Out of China: the next big thing in new cars

Tuesday, 16 July 2019

How much attention should we really pay to China's car industry?

Its seismic history of past attempts to compete in New Zealand might suggest it's a bit of a clown show that struggles to present quality vehicles. It's true some past products have been pitched on budget advantage because that's been about the only positive to mask poor build and safety quality.

However, China's car makers are fast learners; what's available in New Zealand today is already worlds ahead of far we were offered just five years ago. And this will continue. International studies suggest China's rate of improvement is running a double the pace achieved by Korean car brands that, in turn, were a lot faster at realising global ambition than Japan Inc.

The Japanese car manufacturers learned fast. The Koreans learned faster. Expect the Chinese to learn even faster still.

Other factors are at play. More Chinese brands are seeking to sell beyond their borders because now they have achieved ambitions in satisfying their domestic market.

**READ MORE:

A number of Chinese manufacturers are already established in New Zealand, with Great Wall being one of the better known ones.

* Five cool concept cars from the Auto Shanghai motor show

* We drive China's Tesla-beater, the Roewe Marvel X

* Chinese cars: why you need to know about SAIC**

Lynk & Co are rolling out some dramatic cars, a racing programme and an unconventional sales model.

Even though on-going trade friction with the United States and a continued slowing of the global economy last year have stymied domestic market growth, China is still the world's largest car market, by considerable margin. Around 22.5 million annual car registrations are predicted for this year.

However, China has more than 100 car brands and many have factories with huge capacity.

Rather than pull back on production, the big guns that we are already familiar with - Great Wall and its SUV specialist, Haval, SAIC/MG and Geely Auto – have determined instead to offset slackening demand on their home turf through delivering more product, in greater volume, into global markets.

There's a big EV presence in Shanghai: you can spot the plug-in cars by their green number plates.

It's a plan that might compel other marques you might never have heard of to apply for passports as well. One very exciting prospect in the wings is Lynk & Co, a Geely Auto premium brand which uses latest platforms and tech developed by Volvo, which it owns (along with Lotus and the London Electric Vehicle Company).

Geely's parent, Zhejiang Geely, has said it wants to build Lynk & Co vehicles in Volvo's factory in Belgium in a push to have more global presence.

The potential for a tidal wave of product with all the usual price advantaged attractions is likely and it could well be a truly mass attack: the big players here have production lines designed to output up to one million units per annum.

MG has launched an electric version of its small SUV, the ZS, in China already. It is coming here.

Some surmise that the flux in the domestic market could leave China's makers 22 million units short of maximum capacity. If it's not politically expedient to slow down, reduce (or even shutter) the production lines, then the only option is to ramp up export production. North America is the obvious place to target but if the US is as hostile to Chinese product as their president expects it to be, then those brands will have little choice but to increase their efforts in places with more friendly trading conditions.

This prospect arises at a time when another kind of expansionism is occurring in China.

One reason why the mood at Shanghai could be considered electric is because this country is now set to enter a new, highly-significant phase of an ambitious, Government-driven electric vehicle push.

Haval's delightfully tiny and adorable Ora EV isn't likely to ever make it to our shores, sadly.

Determination to cut back oil consumption, clear up the air and look for new ways to compete with the global car-making powerhouses in Japan, Europe and North America has compelled the Chinese government to swing its domestic producers toward becoming specialists in what it calls New Energy Vehicles (NEVs), a category that includes hybrid and full electric models.

Consumer pick-up at home, driven by subsidies and other incentives, has been swift. In 2015 China overtook the US as the world's biggest market for EVs and home demand now accounts for more than 50 per cent of total global production.

It's true that this isn't a swing that has occurred purely through buyer desire; Government mandate makes NEVs impossible to resist. The national administration recently implemented rules effectively prohibiting the establishment of new companies that only make combustion-engine cars.

If subsidies don't persuade, there are other means. A recent BBC report cited how, in Beijing, where licence applications are usually distributed by lottery, and Shanghai (where auctions are the go) NEV buyers get a license plate for free. In other Chinese cities, subsidies and rebates are given to buyers who purchase NEVs. How could they refuse?

Anyway, domestic annual electric car sales, having topped one million for the first time last year, are forecast to achieve double this in 2020 and 3.5 million in 2023. It will take NEVs years to overtake fully fossil-fuelled fare, but the proliferation is growing: Types that presently account for eight per cent of China's passenger-vehicle sales are destined to achieve a 20 per cent share in 2025 and 68 per cent in 2040.

It is little wonder that this year's Auto Shanghai motor show stands were packed with an interesting array of battery-compelled vehicles, of all sizes and reaching categories, from city cars to outright high-performance sports machines and also one-tonne utes; a lithium ion-battery edition of the next gen Great Wall ute, expected here next year, will ultimately include a lithium-ion battery compelled version.

The EV push has raised interest from international brands that generally trade here in partnership with local involvers. Nissan, Toyota, Volkswagen, BMW, Volvo and General Motors are all creating EVs in China. Some are specifically for sale there. Others are going to be exported. The Mini EV will be built here, so too Mercedes' first full electric, the EQC.

Volkswagen Group and Tesla are committed to EV manufacturing in China, while Nissan is looking for acquisition targets in the local industry. Tesla's gigafactory just outside Shanghai is almost ready to begin production of its vital mass market car, the Model 3. Conjecture is that this version will be of better design and engineering quality than the US car, the Chinese having determined how to effect improvements while containing cost.

Among the domestics, Nio is probably best known through having made international waves when its 1014kW EP9 supercar clocked a six minute and 45.9 seconds lap of the Nurburgring, not just an electric car record but also quicker than the fastest production car time then.

Nio is often billed as China's wannabe Tesla but others are also keen to claim that status. How long before NZers get to have first-hand experience of product from XPeng, Weltmeister, Singulato, Byton, Aiways, Bordrin Motor and Leap Motors is anyone's guess.

However, Geely Auto has just opened a research and development centre in Germany to develop EVs and next-generation mobility technology. It will employ 300 engineers. Geely Auto also has research units in China's Hangzhou; Gothenburg in Sweden; and Coventry, England.

However, according to the Automotive News Europe website, what is clear is that China will be the main battleground for electric-car makers for the next two decades, seeing off advances by the US and Europe.

At present the major EV take-up is in six big cities: Beijing, Shanghai, Shenzhen, Tianjin, Hangzhou and Guangzhou. These accounted for about 35 per cent of passenger EVs sold in China last year; the counts for Shenzhen and Shanghai exceeded those in Germany and the UK in 2018.