Features
12 oct 18

Is the future of electric mobility more Chinese than German?

How Germany and China are shaping the future of mobility

One in three cars made by German manufacturing groups VW, BMW and Daimler is sold in China. And one in five of the 24 million cars sold in China is German. Who is benefiting most from this remarkable symbiosis? How will it affect the future of mobility? And what will be the impact on the fleet industry? Global Fleet examines.

  1. Why China is ‘destiny’ for German car makers
  2. Chinese rules, German opportunities
  3. Is the future of electric mobility more Chinese than German?
  4. How China is catching up, and why Germany could still win the mobility race

The future of mobility is electric, autonomous and Chinese. That is the ambition of the Chinese government. The cars that will get us there are German. That is the hope of the German car industry. But could it be that China has already outmanoeuvered the Germans?

Just this year’s list of new German involvement in China’s automotive drive is impressive.

  • VW has committed €15 billion to research in China on e-mobility, connectivity, autonomy, while “systematically expanding its partnerships”. With its Chinese joint-venture partner FAW, WV wants to develop a new brand specifically for NEVs (New Energy Vehicles). Separately, VW will also develop EVs with Anhui Jianghuai Automobile Group under its SEAT brand.
  • BMW is starting car-sharing in Chengdu, in partnership with Shanghai-based EV car-sharing company EVCard. This will be a challenging journey for the Bavarians, as they don’t hold enough license plates. BMW also finalised plans to produce electric Minis in a joint venture with Great Wall. And the company is also joining Apollo, Baidu’s autonomous-driving project.
  • Daimler extended a deal with Tsinghua University to continue development of autonomous cars. The manufacturer of Mercedes-Benz also announced that it was the first foreign company to be granted a license to test automated cars on the streets of Beijing – a field in which China hopes to lead pretty soon.
  • Supplier Continental has signed a deal with Didi Chuxing to develop autonomous, electric cars.
  • Bosch is cooperating with Chinese EV startup NIO to build sensors and control systems for electric cars.

Formidable presence

The German car industry is thus increasing its already formidable presence in China. In 2010, German automakers had 8 factories in China. That figure has now trebled to 29. At the start of this decade, they produced 1.97 million cars in China. Last year, that had more than doubled, to more than 4.5 million.

No less than 55% of the 24.8 million cars sold in China last year were manufactured by non-Chinese brands. With their 20% market share, the German brands far outperform their American, Korean and Japanese competitors.

To increase their share of the Chinese market even further, the Germans have fully committed to China’s electrification policy. Already at the end of 2016, there were more than half a million cars with alternative powertrains on China’s streets, and that number will increase rapidly, not just through production quotas but also via traffic bans on internal-combustion vehicles in the highly polluted major cities of the country. Beijing has even mooted (but not yet enacted) a complete ban on ICE vehicles.

By 2025, VW aims to produce no less than 40 models with alternative powertrains in China – 25 models more than previously announced. But Volkswagen is also keeping an eye on the segment preferences of its Chinese customers. The most popular segment on the Chinese market remain the SUVs, of which VW and its partners alone will market 9 new models throughout 2018 and 2019.

Trade war

VW and German automakers in general hope that increasing production in China will also lead to increased sales in the country, which will remain the world’s largest car market for the foreseeable future.

The trade war between China and the U.S. is adding a further incentive to German manufacturers to shift production to China. Germany is not a party to the trade conflict between China and the U.S., but its automakers are suffering nonetheless.

China’s punitive 25% extra tax on imported cars (on top of the existing 25%) will not hit Ford, Fiat/Chrysler or GM, all of whom produce their cars for the Chinese market in China. Tesla is the only American brand directly affected, as it produces all its vehicles in the U.S. (although there are plans for a factory in Shanghai). Tesla sales in China amount to $2 billion, so the additional tariffs would add up to $500 million to that.

BMW and Daimler produce many of their cars for China in the U.S. The impact of the extra import taxes would be around $1 billion for BMW and $765 for Daimler in 2018 alone. However, the longer-term impact of the trade war could be bad for the U.S. and good for China: BMW has already moved production of its X3-Series destined for China away from the U.S., to plants in South Africa and China itself. Daimler is also planning to move production out of America.

