As Beijing phases out subsidies for electric vehicles and introduces mandatory EV sales targets, auto companies are striving to make electric cars that Chinese drivers actually want to buy.
With overall auto sales in China falling flat last year, and more companies in the EV arena than ever before, the competition is getting fierce. And that competition was on display last week at the 2019 Shanghai auto show.
Chinese automakers are well positioned to lead as China’s auto sector sees greater adoption of new energy vehicles (NEVs) — a category that includes battery electric, plug-in hybrid and fuel cell vehicles, but today is almost entirely focused on plug-ins. Chinese auto brands have struggled to gain a foothold in the gasoline-powered vehicle market, making up just 10 percent of global sales. But it’s a different story in the EV sector, where Chinese firms are responsible for more than 50 percent of global sales.
China has benefited from a combination of favorable factors, according to Paul Gong, automotive analyst at UBS, “including government subsidies (at least at the initial stage), customers’ willingness to try new technologies, adequate industry supply chain, fast-rolling charging infrastructure, as well as capital funding by investors of various backgrounds.”
As we covered in previous Squared columns, foreign automakers want to get into on the game in a big way. From Tesla to Volkswagen, global brands are investing billions of dollars in China’s EV market as the country begins to relax restrictions on foreign companies. At the same time, China’s domestic EV markers are making serious moves.
Small and compact sedans are typically sold in the highest volumes in China, according Gong. But as technology has advanced and China’s EV market has matured, companies are introducing a wider array of vehicle types than ever before, including medium-sized sedans and SUVs. While China is by far the largest EV market in the world today, the long-term success of the sector rests on companies being able to sell cars based on consumer appeal, rather than their low cost enabled by government support.
With nearly 500 EV companies of various kinds currently operating in China, it would require writing an encyclopedia to outline each of their offerings. So instead, this week’s column looks at Shanghai auto show highlights from four of today's most prominent Chinese EV manufactures.
Beijing Auto Industry Corporation is one of the biggest EV producers in China. Last year, BAIC's EC180 was the best-selling electric car in China, and the second best-selling EV in the world after the Tesla Model 3. Tesla unseated BAIC for the top sales spot in 2018, even though the EC180 improved deliveries 16 percent to more than 90,000 units.
BAIC’s EC180 costs around $22,000 before subsidies, has a range of around 110 miles and a top speed of 62 miles per hour. The rise of mini-EVs designed for short-range driving between 60 and 90 miles has helped to boost the popularity of EVs in China overall. According to data from JPMorgan, prices for mini-EVs start at around $6,250 (RMB 40,000), making them a very affordable option.
At the Shanghai auto show, BAIC took a different tack and decided to show off its high-end EV line, Arcfox, developed by BAIC Group’s subsidiary Beijing New Energy Vehicle. Three Arcfox models unveiled in Geneva earlier this year were on display at the China show, including the GT electric hypercar, which comes with a 370-mile range and is capable of reaching 62 miles per hour in under 2.59 seconds.
BAIC also highlighted the Arcfox ECF SUV in Shanghai, its first crossover of any kind, which comes with a range of 240 to 434 miles, depending on the battery size. The third vehicle, Arcfox Lite, is a two-seat mini car available mainly to short-term rental fleets in China.
Both the ECF and the GT are expected to go on sale in China in the first half of 2020. The GT, which is being developed in Spain, rather than China, goes on sale in Europe “as soon as possible” a company executive recently told Automotive News, but he did not give a time frame.
Strong EV sales at home coupled with a strategy to go abroad make BAIC an important company to watch.
Geely Auto Group, founded in 1986, is the largest privately owned automaker in China. In November 2015, Geely announced an ambitious new initiative dubbed Blue Geely, which set out to make 90 percent of the company’s auto sales consist of NEVs from 2020. To hit that target the private Chinese automaker announced plans to launch more than 30 NEV models within the next three years.
The company reportedly created a new business entity earlier this year to house the development of NEVs. Last year the automaker launched three NEV models — the Emgrand EV450 medium-sized sedan, with a 260-mile range; the Borui GE plug-in hybrid; and the Geely Emgrand GSe, the company’s first electric crossover SUV.
At this year’s Shanghai auto show, Geely teased its latest EV offering: the Preface electric sedan. This isn’t the company’s first electric sedan, but it’s the first one built with the “Compact Modular Architecture” that Geely co-developed with Volvo. The Preface is still a concept at this point, but should be able to scale rapidly and cost-effectively by leveraging the expertise of both auto companies.
That's not all. In fact, the Preface (ironically) came after Geely unveiled the first vehicle model under its new pure electric automotive brand named Geometry.
