he auto industry’s center of innovation is Cali-
fornia, where scores of startups work to duplicate
Tesla’s success, and most major automakers now
maintain development facilities. The prototype of the future
electrified transport system is to be found in Norway, where
over half of all new cars sold now sport plugs. However, if
volume counts for anything, the future of EVs, and thus the
future of the global auto industry, may lie in China.
For better or for worse, the EV industry continues to be
driven by government policies, and it’s quickly gravitat-
ing to China, where the government is mandating a swift
transition to electrification, not only in order to address the
country’s acrid air pollution, but also as a ticket to the global
auto industry’s top table.
“Without government regulation, there would be no elec-
tric car industry [in China],” auto consultant and old China
hand Michael Dunne told 60 Minutes in a recent segment
on China’s growing domination of the EV world.
In the US, the regime of emissions and fuel economy
standards that has forced OEMs to grudgingly produce EVs
is in the process of being dismantled (although that process
will take months or years to play out, and could yet be
reversed). In Europe, official support for electrification is on
firmer ground, but the changing political landscape could
cause things to stall there as well.
Toyota Executive VP Bob Carter recently underlined
the defining role of governments, saying, “This is going to
be a slow evolution in the US market, unlike in China and
Europe where there are government regulations hastening
electrification.”
In authoritarian China, automakers worry less about
changing political winds, but the opacity of government
decision-making creates a different kind of uncertainty.
China-watchers recently got a surprise when the govern-
ment slashed EV subsidies (the market was expecting
smaller cuts). However, the reductions are widely seen not
as a reversal of the pro-EV policy, but rather as a way to cull
the ranks of EV-makers, which a government spokesperson
said had become dependent on subsidies at the expense of
innovation.
Under the new rules, NEVs (new energy vehicles, aka
plug-ins) with an electric range below 250 km will no longer
qualify for subsidies at all. Roland Irle of EV-volumes.
com, among others, believes that the government’s goal
is to winnow the industry to fewer and more competitive
players. “Times will get tougher for makers of sub-standard
models,” Irle writes. “2019 will see the production of several
low-range EVs halted.”
There certainly seems to be room for consolidation.
Bloomberg reports that there are now 486 EV manufactur-ers registered in China. At least
two dozen brands exhibited
NEVs at the recent Shanghai
auto show, from US-traded startup NIO to long-established
BYD (which also builds electric buses in California). Doz-
ens of EV startups have raised a collective $18 billion since
2011, according to Bloomberg NEF. And it’s not just auto-
makers - electronics assembler Foxconn, internet retailer
Alibaba, real estate developer Evergrande and even video
game company The9 are all getting into the EV racket.
While the overall Chinese car market has been crater-
ing for several months, NEV sales grew by 79% in 2018, as
China’s fleet grew to 1.1 million plug-in passenger cars. By
2025, China’s leaders want to see annual sales of 7 million
NEVs - about 20 percent of China’s total auto market.
China is not only building its own massive EV industry- it seems to be laying claim to the EV efforts of the rest of
the world as well. Global automakers have announced plans
to invest over $300 billion in electrification-related projects.
Some $136 billion of that is destined for the Chinese mar-
ket, $72 billion for Germany, and a measly $34 billion for
the US.
Major automakers including Daimler, BMW, VW,
Renault-Nissan, Toyota, GM and Ford all have plans to
produce EVs in China, but many of these models won’t be
for sale in the automakers’ home countries. In the Chinese
market, they’ll be competing not only with local brands,
which have an unfortunate reputation for poor quality,
but also with Tesla, which is miles ahead of the pack in EV
tech, and is building a new Gigafactory near Shanghai at a
breakneck pace.
Red-blooded American EVangelists are feeling frustrated
these days. To give just one example: we were excited to see
VW’s I.D. Roomzz, a full-size electric SUV concept that
was presented at the Shanghai auto show, because if there’s
one thing the EV world badly needs, it’s more electrified
SUV models. However, the ardor cooled when we learned
that - you guessed it - the new wonder vehicle, along with
at least four other upcoming VW EVs, is aimed squarely at
the Chinese market. VW is investing more than 4 billion
euros in China this year, and hopes to deliver 1.5 million
NEVs in China in 2025.
Resistance is futile. “The size of the market alone makes
China the irresistible place to be for any global automaker,”
says Michael Dunne. “If you’re not in China, you’re not
play ing.”
Has the US already ceded leadership of the industry?
60 Minutes’ Holly Williams asked Dunne. “No, it’s not
too late,” he said firmly. However, “if we wait until 2025,
China will be making 5 million EVs a year, and if we’re still
making half a million, now all of the technology and design
engineering [will be] concentrated in China. How do you
catch up with that?”
T
Will the global auto industry By Charles Morris
migrate to China?