Manufacturing News

GM's record China deliveries mask so-so sales of EVs

General Motors is delivering millions of vehicles a year in China, its largest market. That could become a problem if the company doesn’t figure out how to sell more electric vehicles.

GM China is setting records with shipments by its Buick, Cadillac and Baojun brands. But the company sold fewer than 20 plug-in hybrid and battery-electric cars last year.

The automaker has stayed on the sidelines as Volkswagen AG, Ford Motor Co. and others have partnered with local automakers to produce EVs.

Under Barra, who met with reporters Friday in Shanghai, GM has opted to go it alone and wait for the government to finalize requirements compelling automakers to sell more EVs or pay for offsetting carbon credits.

GM declined to take a shortcut that Ford and VW took by partnering with Anhui Zotye Automobile Co. and Anhui Jianghuai Automobile Group Corp., respectively.

Those partnerships will allow VW and Ford to delay setting up their own EV production lines.

“Electrification is a crucial element of our global strategy to reduce CO2 emissions, reduce petroleum use and help customers to save money,” Barra said at a briefing. “Battery technology improvements will continue to make electric vehicles more desirable and more affordable.”

Cutting emissions
GM expects to cut the average carbon dioxide emissions for its China fleet by 28 percent between 2016 and 2020, Barra said. By 2025, GM’s global brands will offer a range of electrification technology in almost all of its models in China, she said.

The company plans to market 10 plug-in hybrids and battery-electric cars, and its Buick, Cadillac and Chevrolet brands aim for collective EV sales of 150,000 vehicles by 2020.

GM is targeting annual sales of half a million vehicles by 2025.

China is poised to become the largest global market to plan a phaseout of the internal combustion engine, following France, the United Kingdom, India and Norway.

China will consider granting foreign investors more access to its EV market, according to the National Development and Reform Commission, without elaborating.

In the meantime, draft rules released in September would require automakers to obtain carbon credits via the sale of EVs, plug-in hybrids and fuel cell vehicles.

Companies that fail to do so would be fined or would have to buy credits from rivals that exceeded the minimum.

'Very challenging'
“It’s a very challenging task for GM,” said John Zeng, Shanghai-based managing director of researcher LMC Automotive. He estimates the automaker will have to produce at least 50,000 EVs and plug-in hybrids next year, and 70,000 in 2019 to meet the proposed quotas.

GM is ramping up production of the E100, a compact EV that the company launched with its local partners in July.

Sold under the entry-level Baojun brand, the model is priced from 35,800 yuan ($5,500) after government subsidies.

Unlike other GM electrified vehicles such as the Buick Velite 5 and Cadillac CT6 plug-in hybrid, the E100 qualifies for government subsidies that lop 60 percent off its sticker price.

While the United Kingdom and France are considering a ban on combustion engines by 2040, China is prodding automakers to speed up their plans.

Competitors' plans
Volkswagen has said it wants to sell as many as 400,000 EVs a year in China by 2020. Meanwhile, Ford expects that 70 percent of its vehicles sold in China will have electrified powertrain options by 2025.

In June, Tesla Inc. said it is working with Shanghai’s municipal government to explore local manufacturing. The company expects to solidify its production plans by year end.

With foreign automakers scrambling to meet China’s policy demands, building clean autos may turn out be the easy part.

“From the credit system to the ban on fossil-fuel vehicles, for sure GM should promote new-energy vehicles aggressively in China,” LMC’s Zeng said. “Production is easy, but selling, now that’s hard.”

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