China steers its way to capture world’s automobile industry
On a bright spring day in Amsterdam, car buffs stepped inside a blacked-out warehouse to nibble on lamb skewers and sip rhubarb cocktails courtesy of Lynk & Co, which was showing off its new hybrid SUV.
What seemed like just another launch of a new vehicle was actually something more: the coming-out party for China’s globally ambitious auto industry. For the first time, a Chinesebranded car will be made in Western Europe for sale there, with the ultimate goal of landing in US showrooms. That’s the master plan of billionaire Li Shufu, who has catapulted from founding Geely Group as a refrigerator maker in the 1980s to owning Volvo Cars, British sports carmaker Lotus, London Black Cabs and the largest stake in Daimler AG—the inventor of the automobile. Li is spearheading China’s aspirations to wedge itself among the big three of the global car industry—the US, Germany and Japan—so they become the Big Four.
“I want the whole world to hear the cacophony generated by Geely and other made-in-China cars,” Li told Bloomberg News. “Geely’s dream is to become a globalised company. To do that, we must get out of the country.”
He’s not alone: At least four Chinese carmakers and three Chinese-owned startups—SF Motors, NIO and Byton—plan to sell cars in the US starting next year. At the same time, Warren Buffett-backed BYD is building electric buses in California; Baidu is partnering with Microsoft, TomTom NV and Nvidia on a self-driving platform; and Beijing-based TuSimple is testing autonomous-driving big rigs in Arizona.
The industry is set for more upheaval as China unravels a two-decade policy that capped foreign ownership of carmaking ventures at 50 per cent. The change may energise companies such as Volkswagen AG and Ford Motor to seek a bigger piece of the world’s largest car market and allow Tesla to set up a fully owned unit. Carmakers may get better visibility of their futures, and those Chinese companies that fear losing sales at home may sense a greater impetus to go abroad. “They are in a better position now than they ever have been,” Anna-Marie Baisden, head of autos research in London with BMI Research, said of Chinese carmakers. “They’ve had so much time working with international manufacturers and have become a lot more mature.”
We’ve seen this movie before from China—in the smartphone industry. The nation used the shift in technology from basic flip phones to hand-sized computers to dominate the manufacturing industry, trouncing then-dominant makers from Finland, Sweden, the US, Japan and Germany.
Last year, three of the top five smartphone handset makers in the world were Chinese, according to Gartner.
Yet the sequel may take longer to become a hit, given the brand loyalty that has existed since Henry Ford debuted the Model T in 1908. How will Chinese automakers convince Midwesterners to give up their Ford F-150 pickups or Tokyo residents to switch from their Toyotas? “Chinese carmakers intend to come over, but what need will they fill?” said Doug Betts, senior vice president of global automotive practice at JD Power. “What is the reason to buy their cars?” Chinese cars probably would compete more directly with Japanese and Korean models, said Bob Lutz, the retired vice chairman of GM. American consumers mostly cross-shop Asian brands. “If they start coming in, they won’t be any more competent than Korean and Japanese cars,” Lutz said. “They would probably take share from other Asian brands because the vehicles will be more Asian in character. They’re not going to get much market share.”
And then there’s President Donald Trump. Trade tensions between the US and China are simmering as both nations move to slap tariffs on each other’s products.