The purpose of this policy is to reduce greenhouse gas emissions, but beyond that is Beijing’s ambition to become the car powerhouse.
Bet on brand new technology
In the 1980s, foreign car manufacturers were allowed to enter the Chinese market on the condition of forming a joint venture with a Chinese partner. The Chinese firms eventually had the knowledge to operate independently through a partnership with a foreign company.
However, according to some unofficial information at that time, the “made in China” cars, despite their eye-catching appearance, were not as good as the original manufacturers in the USA and Europe. Therefore, the only way to surpass the rest of the world was to bet on brand new technology.
Also, the current trend of the auto industry is to shift strongly to eco-friendly and fuel-efficient vehicles. It is also the driving force behind the structural reform in this industry.
Never before has the global auto industry has seen so many changes in trend as it is now. Tesla became the carmaker with the largest market capitalization in the world in the past year thanks to investors’ confidence in the future of electric vehicles.
The giants in the auto industry such as General Motors, Volkswagen also believe that the next generation of cars in the world will run on batteries without the use of gasoline, diesel, or fossil fuels.
Realizing this transition trend, China has mobilized many investment funds in the electric car industry to help domestic enterprises gain an advantage in the competition. CEO Nio William Li said that electricity that can be cheap as low as $ 25,000 or less, suitable for personal finance.
So China came to electric cars. Electric vehicles are less complex mechanically, more dependent on electronic power. Chevrolet Bolt’s electric motor contains only 24 motion segments, according to the analysis done by consulting firm UBS. Meanwhile, the internal combustion engine of the Volkswagen Golf has up to 149 moving segments. China has its supply chain, electronics manufacturing, after years of making batteries, phones, and equipment for the world. This is the advantage.
Battery advantage and government support
A key cornerstone of China’s electric vehicle ambitions is its rapidly growing sector of battery production. This country owns about 70-80% of the global supply of battery chemicals, anodes, and battery cells. China also controls the market for high-strength magnets for the production of electric motors and this magnet assembly technology.
Thus, Chinese electric vehicle manufacturers such as Nio can access cheap supply from domestic manufacturers and suppliers of auto parts.
“China has control over the global battery supply chain,” said Vivas Kumar, a former battery material manager at Tesla.
“Over the next five years, we think Chinese companies across the electric car supply chain will enter foreign markets strongly,” said a recent UBS report. “We believe that raw material costs in China are lower than in other markets. If this is maintained, China can realize its cost advantage over competitors.”
China’s support for the electric vehicle industry remains strong. Companies like Nio have consistently enjoyed generous policy support and incentives from the Beijing government.
Chinese electric car manufacturers have many advantages over their foreign competitors in this market. Because China already has a large-scale electric vehicle supply chain. Beijing has invested in this area for the past 14 years.
China has long adopted rules forcing multinationals to transfer advanced electric vehicle technology to domestic joint ventures and manufacturers. This is a condition for foreign companies starting a business in the market of 1.4 billion people. As a result, Chinese companies rapidly improve the technology and manufacturing process of electric vehicles.
“China’s advance in electric vehicles could lead to its dominance in the global electric vehicle market,” said Yergin, who now serves as vice president of research firm IHS Markit. CNBC. “Electric cars play an important role for China, not only because of oil demand, not only because of pollution but also because of competitive power.”
Reasonable trade marketing strategy
Electric carmakers are opening experience shops at an unprecedented rate in China’s malls. This contributes to promoting the benefits of an eco-friendly ride directly to consumers.
Trade marketing is not a new strategy, but it is very practical, especially for relatively new products that are not easy to decide to buy.
According to the Morning China Post (Hong Kong, China), unlike the traditional display stores, many electric car brands in China are opening new tram experience stores. When you come here, customers will be provided with food, beverages, and the library. Of course, hardcore customers can test drive these cars.
Each department store, such as Global Harbor Shanghai, Chamtime Square, has up to 5 different tram experience shops. These stores range in size from 200 to 1,000 square meters and could cost more than 1 million yuan ($ 150,000) to set up.
“Electric car manufacturers are present in 47 out of 93 shopping malls in Shanghai. We have never seen this before, ”said Vivian Zhu, director of JLL, a group of retailers in Shanghai.
According to data from Cushman & Wakefield Global Commercial Real Estate Services Company, there are currently 189 electric car experience stores in China. Of which, Shanghai accounts for the largest number.
This figure reflects manufacturers’ desire to capitalize on the rapid popularity of “green” cars in the auto market in mainland China, experts say. The domestic electric car manufacturers, such as NIO, Xpeng, and WM, have achieved 400% sales growth in just 12 months.
Mr. Shaun Brodie, a researcher at Cushman & Wakefield, said the large space in shopping malls is very beneficial for trade marketing strategy, especially for electric car companies. They can lure in, entice ordinary consumers to buy one of their electric vehicle products, including the people who still wonder about personal finance.
“Electric car companies can attract more consumers and increase their trade marketing influence by opening experience stores in shopping malls in China. There are already more than 70 car experience stores in quality shopping malls in Shanghai and Beijing. This number is expected to increase in the future, ” said Brodie.
NIO, one of Tesla’s major rivals in mainland China, September 2020 opened a two-story experience showroom called NIO House in Raffles City, Chongqing. The experience store has 1,490 square meters of space, including a library, a coffee shop, and a city view.
Since 2018, NIO has opened 12 similar stores, while rival Xpeng Motors opened 15 experience stores last year. Tesla, the US market leader, has 20 such stores in Shanghai.
Savills, the company that helped Tesla set up its first street experience store at the Xintiandi mall in Shanghai in 2015, said it had seen several car brands open showcases during the project. Top retail projects in primary and secondary cities. These include international brands such as Polestar, Genesis, and Mercedes, as well as local companies Xpeng, Li Xiang, and Byton.
In June 2020, Polestar announced that it plans to open 20 more showrooms in shopping malls in 17 cities across China.
Spend a lot of money for a great purpose
Walking around the vast factory of the electric car maker Nio in Hefei city, anyone can see the huge investment funds pouring into the Chinese electric car industry.
Of course, this modern operating system is not cheap. According to the investment calculators, Nio lost thousands of dollars per car which the company produced due to overspending on the construction of production systems. Last year, investors including many Chinese state-owned companies spent an investment fund worth $ 2.7 billion to rescue Nio.
Nio sold only about 7,200 vehicles last month and has never been profitable. However, many investors still believe in the potential of the Chinese electric car maker. According to NYT, the market capitalization of Nio is now 82 billion USD, surpassing the giants in the traditional car industry like G.M. and Ford. Nio’s New York-traded shares also rose nearly 30 times last year.
Despite huge investment costs, China still believes in the electric car manufacturing industry. Nio, and many other Chinese companies, even the ones just starting a business, can be the future of the global car industry.
Another giant, Evergrande Electric Vehicle Group, suffered losses in the first half of 2020 to mass production factories by 2021. The company aims to produce up to one million units within 3-5 years to achieve a dominant position in the world electric vehicle market.
While Nio, Evergrande, and many others are all promising companies, they have a long way to go to beat Elon Musk’s Tesla to gain market share in the electric vehicle industry.
Accepting losses to expect future achievements, is what electric car manufacturers in China are now aiming for.
“The world auto industry is facing major changes,” said Evergrande President Shi Shouming. “Many countries have in turn began to electrify vehicles, which again confirms China’s foresight on developing new energy vehicles”./.
