Home News Reports Cases Events ERP in China PLM in China Chinese manufacturing  
Chinese manufacturing
 Chinese manufacturing
News
Reports
Events
 
 
Why it's too early to bet on China's EV market
2018/1/26
source: automotive news
Several years ago, China became the world's largest electrified vehicle market, and sales of those vehicles here continue to forge ahead.
 
 
In 2017, deliveries of all-electric vehicles and plug-in hybrids surged 53 percent year on year to nearly 780,000.

Yet despite this sizzling growth, any automaker counting on EVs as a profit maker is more likely to be punished than rewarded.

That¡¯s what happened to two state-owned Chinese automakers, BAIC Motor Group Co. and Jianghuai Automobile Co. Both made huge investments in EVs while neglecting their gasoline vehicles.

Their EV sales soared. Last year, BAIC¡¯s EV sales nearly doubled to 103,200, giving it bragging rights as China¡¯s No. 1 producer of all-electric vehicles.

Meanwhile, JAC¡¯s deliveries of EVs surged 54 percent to 28,000, vaulting the company into the ranks of China¡¯s top 10 EV makers.

But BAIC and JAC paid a high price for neglecting their aging gasoline vehicles.

Last year, sales of BAIC¡¯s brands declined 21 percent to 589,000 vehicles. JAC -- which makes trucks, vans and light vehicles -- suffered a sales decline of 21 percent to 510,000 vehicles.

As sales fell, profits took a big hit. Neither company has disclosed full-year 2017 financial results, but partial results have been awful.

In the first six months, BAIC¡¯s proprietary car brands lost 3.3 billion yuan ($518 million). In the first nine months, JAC¡¯s net profit plunged 73 percent to 219 million yuan.

The two companies have paid a dear price for their hasty development of EVs. And how are their foreign peers doing?

So far, global brands have been prudent. Only a few have started producing EVs in China.

Foreign automakers appear skeptical of consumer demand for EVs. They question whether sales will continue growing as Beijing phases out EV subsidies over the next two years.

They¡¯ve also learned a lesson from Nissan Motor Co., which hasn¡¯t had much luck marketing EVs in China.

In 2014, Nissan¡¯s joint venture with Dongfeng Motor Corp. launched sales of a rebadged Leaf EV under the Venucia brand.

Because the car is produced in China, it qualifies for government subsidies. But its starting price is 267,800 yuan -- twice as much as a gasoline model of similar size.

Not surprisingly, the rebadged Leaf is a flop. Last year, Nissan sold four in China.

Beijing is ambitious about expanding EV production. It wants to boost annual sales of EVs and plug-in hybrids in China to 2 million by 2020.

To achieve its target, the government will launch a carbon credit trading program next year to goad automakers to increase EV output.

But global automakers still prefer to play it safe. To meet their quotas, Volkswagen Group and Ford Motor Co. have partnered with local automakers on EV production.

Last year, VW formed a joint venture with JAC, while Ford Motor struck a similar deal with Zotye Auto Co. The joint ventures will specialize in low-priced EVs that will be marketed under new brands.

These partnerships will allow Ford and Volkswagen to buy time and avoid rushing into China¡¯s EV market with their proprietary brands.

Volkswagen, Ford and other foreign automakers are playing it safe. They¡¯ve concluded that a big bet on an EV market propped up by subsidies is nothing short of foolhardy.