an abundance of automakers, a few are quite large and integrated. Guangzhou Automobile Group (GAC) makes everything from components to complete vehicles, including joint ventures with Honda among others. The company surprised auto show visitors with its Entranze concept, a fashion forward family hauler that’s loaded with advanced technology.
Byton positions itself as an international firm partially created with former BMW executives and the company’s M-Byte was favorably compared with Tesla models during a showing adjacent to last year’s Pebble Beach Concours. Byton vehicles will be built at a new factory in Nanjing, China with an initial capacity of 150,000 units per year.
NIO, a relatively new electric vehicle company from Shanghai has been portrayed as the most likely rival to Tesla. The NIO enterprise has a foot in every EV innovation, from fast charging via commercial vans to automated battery swapping stations. And its model lineup looks good. But so far, NIO has sold just over 15,000 vehicles in China with a net loss of $3.39-billion. What’s more, the US based headquarters recently lost its tech-celebrity CEO Padmasree Warrior. We’ll see what’s next with this dynamic enterprise.
Made in the USA
Although our country (so far) hasn’t compelled foreign automakers to team up with domestic rivals, most major players from Europe, Japan and South Korea have built manufacturing plants here. The conventional business model has been to start with vacant land and build from the ground up, but enterprising startups have uncovered an alternative – take over a shuttered former factory. It’s a strategy that worked for Tesla, generating cost savings and positive PR.
Electric car startup SERES (formerly SF Motors) acquired a former AM General assembly plant in Mishawaka, Indiana that most recently produced Mercedes-Benz R-Class utilities. The facility was originally built for GM’s Hummer H2 vehicles, so its retooling for battery electric vehicles brings a wonderful sense of irony to the South Bend area’s population. And it potentially retains a few hundred well-paying jobs. SERES is an offshoot of Sokon Industry Group with production in China along with research in California, Michigan, Germany and Japan. The conservatively styled sedan and SUV appear ready for market if things go as planned.
Faraday Future made a splash a couple of years ago with its stylish FF91, a low-slung utility EV. The China investor-backed company purchased three office buildings at Nissan’s former Gardena, California campus and announced plans for a $1-billion mega factory in Nevada. But after investors bailed, the struggling firm sold the headquarters buildings and the Nevada land. If Faraday stays afloat, it plans to produce its cars in a former Pirelli tire factory in Hanford, about 200-miles north of its LA area offices.
One of the newest emerging China to USA endeavors is Mullen Technologies, a Southern California retailer of used cars and creator of an Internet car app, and Chinese automaker CH-Auto. Former music mogul and EV advocate David Michery acquired the Mullen organization because of its history and connections with China automotive firms. Mullen’s new offering is CH-Auto’s Qiantu K50, an affordable electric “supercar” that is currently for sale in China. But instead of importing complete cars, Mullen would assemble pre-made components over here.
Mullen’s original plan was to assemble the K50s near its headquarters, perhaps with the reverse Apple slogan “Designed in China, Made in California”. But the West Plains Airport Area Public Development Authority near Spokane, Washington made an offer of a 1.3-million square foot space that Michery couldn’t refuse.
SERES SF 7
Faraday Future FF91
The Retail Mystery
There are a gaggle of new electric vehicle startups from China along with a few U S based enterprises, including Rivian and Lucid, who want to sell you a new car. Many look fondly at Tesla’s direct sales model versus the traditional franchise dealership, and there’s merit in both strategies. Car dealer organizations have already weighed in on what they think of the “direct” model and legislators are well advised to keep their seat belts fastened. It looks like a wild ride.