China’s government is pushing electric vehicles to the forefront, and foreign automakers are scrambling to catch up. The country has already surpassed the United States in terms of total electric vehicle sales, but it still lags behind Europe and Japan.
China’s EV industry is forcing foreign auto makers to catch up.
SHANGHAI— For the first time in the second quarter, electric vehicles accounted for more than one-tenth of new car sales in China. But, with the exception of Tesla Inc., international manufacturers have struggled to persuade Chinese customers that their electric vehicles are on par with the domestic competitors.
Volkswagen AG VOW -1.34 percent, for example, has constructed specialized electric-car plants in Shanghai and Foshan, with a combined annual capacity of 600,000 cars, and is planning a third.
VW began delivery of the ID.4 small sport-utility vehicle in China in March, marking the start of the company’s worldwide ID series—the company’s first real effort to manufacture electric automobiles rather than EV versions of existing gasoline vehicles.
According to LMC Automotive, the Volkswagen Group, which includes brands such as Audi and Porsche in addition to VW, is defending an 18 percent share of the Chinese market. VW alone controls 13% of the market, making it China’s most popular automaker by a wide margin. The ID.4 is an early test of VW’s capacity to maintain its supremacy in China throughout the electric revolution, as well as the public’s willingness to accept the firm’s transition to an EV business.
According to Tu Le, general director of Sino Auto Insights, a consultancy company, the first indications should be concerning for the German automaker. According to Chinese cars website D1EV, Volkswagen has sold 3,300 ID.4s in its first three months on the market. In comparison, the Volkswagen Group sold 1.85 million cars in China in the first half.
In a news conference on Thursday, Volkswagen China CEO Stephan Wöllenstein said that it is too early to pass judgment: It takes six to eight months for a new model to establish itself on the market. In 2021, the firm may still sell 80,000 to 100,000 ID-series cars in China, he added. In China, the ID.6, a bigger SUV, was recently released, and the ID.3 hatchback will be available before the end of the year.
This month, a Shanghai dealership will be selling the XPeng P7 Wing Limited Edition electric car.
Qilai Shen/Bloomberg News photo
Mr. Wöllenstein believes it will take some time to persuade the market of Volkswagen’s electric credentials.
In China, where the market is hurtling toward mainstream adoption of electric cars loaded with digital technology outside the comfort zone of most traditional car companies, global automakers like Volkswagen, which built their brands on gasoline models, are struggling to repackage themselves as electric-vehicle companies.
According to Mr. Le, multinational brands that have long dominated the Chinese market continue to resonate. “However, they don’t really understand technology, and they don’t have the software experts who can create great EV products,” he added, remembering VW’s failed effort to develop EV software in-house.
The brand’s popularity with older Chinese customers has the unintended consequence of seeming stodgy to younger, tech-savvy purchasers, who are the target market for EVs.
Auto-industry analyst Lu Weijia hailed the ID.4 a good vehicle that drives well and provides value for money in a recent review on the WeChat app. “The ID series lacks a technical vibe and a feeling of freshness,” he added, comparing it to the uniqueness and wow effect of many Chinese EVs.
Reviewers panned the ID.4’s driver-assistance system, describing it as “rudimentary” in comparison to most other EVs, and pointing to the ID’s inability to get software upgrades over the air, as Tesla and other EV manufacturers have been able to do for some time.
XPeng, a Chinese carmaker, believes that advanced driver assistance systems and other technology will be the key to attracting new consumers. The Wall Street Journal visits the company’s research and development facility to explore how its competition with Tesla may change the way we drive. Photo credit: XPeng
A Volkswagen spokesperson said, “We think our ID.4s are competitive.” She stated that once its over-the-air update mechanism is enabled, its functions would be substantially improved, but that the firm will require additional time to prepare the technology for usage in China.
The ID.4 is a functional car, according to Mr. Le of Sino Auto Insights, but it “simply doesn’t measure up to a lot of the Chinese alternatives.” Models from BYD Co. and XPeng Inc. provide more functionality for a comparable starting price of about $31,000, he said, while more expensive vehicles from NIO Inc. and Tesla have a significant technological advantage.
According to the China Passenger Car Association, electric cars accounted for 12% of total passenger-car sales in the second quarter, and first-half EV sales surpassed one million vehicles, close to 2020’s full-year total of 1.1 million.
Foreign companies hardly appeared in China’s EV sales charts, according to the association’s statistics, with the exception of Tesla, which sold approximately 130,000 EVs in the first half.
Foreign brands, with the exception of Tesla, hardly register on China’s EV sales statistics.
Qilai Shen/Bloomberg News photo
As sales of their cash-cow gasoline vehicles decline, international automakers are forced to play catch-up, jeopardizing their strong position in China.
Several years ago, some people made the incorrect bet, according to Raymond Tsang, a senior partner at Bain & Co. They chose the simpler option of producing plug-in hybrid versions of current models, which did not sell well, while their Chinese competitors were faster to see that customers would want separate pure-electric vehicles, frequently marketed under new and creative names. As a result, Mr. Tsang said, former China market leaders must now repair the harm of being two or three years behind.
Volkswagen’s market-leading position depends on its ability to create a link between Chinese customers and its ID series, with EVs expected to account for half of its China sales by 2030. Mr. Wöllenstein, the CEO of VW China, said that the firm’s transition to an EV company is “unstoppable and in full swing.”
—This article was co-written by Raffaele Huang.
Trefor Moss can be reached at [email protected]
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China’s EV market is growing at a rapid pace. The country has been able to produce EVs at a lower cost, which has forced foreign auto makers to catch up with the new car technology. Reference: should i buy a car now 2021.
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