Auto Makers Could Face Hefty Losses Meeting China’s Electric-Vehicle Mandate

Auto Makers Could Face Hefty Losses Meeting China’s Electric-Vehicle Mandate

This year, sales are expected to reach 2.2 million and more than three million in 2020, according to the Center for Automative Research (CAR) at the University of Duisburg-Essen.

"Competition is getting more fierce", said industry analyst Paul Gong of UBS.

"There is still huge room out there in the new-energy vehicle market with China's relatively low vehicle-penetration rate", secretary-general of the China Passenger Car Association Cui Dongshu said.

General Motors, Volkswagen, Nissan and other global majors are developing models to suit Chinese tastes.

Still, major carmakers see solid potential, particularly in bright spots such as SUVs and electric vehicles, which will account for numerous new models on display in Shanghai. That requires brands to pour money into creating electric SUVs and sedans to compete with gasoline models on price, looks and performance at a time when they are struggling with a Chinese sales slump.

"The cars will offer roominess, space, fast charging", Diess said during a January visit to Beijing.

Automakers are looking to China, their biggest global market, to drive revenue growth at a time when US and European demand is flat or declining.

China is a top market for global automakers, giving them an incentive to go along with Beijing's electric ambitions.

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On Monday, GM unveiled Buick's first all-electric model for China.

Nissan Motor Co. and its Chinese partner will display the Sylphy Zero Emission, an all-electric model designed for China that went on sale in August. Xiaopeng Motors says its EV has a range of more than 600 kilometers on one charge.

Pressure to shift to electrics is "more an opportunity than a threat" to Chinese automakers, said UBS's Gong.

But that has not stopped global carmakers to turn to the Chinese market. But they account for 50% of electric sales worldwide.

There's a Chinese EV start-up named Weltmeister, which means world champion in German. State-owned power companies have blanketed China with 730,000 charging stations, a vastly larger network than any other country. Annual sales of passenger EVs only surpassed 1 million units for the first time a year ago, according to BNEF, spurred by the subsidies that could slice thousands of dollars off the sticker price.

A tariff war with Washington and weakening economic growth made jittery consumers reluctant to commit to big purchases. That skid worsened this year.

During the first quarter of 2019, Ford sold a total of 136,279 vehicles in China, suffering a 35.8 percent decline year on year. At the same time, industry revenue was squeezed by a 4.1% fall in total Chinese auto sales to 23.7 million vehicles. While sales of passenger EVs are projected to reach a record 1.6 million units this year, that's likely not enough to keep all those assembly lines humming, prompting warnings that the ballooning EV market could burst and leave behind only a few survivors.

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