Advanced Search

The story appears on

Page A11

October 24, 2018

GET this page in PDF

Free for subscribers

View shopping cart

Related News

Home 禄 Business

Awash with green cars, will market drown?

Source: Shanghai Daily | 00:01 UTC+8 October 24, 2018 | Print Edition

My friend Liu Yiwen recently asked me about the proliferation of green-car brands in China and how so many of them can exist in one market.

鈥淚鈥檝e heard there are lots of new-energy vehicle brands showing up, but it鈥檚 hard to keep track of them all,鈥 she told me. 鈥淎s an auto industry journalist, you must know all these brands well. What are their future prospects?鈥

Interesting question.

China is not only the world鈥檚 largest auto market but it is also the leading country in the field of electric cars. Thanks to government incentives and subsidies, the industry has been developing rapidly in the past three years. However, many subsidies are being scaled back even as production increases. The risk of overcapacity and too many players looms.

According to a survey by consulting firm JD Power, there are 455 registered new-energy vehicle companies and 49 electric-car startups in China鈥檚 auto market.

Some new-energy vehicle makers have won a strong foothold in the market, including Chinese electric car makers BYD and BAIC BJEV. Tesla has just purchased land in the Lingang area of Shanghai to build its first factory outside the United States.

The market is becoming a dog-eat-dog realm as companies elbow one another for public recognition and the path to profit.

For new-energy auto companies, building a factory, adapting technologies and building a nationwide sales network involve huge investment. And then there is still the problem of convincing the driving public that electric cars, which are more expensive than conventional internal combustion vehicles, are worthy of consideration, given all the worries about kilometers-per-charge and the availability of charging stations.

All that is set against a backdrop of weakening overall car sales. After a decade of robust sales growth, the Chinese auto market seems to be slipping into the slow lane.

China鈥檚 overall automobile sales in September fell 11.6 percent from a year earlier to 2.39 million. In the first nine months of the year, vehicle sales crept up only 1.5 percent from the same period in 2017, according to the China Association of Automobile Manufacturers.

Whither consumers?

In September, sales of clean-energy vehicles rose 54.8 percent to 121,200 units. For the nine months, they jumped 81.1 percent to 721,500 units. While the percentages are large, the base figures are small compared with overall auto sales.

Carmakers need to think about how many people will actually step up and pay to buy the electric cars they are launching into the market. Product design, quality, durability, reputation, aftersales service and pricing become key elements in consumer decision-making.

Wu Xinyi, one of my friends who works at a consulting firm, said that it appears to be a Darwinian version of 鈥渟urvival of the fittest.鈥

鈥淪ome car manufacturers have spent a lot of money to produce new-energy vehicles, but who will buy them is a big problem,鈥 Wu said. 鈥淐armakers need to secure brand positioning to be able to ascertain where the real consumers are.鈥

He鈥檚 not alone in thinking that the crunch may be nigh. Zhang Xiaofeng, an independent market analyst, said he doubts the market will tolerate the outpouring of vehicle brands.

鈥淢any car manufacturers sell only a small number of electric cars each month,鈥 Zhang said. 鈥淪ome of them are still losing money. The market needs consolidation by mergers and acquisitions. We don鈥檛 need so many automakers.鈥

There were over 200 auto companies in the US in 1920s and 1930s, with total production of 2.5 million vehicles. Today there are less than 20, counting foreign automakers producing cars in the US. More than 60 car companies operated in Germany 50 years ago, with relatively low production volumes. Many of them have disappeared. The same situation now looms over China.

Ferit Kucukay, managing director of the Institute of Automotive Engineering at the Technical University Braunschweig and chairman of the Car Training Institute Symposium China, predicted that only about 20 percent of existing companies will be around in 30 or 40 years.

But there is a silver lining to this cloud, he said.

鈥淥ne good thing is that the more companies you have, the more innovation will come to the market,鈥 he said. 鈥淓lectric startups bring us good ideas, and some of them will be taken over by other automakers. The combination of different good ideas may produce bigger, more viable companies.鈥

Business
锘

 

Copyright 漏 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.

娌叕缃戝畨澶 31010602000204鍙

Email this to your friend


锘