Tag Archives: China auto industry

Belt, Road and Electric Vehicles

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By Gary S. Vasilash

The Chinese Belt and Road Initiative was launched in 2013 by Xi Jinping. BRI is a means by which China, though investments and development projects around the world, aims to have increased global influence. According to the Council on Foreign Relations (certainly not something you’d imagine would be cited on a site like this):

“China’s overall ambition for the BRI is staggering. To date, 147 countries—accounting for two-thirds of the world’s population and 40 percent of global GDP—have signed on to projects or indicated an interest in doing so.”

What’s more, CFR points out:

“Beijing could seek geopolitical leverage over BRI countries. A 2021 study analyzed over one hundred debt financing contracts China signed with foreign governments and found that the contracts often contain clauses that restrict restructuring with the group of twenty-two major creditor nations known as the ‘Paris Club.’ China also frequently retains the right to demand repayment at any time, giving Beijing the ability to use funding as a tool to enforce Chinese hot button issues such as Taiwan or the treatment of Uyghurs.”

All of which is to say that the Belt and Road Initiative is somewhat controversial in places other than Beijing.

CFR quotes French president Emmanuel Macron saying during a 2018 trip to China that BRI could result in the countries that have signed up for the loans and/or development programs becoming “vassal states.”

Which makes it odd to see this headline on a recent news release:

Deepening “Belt and Road” Initiatives: Remarkable Global Expansion for DENZA in 2023

DENZA is a car brand that was established in 2010 by Chinese company BYD and Mercedes-Benz. While it started out as a 50:50 joint venture, last year Mercedes sold all but 10% of its share to BYD.

(Image: DENZA/BusinessWire)

The original announcement about the company noted it would combine BYD’s capabilities in vehicle electrification (BYD is a world leader in that space) and Mercedes’ capabilities in providing luxury and quality. A sensible approach for a startup: the best of both worlds.

While DENZA has been somewhat quiet over the past several years, the company describes 2023 as its “inaugural year on the international stage.”

And then there’s this from the news release:

“With a steady and orderly international expansion, DENZA has not only won the hearts of global media and customers but has also laid a solid foundation for becoming a leading international high-end brand, poised to be the ‘business card’ of Chinese new energy luxury cars, redefining China’s automotive industry and introducing DENZA to a global audience.”

Which, going back to the Belt and Road Initiative, really sounds rather, um, ominous, given the methodical approach that is being taken, especially in contrast to the less-consistent execution by some Western OEMs (i.e., from being all-in on EVs to being sort-of-in to. . .). DENZA has a plan and they’re working it.

And seeing more business cards being passed out by several other Chinese EV companies goes to explain, in part, why the European Union launched an investigation this past Fall into whether Chinese EV OEMs, which are gaining considerable traction in the European market, are benefitting from what could be considered “unfair” government subsidies.

This could cause a considerable concern for European OEMs given the importance of the Chinese domestic market to them and the possibility that the Chinese government could retalitate to things like the imposition of tariffs on Chinese EVs coming into the EU by making it more difficult for EU-based OEMs in the China market.

For example, through Q3 2023 Mercedes-Benz Cars sold the following number of vehicles:

  • Germany:     172,900
  • U.S.:             216,700
  • China:          570,600

Presumably the folks in Stuttgart aren’t going to want to agitate any issues with their biggest market by volume, and they aren’t the only ones.

Somehow the auto industry is becoming as much political as it is technical.

China and the EU

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By Gary S. Vasilash

Here’s something that at the very least ought to raise some eyebrows in Detroit and Washington DC.

This, from the European Automobile Manufacturers Association’s report on economic activity released last week:

“In the first three quarters of 2023, China maintained its position as the primary source of new EU car imports in value terms, growing by an impressive 58.1% and claiming a significant 17.2% market share in value terms.”

While one might imagine that it would be Japan, but that countries auto manufacturers are in third place, at 14.4% of the market, behind South Korea, at 14.6%.

The U.S.? In fifth place, at 10.6%, behind the United Kingdom, which has 14.1% of the EU market.

It’s not so much that the U.S. is so far behind the others (realize that the delta behind the U.K. is 25%), but that China is gaining so much ground in the EU so quickly.

How does this portend for the future of U.S. OEMs, especially if the Chinese start bringing in lower-cost cars that many Americans can afford despite the current 27.5% tariff that the Chinese would have to absorb?

The Expanding Growth of the Chinese Auto Industry Examined

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By Gary S. Vasilash

Tu Le grew up in metro Detroit. He made his way out to Silicon Valley, where he lived and worked. Then made a move to Beijing.

He recalls that when in China he recognized that there was a massive shift going on in the auto industry, one largely predicated on the digitalization borne of on-board electronics. Then there was the electrification of the powertrain.

This led him to found a consulting firm, Sino Auto Insights, which has a perspective on what’s going on in the industry—which he refers to as the “mobility industry”—from the perspectives he’s gained from living in Detroit, working in Silicon Valley, then spending serious time in China.

Tu thinks that one of the things that is happening that is going to have profound effects on the traditional OEMs—be they based in the U.S., Europe or Japan—is that Chinese companies are working at a clock speed that can make efforts undertaken by those traditional seem to be in slow motion.

The technology transition is not in the least bit minor.

What’s more, not only is the competitiveness of Western companies operating in China waning, but Chinese OEMs are now selling their vehicles—which have, he says, surprising levels of tech and capability—in markets around the world, which puts pressure on OEMs in their home markets.

And while this hasn’t happened in a notable way in the U.S., it is a matter of when, not if, Tu says.

On this edition of “Autoline After Hours” John McElroy, Lindsay Brooke of SAE International and I talk with Tu about these developments.

Not only is the growth and expansion of the Chinese auto industry a technology story, but given the tensions that are increasing between the U.S. and China (think only of the recent spate of balloons), there is a political aspect to this, as well.

And you can see the show here.