China's automakers must adapt quickly or lose out on the electric car boom

BEIJING — Chinese automakers, including state-owned GAC Group, cannot afford to take it easy amid the country's electric vehicle boom if they want to survive.

Adoption of battery-powered and hybrid cars has risen in China, but the onslaught of new models has sparked a price war that has forced… Tesla To lower their prices as well. While Chinese automakers are also looking to grow abroad, other countries are increasingly concerned about the impact of cars on domestic auto industries, requiring investment in domestic production. It is now survival of the fittest in China's already competitive electric vehicle market.

“The speed of removal will increase,” Feng Xingya, president of GAC, told reporters on the sidelines of the Beijing Auto Show in late April. That's according to a CNBC translation of his Mandarin remarks.

Feng said that GAC reduced the prices of its cars one week before the Labor Day holiday on May 1 in China, noting that the price war contributed to the decline in its sales in the first quarter. The automaker's operating revenue fell year-over-year in the first quarter for the first time since 2020, according to Wind Information.

In order to maintain its competitiveness, Feng said GAC is cooperating with technology companies such as Huawei, while working on internal research and development. The automaker is a joint venture partner of Honda and Toyota in China, and has an electric vehicle brand called Aion.

“In the short term, if your product isn't good, consumers won't buy it,” Feng said. “You need to use the best technology and the best products to meet consumers' needs. In the long run, you need to have a fundamental competitive advantage.”

Like other automakers in China, GAC is also looking abroad. Domestic sales of new energy vehicles, which include battery-only cars and hybrid-powered cars, slowed their growth pace from March, compared with December, according to data from the China Passenger Car Association.

Last year, GAC revamped its overseas strategy with the ultimate goal of selling 1 million cars overseas — electric, hybrid and gasoline-powered, Wei Haigang, general manager of GAC International, told CNBC in an interview last week.

The company still has a long way to go. Wei said it exported only about 50,000 cars last year. But he said the goal is to double that to at least 100,000 cars this year, and reach 500,000 units by 2030 — with targets and sales strategies for different regions of the world, starting with the Middle East and Mexico.

“We are now doing our best to accelerate our overseas expansion,” he said in Chinese, translated by CNBC.

Chinese car sales abroad rose last year, putting the country on par with Japan as the world's largest car exporter. The European Union and the United States last year announced investigations into electric cars made in China, amid efforts to encourage consumers to move away from gas-powered cars.

Part of GAC's international strategy is to localize production, Wei said, noting that the company uses a variety of methods such as joint ventures and technology partnerships. GAC opened a factory in Malaysia in April and plans to open another in Thailand in June, with Egypt, Brazil and Turkey also being considered, he said.

GAC plans to set up eight subsidiaries this year, including in Amsterdam, Wei said. But he said the United States is not part of the company's near-term overseas expansion plans.

In recent months, US and European officials have emphasized the need to address China's “excess capacity,” which can be loosely defined as the production of state-subsidized goods that exceeds demand. China has addressed such concerns, and the Chinese Ministry of Commerce has claimed that new energy faces a capacity shortage from a global perspective.

“There has always been excess capacity in the Chinese auto industry,” said Stephen Dyer, co-head of Greater China business at consulting firm AlixPartners, and Asia's leader in auto and industry.

“The difference today is that excess capacity is now accompanied by highly competitive vehicles,” he told CNBC on the sidelines of the auto show. “So, in our EV survey, I was surprised to find that about 73% of US consumers could identify at least one Chinese EV brand. Europe was close.”

Dyer expects this to increase overseas demand for Chinese electric cars. An AlixPartners survey found this BYD It received the highest brand recognition across the United States and major European countries, followed by… New And Jump drive.

BYD exported 242,000 vehicles last year and is also building factories abroad. The company's sales are roughly split between hybrid and battery-powered vehicles. BYD no longer sells traditional gas-powered passenger cars.

In addition to price, this year's auto show in Beijing reflects how companies – Chinese and foreign – compete on technology such as driver-assistance software.

Chinese consumers place almost twice as much importance on technology features as American consumers, Dyer said, citing an AlixPartners survey.

He noted that Chinese startups are so aggressive that they can sell a car with new technology, even if the software still has problems. “They know they can use over-the-air updates to quickly fix bugs or add features as needed,” Dyer said.

Interest in technology does not mean selling consumers only battery-powered cars. In the short term, consumers are still concerned about driving range – meaning hybrids are not only not in demand, but often used without a battery charge, Dyer said.

until Volkswagen Enters the “smart technology” race. At the auto show, the German auto giant revealed its joint venture with Shanghai's state-owned SAIC Motor, and collaborated with the automotive unit of Chinese drone company DJI to create a driver assistance system for the newly launched Tiguan L Pro.

The initial version of the SUV is gasoline-powered, and the company's slogan is: “Oil or electricity, both are smart,” according to a CNBC translation of Chinese.

Battery manufacturer Cattle Zhong Shi, an analyst at the China Automobile Dealers Association, said the company has a more prominent display stand this year, likely in the hope of encouraging consumers to buy cars with its batteries, as competitors' market share grows.

Automotive chip companies Black Sesame and Horizon Robotics also had booths inside the main exhibition hall.

Acquired by Lotus Technology, a British high-end car brand jellyfound in a survey of its customers that their top requests were automatic parking and battery charging, allowing drivers to remain in the car.

This is according to CFO Alexious Kuen Long Lee, who spoke with CNBC on the sidelines of the Beijing Auto Show. He noted that the company now has automatic battery chargers in Shanghai.

Last week, Lotus and Nio also announced a strategic partnership on battery swapping and charging.

“I think there is a passing of the baton, with Chinese brands becoming much bigger and stronger, and foreign brands still trying to figure out the best path to energy,” said Li, who has worked in China since 1998. Are they still deciding on plug-in hybrid electric vehicles (PHEV), are they still thinking about battery electric cars, are they still thinking about internal combustion cars? The whole decision-making process becomes so complicated, with so much resistance internally, that I think they are not as productive.”

But he believes Lotus has found the right strategy by expanding its product line and going straight into battery-powered cars. “Today's Lotus is similar to the status of global brands in China, perhaps in the year 2000,” he said.