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Chinese EV Makers Step Up Competition
April 2021
China's electric vehicle makers are looking to topple Tesla's dominance in the domestic market, which is expected to see exponential growth in the years ahead. The groups have used Shanghai's Auto Show, which opened on Apr. 19, to tout their latest offerings and technology to entice younger buyers. Indeed, surveys are suggesting that the country's under-35s are increasingly in favour of domestic brands.

AME is forecasting China's NEV sales to reach 1.8m units in 2021, rising 40% from last year on strong economic growth, continuous stimulus policies and a blitz of new models from manufacturers. China plans to boost sales of new energy vehicles to make up 20% of new car sales by 2025, from less than 5% last year. AME expects NEVs in China to make up close to 90% of the country's new cars by 2050.

 

 

Nio

Nio unveiled its new three-year plan at Auto Shanghai to boost recharging and battery swap services to ease consumer anxiety over battery life. Nio's 'Power North Plan' aims to deploy one battery swap station or charger station every 100km along the expressway and one every 3km in prefecture-level cities in eight regions in Northern China. "With that, NIO will make a step closer to the vision of driving an electric vehicle wherever a gasoline car can go," the company said.

While Nio is a relatively small player compared to BYD, SAIC and Geely, interest in the automaker has been heating up. Nio's first-quarter sales of 20,060 electric vehicles was up by a massive 423% on-year and beat the previous quarter by almost 16%. Nio's EV sales more than doubled in 2020 to 43,728 units of its ES6, EC6 and ES8 models, while the US-listed company's stocks surged an incredible 1400%, surpassing legacy automaker General Motors.

 

 

Much of the interest in Nio stems from its battery swap system, which it sells as a “battery-as-a-service” option, allowing it to lower the price of its premium EV models. “We’ve seen electric vehicles range anywhere from $10,000 to $70,000 more than your standard internal combustion engine vehicle, and that’s simply because the cost of the battery is so expensive," said JoAnn Yamani, Nio’s director of communications.

 

 

Instead of paying for the battery in the cost of the vehicle, customers can pay for a monthly subscription to a service, roughly comparable to the cost of buying gas for a traditional car. Whenever more power is needed, the car can be taken to a battery-swap station, and a machine automatically installs a freshly charged battery within three minutes. “And then you can just drive off. You don’t have to worry about sitting around waiting for your car to charge up." Customers can also use an app to request a mobile charging unit be sent to their location.

Nio has 191 swap stations in 76 cities and is targeting a ramp up to 500 stations by the end of this year. The company said it reached its 200 millionth battery swap milestone on Mar. 24, 2021. Nio also recently announced a partnership to install 5k battery swap stations at Chinese oil giant Sinopec's gas stations over the next few years.

The concept of battery swapping isn’t all that new. Israeli-based start-up Better Place launched a small network of stations in Israel in 2012 but filed for bankruptcy the following year after it failed to take off. Tesla tested battery swapping and opened a station in 2013, but then abandoned the idea to focus on building a network of superchargers. Nio believes the idea was just ahead of its time, as EV ownership was then in its infancy. Still, EVs are expected to reach price parity with internal combustion engines in a few years, so there may be less demand for battery-less cars based on cost.

 

 

Nio unveiled early this year its first autonomous model, its new US$69,184 ET7 luxury EV sedan, which will be available in the first quarter of 2022. The ET7 is also the company’s first sedan model, in contrast to its current SUV designs. It has three battery pack options providing a driving range of at least 500km with the 70kWh, 700km with the 100kWh battery, and over 1,000km with the new 150kWh battery.

Nio is also busy increasing output capacity at its JAC-NIO production base in Hefei, China. The plan is to have a single shift capacity of 150k units per year by the end of 2021. The company reached its 100k production milestone on Apr. 7, 2021 after its first EV was produced in May 2018.

 

SAIC-GM-Wuling

Tesla’s Model 3 sedan was the world’s best-selling EV in 2020, but a smaller Chinese rival is quickly gaining ground. Costing less than US$5k, compared to the Model's 3 starting price of around US$36k, it's not hard to see the appeal of the Wuling Hong Guang Mini EV.

