New Energy Vehicles Breakthrough Upwards and Outwards

New Energy Vehicles Break Through Upwards and Outwards

Recently, two seemingly unrelated events have significant implications when taken together. The first event is that Xiamen Tungsten, a subsidiary of Xiamen Tungsten Co. Ltd., announced plans to establish two joint ventures with French company Eramet in Dunkirk, one for producing cathode materials and the other for precursor materials. The second event is that the China Association of Automobile Manufacturers recently released data showing that China's new energy vehicle exports reached 91,000 units in April, a year-on-year increase of 1,028.5% and a month-on-month increase of 29.4%.

There is a common trend behind these two events: China's new energy vehicle industry has begun to go global, becoming the second "Made in China" hallmark after high-speed rail. For China's economy today, new energy vehicles are not only an important driving force for local economic growth, but also a lever for economic transformation and high-quality development, and a key to reshaping China's position in the world automobile industry.

For the global economy, this is China's greatest contribution to the world economy, including not only raw materials but also supply chains, technological innovation, manufacturing capabilities, and so on. Therefore, for China, this is a competition that cannot be lost in the world's new energy vehicle race.

Reality: Lack of High-End Development, Fierce Price War

As a vanguard for Chinese national brands, new energy vehicles are accelerating high-quality development and rising strongly on the world automotive stage. As of 2022, China's new energy vehicle production and sales have remained the world's number one for eight consecutive years, accounting for more than 60% of the world's total sales.

In addition, according to last year's export volume, China has surpassed the automobile power Germany and become the world's second-largest automobile exporter. In the first quarter of this year, China has surpassed Japan and become the world's largest automobile exporter. New energy vehicles have made a significant contribution to this.

China's new energy vehicles have already possessed new advantages that can compete with automobile powers, but another reality is that China still lacks high-end brands. From the perspective of export destinations, China's new energy vehicles are mainly sold to Southeast Asia, Africa, and some countries in Eastern Europe. It is still difficult to enter the European and American markets. This is a challenge that the domestic new energy vehicle industry has to face.

Zhang Hong, Secretary-General of the New Energy Vehicle Branch of China Automobile Circulation Association, pointed out that China still has many aspects to work on for automobile exports, such as the market share in mainstream markets such as Europe, the United States, and Japan, the proportion of high-end models, and the ownership of core technologies.

At the end of last year, China's subsidy policy for electric vehicles was withdrawn, and the growth rate of the domestic electric vehicle market has slowed significantly since this year, with a year-on-year growth rate of retail sales dropping from 146.6% in the first quarter of last year to 22.4% in the first quarter of this year. At the same time, more and more new energy vehicle brands have introduced subsidies or price discounts, and the industry has set off a fierce price war.

The decline in sales and price reduction is a huge challenge for the new energy vehicle industry, and many brands have to resort to internal competition, seriously affecting the technological innovation of car companies and the high-quality development of the entire industry.

Trend: Some Automakers are Breaking Through by Going Up and Out

Fortunately, as the new energy vehicle industry enters the second half, a few brands have started to break through by going up and out. In early January this year, BYD launched its high-end new energy vehicle brand, Yangwang, entering the million-level market. At the Shanghai International Auto Show in April, Dongfeng released its luxury electric off-road product, the Mengshi 917, with a pre-sale price range of 700,000 to 1.6 million yuan. At this year's Shanghai Auto Show, there was also a detail where executives from luxury car brands such as BMW, Porsche, Bentley, Lamborghini, and Ferrari began to wander around the booths of domestic high-end new energy vehicles.

Zhou Minhao, President of the Shanghai Association of Trade in Services, said that the trend towards high-end development in Chinese domestic brands is already very significant.

Whether domestic brands can take the high ground of luxury electric vehicles will determine whether China's automotive industry's strategy of overtaking in bends can truly succeed, and it is also a symbol of the transformation from "Made in China" to "Created in China," from "Chinese speed" to "Chinese quality," and from "Chinese products" to "Chinese brands." Cars are not only the culmination of modern industrialization but also a product with strong cultural attributes. Automotive powers such as the United States and Germany are also cultural powers in the automotive industry, exporting culture through hot-selling car products. In the current era, it is also a historical mission of China's automotive industry to create a new Chinese creation and a Chinese cultural calling card through high-end quality, high-end services, and a high-end ecosystem.

