Chinese ‘e-car’ makers look for way out of glut
HANGZHOU, China, Oct 17, (RTRS): Humming away in an industrial estate in the eastern Chinese resort city of Hangzhou, electric vehicle designer Automagic is one of hundreds of companies looking to ride the country’s wave of investment in clean transportation.
The company wants to find a niche in a crowded sector that already includes renewable equipment manufacturers, battery makers and property developers like the Evergrande Group, as well as established auto giants.
But not all of these electric vehicle hopefuls will make it to the finish line.
“This (large number of firms) is inevitable, because whenever there is an emerging technology or emerging industry, there must be a hundred schools of thought and a hundred flowers blooming,” said Zhou Xuan, Automagic’s general manager, referring to Chinese leader Mao Zedong’s ill-fated 1956 “Hundred Flowers” campaign aimed at encouraging new ideas.
China is using preferential policies and brute manufacturing power to position itself at the forefront of global efforts to electrify transportation. By the end of 2017, ownership of new energy vehicles (NEV) – those powered by fuels other than petrol – reached 1.8 million in China, over half the world’s total.
With market expectations high, Chinese EV maker NIO, a rival to Tesla, launched a high-profile IPO in New York last month.
Designs
In July, the industry ministry published a list of 428 recommended NEV designs built by 118 enterprises throughout the country. It included not only established carmakers like FAW Group and Geely Automobiles, but also small, new entrants with names like Greenwheel, Wuhu Bodge Automobiles and Jiangsu Friendly Cars.
But regulators are already concerned about overcapacity and “blind development.” As subsidies are cut, smaller start-ups need to develop a competitive edge.
“After a period of intense competition, the rocks will appear, and the weak will be consolidated or eliminated,” Zhou said.
Overcapacity has been a persistent concern for many Chinese industries, with thousands of firms, backed by growth-hungry local governments and supported by risky loans, expanding quickly.
Over the years, China has been forced to take action against price-sapping supply gluts in steel, coal and solar panels, among others.
Electric vehicles could be next, as local governments feel pressure to create champions while following state instructions to “upgrade” their heavy industrial economies.
Some executives say the market is already distorted by subsidies granted to inefficient and poorly performing firms.