 

 

It's even been outselling Tesla in China this year, with March sales at a record high 39,745 units, compared to 35,479 units for both Tesla's locally made Model 3 (25,327) and Y (10,151)—which was also up 149% on-year.

The tiny, two-door hatchback designed for inner-city driving debuted in China in July 2020. It is manufactured under a joint venture between Wuling, Chinese state-owned automaker SAIC Motor, and General Motors. A new car is produced every minute at the Lizhou, Guangxi factory, which only takes four hours to make from start to finish. It has two battery pack options providing a driving range of 120km with the 9.3kWh and 170km with the 13.9kWh battery. By comparison, Tesla's Model 3 has a range of 460km with the 54kWh battery or 620km with the 75kWh battery.

 

Xpeng

Xpeng, a Nasdaq-listed start-up based in Guangzhou, announced at Shanghai Auto that it is adding lidar to its third EV. The Xpend P5 will use lidar-powered autonomous-driving features, which work on the principle of radar but uses light from a laser to measure distances. Tesla has rejected lidar, and recently hinted it would remove radar from production outright as it edges closer to pure vision based on camera and machine learning.

But that hasn't stopped others from embracing the technology. Nio unveiled a lidar-powered EV in January which will start production in 2022, while Arcfox—a new brand created by a subsidiary of state-run Baic Motor and technology group Huawei—launched its first model, known as Alpha S, at Shanghai Auto.

Xpeng sold 13,340 EVs in the first quarter, skyrocketing 487% on-year and up 3% from the fourth quarter of 2020. Xpeng is currently making the leap to Europe, launching its G3 electric compact SUV in Norway in December last year.

 

Tide Turns in EV's Favour

China sold 515k NEVs in the first quarter of 2021, 352% higher than the same period last year (114k), but down 15% from the previous quarter (608k). Meanwhile, China produced 534k units in the January-March period, skyrocketing from 105k in the same period of 2020, but down 11% from the last quarter (600k).

 

 

Last year, China's NEV sales rose 10.9% on-year to 1.367m units, while the country produced 1.366m, up 7.5% from 2019. By contrast, China's traditional vehicle sales slipped 1.9% on-year to 25.311m in 2020, while production declined 2% to 25.225m. NEV growth last year was attributed to government stimulus which helped fuel a recovery in the second half of the year, offsetting losses in the first quarter when the pandemic emerged.

China's State Council announced in November last year that it lowered its NEV target to 20% of all new sales by 2025, from the 25% goal outlined in late 2019, as it was too ambitious. The development plan outlined preferential tax policies for NEVs, further charging points infrastructure funding, and supportive policies for parking and charging.

China’s two largest utility companies—State Grid Corp of China and China Southern Power Grid—have invested almost US$1bn in charging infrastructure, and the latter has promised an additional US$3.6bn over the next four years. On the downside for consumers, subsidies for regular NEVs have been reduced by 20% this year in an attempt to make the sector more market driven.

Despite this, China's NEV adoption is expected to growth further in 2021 as the economy continues to rebound strongly from the pandemic, while more intense competition among carmakers with a blitz of new models is expected to raise demand. As a result, China's NEV sales could reach 1.8m units this year. Despite the momentum, some automakers have faced disruptions from the global semiconductor shortage. For example, Nio's production was halted at one plant for five days last month.

 

 

Local Appeal

The turning tide from traditional vehicles towards electric cars is creating openings for Chinese brands to gain a foothold in the market. Legacy automakers selling ICE cars built up their reputation over decades, but when it comes to the new EV world, it could be anyone's game.

Around 60% of Chinese buyers born after 1995 said they would buy a local brand, according to a survey by US data provider JD Power released in March. Even looking at all potential Chinese shoppers, almost 50% of those intending to buy a car in the next six months said they would buy a domestic brand, the survey said.

Geely's new premium EV brand, Zeekr, launched this month aims to target tech-savvy, younger clientele, the company's VP Flynn Chen said. The company plans to roll out two models per year for the next three years using a network of more than 100 stores to be opened across China in 2021.