Apart from BYD, there is another brand that cannot be ignored in the high-end luxury electric vehicle race - BeyonCa Motors. Public information shows that this car company has received strategic investments from French state-owned enterprise Renault Group and Chinese Dongfeng Motor Group. The founder is the current Renault China Chairman and CEO, Weiming Soh. He led the cooperation between Renault Group and partners such as Geely Auto, Faraday Future, Minth Group, Dongfeng Group, and other manufacturers, and was also the highest-ranking Asian executive of Volkswagen Group worldwide, leading the three transformations of Volkswagen in China and laying a solid foundation for the development of Volkswagen Group in China. It is worth noting that Weiming Soh was the Greater China Chairman of several super luxury car brands, including Bentley and Lamborghini. From his resume, he not only has a good understanding of the domestic market, but also has a high level of global vision, which also determined that BeyonCa Motors, at the beginning of its establishment, was different from other domestic new energy vehicle brands.

In addition to Weiming Soh, most of the core team members of BeyonCa Motors have served as responsible persons for global research and development, design, production, and quality management in brands such as Bentley, Mercedes-Benz, Audi, and Volkswagen. More than 20 legendary models such as Bentley Bentayga, Mercedes-Benz EQC, and Lamborghini URUS were all created by this team.

The high-end car markets in Europe, America, and the Middle East have always been a dream for domestic brands. However, these markets have been dominated by several hundred-year-old European car brands. They rely on the advantages of modular platforms and strong supply chain resources to create highly competitive luxury products and define the characteristics of luxury cars with classic and timeless designs. Even though these brands have been slow to adapt to the competition in intelligence and electrification, they still hold the definition of "luxury" in the automotive industry. The reason why BeyonCa Motors is considered as an observation sample is that for the first time, so many top executives from hundred-year-old companies have actively chosen to start a luxury intelligent car brand in China. Their experience and resources, as well as their understanding of luxury cars and brands, are the key factors for the current upgrading of the domestic automotive industry.

According to industry analysts, although BeyonCa Motors is a new brand in the industry, from the current public information, it is "aiming high" with high standards, high technology, and high value.

"The domestic new energy vehicle industry not only needs to attract the wider mainstream market in China but also needs to break through and go abroad to open up international markets," said the analyst. Only in this way can China's new energy vehicle industry have a place in the world automotive industry pattern.

Opportunities: Complete Industry Chain and New Export Routes

Since the 18th National Congress of the Communist Party of China, the central government and the State Council have attached great importance to the development of the new energy vehicle industry and made a series of major decisions and deployments. They have provided a clear "roadmap" for the high-end development of China's electric vehicle industry, based on the industry chain, and provided strong support and assistance policies for new energy vehicle companies to promote the industry's transformation towards high-end, intelligent, and green.

Since this year, Beijing, Shanghai, Zhejiang, Jilin, Shanxi, and other places have successively issued relevant documents to support the development of the new energy vehicle industry. Behind the scenes, local governments are all aware that the new energy vehicle industry is an important lever for industrial upgrading and high-quality development.

In fact, currently, first and second-tier cities with relatively good economic development all have their own new energy vehicle flagship projects, such as Beijing's BAIC and Li Auto, Tesla in Shanghai, BYD in Shenzhen, GAC and Xpeng Motors in Guangzhou, Geely in Hangzhou, and Voyah in Wuhan.

Under the top-level design of the central government and the strong support of local governments, China's new energy vehicle industry chain is already very complete. There is not only a complete new energy vehicle supporting industry, such as battery giant CATL, automotive glass giant Fuyao, and Huawei's intelligent automotive system, but also many well-known vehicle brands, such as BYD, Nio, Xpeng, Li Auto, and many new energy vehicle brands under traditional automotive groups, both domestically and internationally.

It can be said that China's automotive industry, especially the new energy vehicle industry, has never seen such a strong tide of competition. On the one hand, this is due to the long-term support from the central and local governments, and on the other hand, after years of development and accumulation, China's automotive industry foundation is already quite strong.

"Quantitative changes lead to qualitative changes." Now many higher-end new energy vehicle brands are beginning to emerge, such as YANGWANG, MENGSHI, and BEYONCA. They have begun to challenge traditional luxury car brands in Europe and the United States.

According to data released by the Ministry of Commerce on May 25th, China exported 1.494 million vehicles in the first four months of this year, a year-on-year increase of 76.5%. Among them, exports to countries along the "Belt and Road" totaled US$13.64 billion, an increase of 1.2 times and accounting for 45.9%. The proportion of new energy vehicle exports in the total export amount has increased to 42.9%, and its contribution to the growth of automotive exports has reached 51.6%.

Behind this set of data, the trend is already very clear. As the economies of European and American countries decline and demand weakens, countries and regions along the "Belt and Road" have begun to support China's auto exports. For China's emerging high-end new energy vehicle brands, this is a rare strategic opportunity.

Currently, China is accelerating the construction of a new development pattern of "dual circulation." For the new energy vehicle industry, there is a strong automotive industry foundation and a complete industrial chain as a backing domestically, and the "Belt and Road" provides an expanded market for going abroad. The high-end new energy vehicle brands have found themselves in a period of opportunity.

Reporter Tian Xinyuan from China Reform Daily