Sieren’s China: Controlled carnage coming for China’s electric car market

At last week’s “car industry summit” in Berlin, a masterplan to ensure that Germany’s carmakers have a future was revealed. The idea was to finally create a widespread network of charging stations across Germany so that by 2030 there would be between 7 million and 10.5 million electric cars on the roads.

Germany currently has only 16,000 charging stations. Last year, only 83,000 of 47.1 million vehicles were e-cars. A paltry figure compared to China’s 2.6 million electric cars — that’s 5% of all vehicles. Beijing plans for electric cars, hybrid and fuel cell cars to make up 20% of all vehicles by 2025.

Read more: Does Europe, does Germany really need its own battery cells?

A powerful hub of the car industry

In 2014, Chinese President Xi Jinping declared that China would only be able to become a powerful hub of the car industry if it developed cars that ran on alternative energies. Over the past 15 years, the government has invested the equivalent of some €50 million ($57 million) into promoting e-mobility. Strict vehicle emission standards in big cities are also helping to promote e-cars, which are subsidized and more likely to receive permits. But there is plenty of room for improvement.

Pioneering Chinese tech giants such as Alibaba and Tencent were quick to invest in the industry. There was so much digital know-how in China that relative newcomers could afford to challenge established foreign companies such as Tesla, Daimler and Ford. This triggered a start-up boom in China, where there are some 490 electric carmakers today.

DW columnist Frank Sieren

National carmakers control about 95% of China’s car market. Foreign carmakers have not really been able to make inroads in the e-market. German carmakers are still trying to get ahead using technology, while many customers in Asia seem more interested in the entertainment possibilities offered by digital technology. That makes them more likely to be interested in a car’s touchscreen than its cylinder capacity or in making sure that it boasts a good digital stereo system for when they are stuck in traffic jams rather than concentrating on its crumple zone.

The shrinking Chinese car market

After 30 years of steady growth, the Chinese car market shrank by 3.8% in 2018. Although the market for e-vehicles is still growing, a downward trend is predicted. By April 2019, 18% of new registrations had been allocated to electric cars, fuel cell cars and hybrid vehicles. Last year, this figure was 62%. Even the companies on which many hopes have been pinned, such as Chinese Tesla rival Nio, which went public in New York last September, are struggling.

The trade dispute with the United States has, of course, raised uncertainty among customers and investors, but this is not the only issue. There are simply too many open questions concerning e-mobility in China. Which company of almost 500 will survive in the end? Will there be a smooth transition from attractive prototypes to mass production? Could hydroelectric cars soon be a serious alternative?

By mid-June this year, China’ electric automakers had only managed to attract $783 million worth of investment. Last year, they had attracted $6 billion by the same time and $7.7 billion over the whole year.

Radical reduction of subsidies

This is all according to plan. China’s e-market is in a consolidation phase. Beijing will halve subsidies for electric cars with a range of at least 250 kilometers (155 miles) this year and cut them entirely next year. This is a controlled mass extinction program to let the market choose the fittest company. The move is a good mix of planned and market economy. The government pushed the companies so that they could take to the highway, but now that they are off and running the support dries up.

To survive, Chinese carmakers will have to expand into the international market. This is not good for Germany’s car industry. In the future, there will be more e-vehicles on German highways and a good number of them will be Chinese.

Frank Sieren has lived in Beijing for over 20 years.

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Article source: https://www.dw.com/en/sieren-s-china-controlled-carnage-coming-for-china-s-electric-car-market/a-49418789?maca=en-rss-en-all-1573-rdf