Meanwhile, the scene of Chinese domestic EV manufacturers is getting more crowded by the month. Basically, there are two avenues. One is traditional OEMs extending their product range. The other is via startups using investment and support from major tech players, such as Tencent (owner of WeChat, China’s favourite digital portal and the world’s fifth-largest tech company) and Alibaba (China’s biggest online retail company, and just a few billion dollars smaller than Tencent). Here’s an overview. Note the German involvement/inspiration in a number of them:

Traditional OEMs

  • Chery produces the fully-electric minicar eQ, 4th-bestselling EV in China (priced below $10K).
  • BYD produces the e6, a Polo-sized hatchback, and a PHEV version of its popular Song model – one of the few compact crossover hybrids on the Chinese market.
  • Geely owns Volvo, London Taxi, Lotus, and most of Zhi Dou, which produces the DC, an ultra-compact full-electric two-seater. The car is also produced for Zotye, where it is called the E20.
  • Beijing Electric Vehicle Corp. is a subsidiary of BAIC, 12% owned by Daimler. It produces the EC180, the cheapest and most popular EV in China. (<$8,000) and a wider range of EVs.
  • A.k.a. Shanghai Auto, SAIC is one of the oldest OEMs in China. It has joint ventures with VW and GM, producing and selling under those two brand names. It also owns the popular LCV brand Maxus which produces the EV80, the largest eLCV on the Chinese market.

Startups

  • NIO: Shanghai-based, with investment by Tencent, Baidu and Lenovo. Offices in San Jose, London and Munich.
  • Byton, a.k.a. ‘Future Mobility’: Nanjing-based, with investment by Tencent and Foxconn. It has locations in the U.S. and in Germany (Munich). CEO Carsten Breitfelt is ex-BMW, used to be in charge of the i8 programme. President is Daniel Kirchert, ex BMW Brilliance and Ex Dongfeng Infiniti.
  • XPENG, a.k.a. Xiaopeng: Guangzhou-based, with investment by Alibaba and Foxconn.
  • Iconiq: Tianjin-based, with investment by Ping An Insurance and GSR Ventures, and a partnership with Microsoft.
  • WM Motor Technology: Shanghai-based. WM is short for Weltmeister, or for Weima, which is Chinese for ‘powerful horse’. Investment from Baidu and Tencent.
  • Singulato Motors: Beijing-based, with investment by Qihoo 360, GX Vapital and TaoYun Beijing Investment Fund.
  • AIWAYS: based in Shanghai and Germany. Chief Product Manager is Roland Gumpert, founder of GMG, which built the Apollo supercar. GMG is now a subsidiary of AIWAYS, which received funding from Shagang Group.

As shown by this litany of Chinese EV manufacturers, traditional OEMs and startups, China is serious about its electric-mobility ambitions. Despite its growing flexibility towards foreign OEMs, Beijing has also established some ‘red lines’ which are not so easy to cross.

Security grounds

Yes, German OEMs will be allowed to contribute to the growth of China’s EV sector. VW plans to sell 400,000 EVs in China by 2020, which is to increase to 1.5 million by 2025. That growing fleet of electric vehicles will require a huge amount of batteries. And here, Beijing is not budging. The Chinese government has released a list with battery producers which are allowed – all Chinese. Foreign ones are taboo, on ‘security grounds’.

It now seems that China’s home-grown advantage in battery technology is paying off worldwide, and more particularly, in Germany itself. It was recently announced that Chinese EV battery specialist (and global market leader) CATL is setting up a production unit for lithium-ion cells near Erfurt in Thüringen.

Key industry

This despite the fact that German OEMs judged the production of battery cells in Germany “too expensive” to do themselves. Suppliers Bosch and Continental have recently abandoned their ambition to produce lithium-ion batteries, leaving it to their Asian competitors.

BMW is participating in CATL’s German plant, in order to be able to buy the batteries cheaper. In all, BMW wants to buy about €4 billion’s worth of battery cells off CATL, a third of which is to come from Erfurt. Does that mean Germany’s car industry has been defeated by the Chinese in the EV segment?

Even Angela Merkel called EV battery technology a ‘key industry’ that Europe shouldn’t abandon, bluntly asking: “Can we have a future as a car-manufacturing continent if our battery cells all come from Asia?”

Authored by: Frank Jacobs