Chinese government all in on EV
Subsidies for carmakers a concern for West
SHANGHAI — Nio, a Chinese electric car company that competes with Tesla, employs 11,000 people in research and development, but sells a mere 8,000 cars per month.
It has invested so extensively in robots that one of its factories employs just 30 technicians to make 300,000 electric car motors a year. Nio offers $350 augmented reality glasses for each seat in its cars, and has introduced a cellphone that interacts with the car’s self-driving system.
And none of it is profitable — far from it. Nio lost $835 million from April through June, or $35,000 for each car it sold.
Nio and other companies in China’s sprawling electric car sector have formidable government backing that allows them to withstand such losses and keep growing. When Nio nearly ran out of cash in 2020, a local government immediately injected $1 billion for a 24 percent stake, and a state-controlled bank led a group of other lenders to pump in another $1.6 billion.
Today Nio embodies China’s dominance of electric vehicle innovation and manufacturing, underlining its threat to traditional auto powers in Europe and the United States.
The strike by the United Auto Workers union against three Detroit carmakers, now in its third week, is at its heart a conflict over electric vehicles: The companies say they must invest billions of dollars to retool their operations, while workers say they must defend their jobs from automation and technology while increasing their pay.
On Wednesday, European politicians worried by a wave of Chinese exports formally launched an investigation into whether electric car manufacturers in China have received government subsidies, a step that could lead Europe to impose tariffs. China’s EV exports have surged 851 percent in the past three years, mainly to Europe. The inquiry by the European Union is geopolitically complicated: Many of Europe’s most important companies have ties to China’s market, and China is ready to retaliate.
China’s Ministry of Commerce denounced the inquiry Wednesday, calling it “naked protectionist behavior that will seriously disrupt and distort the supply chain of the global automotive industry chain.”
Companies like Nio, which is spending heavily on marketing in Germany and other European countries, need exports. The question is whether it can sell enough cars to justify its enormous research and investment effort.
“I’m actually not concerned about the capacity or volume of manufacturing — I’m only concerned about the demand,” said William Li, the chair and CEO of Nio, at a news conference in Shanghai.
As American and European manufacturers struggle to catch up, Chinese automakers lead the world in a critical aspect of the EV supply chain: battery technology. They have pioneered new battery chemistries that allow long-range driving at considerably reduced cost.
China also dominates electric motor production, and in designing high-efficiency systems that tie together batteries and motors.
Electric car sales are growing fast, but China has been building factories even faster for practically every electric car component. That has created a glut of capacity that has driven price tags for electric cars below the price of gasoline-powered cars.
Wages also tend to be lower in China. Auto workers in big cities like Shanghai earn about $30,000 a year in pay and benefits, while workers in less expensive cities in the interior earn considerably less.
By contrast, Ford Motor has said its workers earned an average of $110,000 a year in pay and benefits. The UAW is seeking a 40 percent pay raise over four years, plus a paid day off each workweek.
As Nio’s new electric motor factory shows, Chinese car manufacturing is now among the most automated in the world.
American automakers are finding that they have to buy industrial robots and other automation from Chinese suppliers, said Michael Dunne, an auto analyst in San Diego who specializes in China.
“They look around and say does America have anything close to their ability on automation, and the answer is no,” said Dunne, a former president of General Motors Indonesia.
Paul Gong, head of Asia automotive research for the bank UBS, predicted that Chinese carmakers would capture a third of the global car market by the end of the decade.
Much of the growth in his forecast is a jump in Chinese carmakers’ share of the European market to 20 percent, from just 3 percent now.
In China, he said, “the competition is so fierce that it pushes every automaker to develop new technologies.”