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Foreign heavyweights waiting to pounce on the Chinese NEV market

Foreign carmakers have not really participated in China’s new energy vehicle game as far as locally produced vehicles are concerned.

But that’s about to change as a slew of announcements by major foreign automakers in recent weeks is setting up a showdown between them and their Chinese counterparts, who are ahead of the game for now, by the turn of the decade.

On July 5, Daimler and BAIC Group signed an agreement for the localization of battery electric vehicles (BEVs) under the Mercedes-Benz brand and battery packs using Chinese locally-sourced cells. That comes a little more than a month after the two partners had signed an agreement to further strengthen cooperation in NEVs where Daimler plans to acquire a minority interest in BAIC Group subsidiary Beijing Electric Vehicle Co., Ltd. (BJEV).

On June 29, Volkswagen Group announced that it will launch more than 20 new plug-in hybrid and battery electric vehicles in China, both domestically-made and imported, by 2025. On the same day it signed agreements with three Chinese charging poles providers and operators (CPOs) to provide convenient, fully integrated and end-to-end charging service to Volkswagen NEV customers in China. The German carmaker also announced recently that it will begin producing electric motors in Tianjin in December 2018 with annual output capacity of 120,000 units, to be supplied to FAW-Volkswagen and SAIC-Volkswagen which will begin production of NEVs in 2019. Its joint venture with JAC also began construction on June 29 and will roll out its first NEV model next year.

The largest foreign carmaker and the parent of the leading premium brand in China are obviously moving swiftly both because China is and will continue to be the largest NEV market in the world and because the recent CAFC+NEV “dual credit” scheme that will go into effect next year are forcing them to speed up their game in which they are already behind.

Volkswagen’s move to take care of the charging issue by offering a one-stop-shop solution is interesting as it sort of puts the “egg” before the “chicken” so that when their NEVs do come out it will be convenient for their customers to charge their vehicles. Daimler’s decision to localize battery production is also interesting as the vertically integrated move means that it will become the only premium car maker to have a local battery plant in China. The recent new guidelines on foreign investment allowing no restrictions in battery production as far as foreign equity is concerned, probably played a role in that decision, and it is also to meet demand for electric vehicles flexibly and efficiently, as a senior executive pointed out.

Foreign carmakers have been rather patient on the NEV game in China. But they are certainly waiting for that chance to pounce on the Chinese NEV market, especially when subsidies entirely phase out after 2020. Will Chinese brands, which are ahead of the game for now, still remain in front by then?

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