The Geometry A, launched days before the auto show, is a high-end EV with up to 311 miles of range. Prices in China will start at $31,250 before incentives, which puts the Geometry A on the lower end of the premium spectrum.
The A is the first of 10 models Geely plans to launch for the Geometry brand by 2025. The lineup will eventually include minivans and SUVs, according to the company. This represents a major move for Geely. “The launch of Geometry and its first product advances Geely’s strategic goal of becoming one of world top 10 automotive groups,” said Zhejiang Geely Holding Group President and Geely Auto Group President and CEO An Conghui, in a statement.
A lot of companies are called “Tesla killers.” In China, Nio is at the top of that list.
The Chinese EV startup IPO’d in the U.S. last year for $1 billion. The company introduced its first supercar, the EP9, in 2016, followed by its first mass production car, the ES8, in December 2017. The ES8 is a 7-seat, all-electric SUV priced below the Tesla Model X in China. More than 15,000 of the SUVs have been delivered since production launched last June. In the coming months, Nio will start deliveries of the ES6, its smaller five-seater SUV.
Nio put its entire electric lineup on display at the Shanghai auto show, including the Nio Formula E Team car and the new Nio ET Preview sedan. That’s an impressive list of vehicles for an automotive startup, after just four years of development. Nio's ability to raise large sums of money has certainly helped with the process.
The Preview was praised by reviewers as one of the best-looking sedans at the event. The EV comes with Nio’s high energy density NCM811 nickel-cobalt-manganese battery pack and high efficiency motors, which the company says enables the car to achieve a range of up to 317 miles.
Nio has its eyes on becoming a global Tesla competitor, not just within China. It stands a good shot of taking on Tesla if it can continue to beat the Silicon Valley automaker on price. But so far Nio hasn’t said when it plans to go abroad.
"We will go global with [sales] in both Europe and the U.S.," Roger Malkusson, Nio's VP for vehicle engineering, told Car and Driver, “but we don't have any plan we can reveal for when that can happen. [...] You need to be very humble to go to new markets. We have an advantage here compared to Tesla: We know China. But we lose that advantage when we go to Europe and the U.S."
Xpeng Motors is not just a potential Tesla killer, but also a Tesla borrower.
Xpeng, also known at Xiaopeng Motors, was founded in 2014 — the same year Tesla open-sourced its patents. Founder and CEO of Xpeng Motors, He Xiaopeng, has acknowledged that he was inspired by Tesla. Many industry watchers pointed out the similarities when Xpeng launched its first EV, the Xpeng G3, in December 2018.
Today, the Chinese EV upstart is worth billions of dollars and is backed by Chinese tech giants Alibaba and Foxconn. It’s also at the center of a trade-secret dispute.
The Xpeng G3 electric SUV comes with five seats, a 227-mile range, and a price tag in China of $33,000 to $37,500 before subsidies, which is substantially less than the Tesla Model 3, which starts at $64,000 in China. According to Brian Gu, vice chair and president of Xpeng, that price differential is more than a competitive edge; it’s part of his company’s strategy.
He recently said on Bloomberg TV that Xpeng is intentionally going after the lower-priced middle market, whereas Tesla is considered a premium brand, despite the introduction of the Model 3.
Xpeng unveiled its second EV at last week’s Shanghai auto show: the Xpeng P7. The P7 electric sedan was created on an entirely different platform from the G3, and comes with a longer range of more than 370 miles. It’s also equipped for rapid acceleration, and Level 3 semi-autonomous driving that’s tailored for China’s congested road conditions.
In addition, the P7 is designed to be smart and to learn from driver habits, preferences and even moods. The car is being targeted for delivery in the second quarter of 2020 and has already received over 3,000 orders, according to the manufacturer.
While Xpeng is trying to distinguish itself from other brands, the P7 appears to have a lot in common with Tesla. At a lower sticker price, success will come down to how well the P7 performs once it's actually in customers' hands.
But who will buy them?
China's NEV sector is huge and there are a lot of products on offer. That much is undeniable. But it's "far from a well-developed and smoothly functioning market," according a recent report by the Center for Strategic and International Studies (CSIS).
Government spending is equivalent to more than 40 percent of total NEV sales, the report states. That means the industry would not exist, at least not in its current state, without extensive government intervention.
Chinese policies have successfully resulted in a robust EV supply, as this snapshot of the top Chinese EV makers indicates. But, CSIS states, “[i]t is far from clear that there is genuinely deep consumer demand."
A reckoning will eventually come, according the authors, where the government will have to decide which companies to let fail and which ones to keep afloat.