China is adopting an industrial strategy it hopes will cement its role as the world leader in the manufacture of electric cars, producing and exporting millions of China-made EVs a year.
The strategy is part of the state-led “Made in China 2025” plan, which aims to make the economic giant self-sufficient in 10 core technologies, including the manufacture of clean energy vehicles.
The MIC2025 plan foresees Chinese carmakers producing 3 million EVs each year, 80 per cent of which would be sold on the local market and another 10 per cent of cars made by the country’s top two carmakers would be sold overseas.
But Peter Chen, a Shanghai-based engineer with US car parts maker TRW, says this is easier said than done.
“To become a world leader in terms of technologies is not an easy job,” he tells SCMP.
“Given the huge market size in China, EV is certainly a key industry where the government wants to develop its own players to be world leaders.”
China is already the world’s largest car market, with over 1 million passenger EV sales expected by the end of 2018, 96 per cent of which are made by domestic carmakers according to figures from EV Volumes.
The EV market in China is not set to slow down either, with year-on-year growth since 2015 in an ever-increasing trend upwards, from +65 % to 2016, +72 % to 2017 and expected to be +83 % by the end of 2018.
However, China generally acknowledged as having a way to go on EV technology, with EV range considerably less than overseas counterparts, usually well below 300km.
“Chinese EVs are still several years behind the global leaders in terms of technologies,” Cao Hua, a partner with private equity group United Asset Management tells SCMP.
“The limited driving range and the lack of charging stations are still the major stumbling blocks to the rise of China’s EV sector.”
To that end, Chinese carmakers are inking deals and partnerships with overseas investors and auto giants alike.
American billionaire Warren Buffet has invested in leading EV maker BYD, Chinese internet giant Baidu recently formed partnerships with both Volvo and Ford, while Tesla’s biggest external investor, Baillie Gifford, bought into EV maker Nio.
But overseas auto giants are also making plans to take advantage of the growing Chinese EV market, and as such a gauntlet has been laid down.
Pioneering EV maker Tesla, which is introducing the Model 3 to China in March 2019, is well down the road to their Chinese gigafactory having put down $US200 million for land just outside Shanghai, and VW has just announced a new auto plant at which they plan to output 300,000 EVs per year.
“The competition will be cutthroat as production volume jumps in the coming years,” says Nomura’s auto analyst Joseph Wong.
“Foreign brands will ratchet up pressure on Chinese home-grown brands as they are able to make better products.”