A close watch of NEV industry in Hefei
▶ US ‘overcapacity’ hype originates from competition anxiety
Hefei, the capital city of East China’s Anhui Province, is a “dark horse” in China’s new-energy vehicle (NEV) industry where one NEV is rolling off the assembly line every minute on average for some producer. The city is home to six vehicle manufacturers including JAC, BYD and NIO, as well as more than 500 upstream and downstream industry chain companies.
Against the backdrop of the current rapid development of China’s NEV industry, the US has sought to overhype a narrative of Chinese “overcapacity.”
Global Times reporters recently visited several of Hefei’s NEV suppliers, including those from upstream and downstream industries, where local business leaders and experts noted that local NEV is developing in a competitive market where technological innovations and stable supply chains are key. The claims of “overcapacity” are a thinly veiled guise for protectionism, where are quickly dismissed upon examining the reality of the ground.
‘A car produced every minute’
Wang Yang, who leads SinoEV (Hefei) Powertrain Technologies Co, has witnessed the development of NEV industry from scratch in Hefei.
Established in 2010, the company has produced more than 1.4 million power battery systems as of the end of 2023, cementing its position as the fourth largest power battery system supplier for pure electric passenger vehicles in China.
“The NEV industry chain in Hefei is complete with concentrated upstream and downstream industries, bringing a relatively large competitive advantage for us,” Wang said.
In Wang’s factory, Global Times reporters witnessed production line workers, dressed in neat work clothes, carrying out inspection, dispensing and welding in an orderly manner to ensure the precise assembly of battery cells and the accurate connection of circuit boards.
In 2023, local NEV output stood at 740,000 units, accounting for around 8 percent of the national output, or ranking the top three among the cities. Hefei produced 163,200 NEVs in the first quarter of this year, representing a year-on-year increase of 28.8 percent.
The NIO Second Advanced Manufacturing Base is a must-to-visit site for NEV observers visiting Hefei. A garage that can accommodate 246 vehicle frames and resembles a “Rubik’s Cube” is visually impactful when entering this smart factory. At first glance, the colorful frames are waiting for “flexible” production to meet the needs of individual customization.
According to Jiang Zhaojun, who oversees the base, the “brain” of the factory is the intelligent manufacturing management system. Everything from the production scheduling of the factory workshop to the tightening strength of each screw is controlled by this system, with a machined installation plus and minus error of only 0.5 millimeters.
Currently, there are six new R&D institutions and 70 innovation platforms for vehicles located in the city. Semi-solid-state batteries, lithium metal batteries and smart cockpit chips are world-leading, according to the information that local departments shared with the Global Times.
‘Support of overall environment’
Companies have found that China’s complete NEV industry chain difficult to replicate elsewhere.
Wang from SinoEV said that his company had also launched businesses in India and the US, while, “the biggest difference between China and other countries is the completeness of the industrial chain,” he said.
Take India as an example, although the development of NEV and power batteries in India is in its early stages and has great potential, the Indian market currently lacks raw materials, such as lithium ore resources and battery cell production capacity for power battery industry.
“In comparison, domestic NEV industry chain is very complete, for there are many suppliers for the same parts to choose from, and different suppliers have their own advantages,” Wang said.
“The development of our business cannot be separated from the support of overall environment.” Wang added.
In April this year, Volkswagen China announced that it plans to invest 2.5 billion euros ($2.7 billion) to expand its production and innovation center in Hefei, and accelerate the development of two smart electric models jointly developed with NEV maker Xpeng.
In just three years, Volkswagen has established a new intelligent connected EV center in Anhui and built complete NEV value chain covering R&D, production, sales and after-sales services.
‘Concern over China’s competitiveness’
In response to the foreign media reporting on an “EV price war” and “Major EV company going bankrupt” as the evidence of “overcapacity,” industry insiders said that China’s NEV companies are developing in a competitive market environment thanks to the technological innovations and well-established and stable local supply chains, as well as Chinese consumers who are willing to accept new things. They believe the consumer market is not saturated and there will not be excess high-quality production capacity.
The hype of “overcapacity” is more out of concern over China’s increasing competitiveness and the fear of losing its own industrial advantages, based on protectionists concerns, they said.
Wang from SinoEV said that when discussing the issue of “overcapacity,” we should first focus on the demand side. “In fact, global sales of new energy vehicles continue to rise,” he said.
Data from Clean Technica showed that for the whole of 2023, global cumulative sales of new energy passenger vehicles were 13.68 million units, a year-onyear increase of 31 percent. Wang believes that the consumer market is not saturated, judging from the current growth rate.
Huo Jianguo, a vice chairman of the China Society for World Trade Organization Studies in Beijing, said that the US fallacy of “overcapacity” is actually curbing China’s technological development and industrial upgrading, aiming to protect the US own backwardness, and “it is real trade protectionism.” This approach distorts fair competition and disrupts the global NEV industry chain and supply chain, Huo said.
“We hope that our business and customers will be more widely distributed, but currently, production and site selection are based on actual needs, rather than blindly building factories and expanding production capacity,” Wang said.
Jiang from NIO said that Chinese NEV companies are not wildly expanding production, but are following market rules and centered on controllable dynamic balance in meeting market demand and company development.