Global automakers seek to make China electric vehicle export hub

Attractions include high productivity and strong supply battery chain

An Xpeng Motors G3 electric sport utility vehicle © Bloomberg

by Tom Hancock in Shanghai
Global automakers are pushing forward with plans to use China as an export hub for the world, particularly for electric cars, after signs from Washington and Beijing that they are getting closer to resolving their year-long trade war.
Ford was forced to cancel plans to export its Focus model from China to the US due to the trade war. But it is “halfway through” developing a model in the eastern city of Hangzhou that will be “made in China for the world”, Tim Slatter, Ford China’s product development executive, told the Financial Times.
“You are going to see Chinese design coming to the west,” he said, adding that US-China trade negotiations could “lead to an environment where we can more easily operate trade between China and other markets”.

BMW will produce an electric version of its X3 sport utility vehicle in China from next year, which will become “the first that we will export [from China] to other markets in substantial volumes”, said Pieter Nota, the company’s chief financial officer.
Carmakers in China exported about 1m vehicles last year, up 16 per cent from 2017, mostly to developing markets such as Iran. Overseas sales are a way for domestic carmakers to weather a downturn in the Chinese market, which has left them with severe overcapacity.
Guangzhou Auto, which suspended plans to export its Trumpchi SUV to the US due to the trade war, said recently that it hoped to turn the model into a “top mainstream brand” in Russia within five years.
Automobile factories in China are often newer and more productive than their overseas equivalents, say executives. The logic of exporting from China makes even more sense for electric vehicles, where the huge local market has already created a supply chain, especially for batteries.
BMW is working with China’s CATL, the world’s largest battery producer.
“China is the number one market for EVs, which is why it make sense from a production perspective to locate in China,” said Mr Nota.
Hybrid carmaker Lynk & Co, which is backed by Chinese automaker Geely, sold more than 120,000 vehicles in China last year and has annual capacity for about 400,000. It aims to sell in Europe but has cancelled initial plans to produce cars in Belgium.
“It’s planned that our first sales in Europe will be built in China. We decided in November to stick to Chinese production,” said Alain Visser, chief executive.
China announced last year that foreign companies would not need to partner with local companies for electric vehicle manufacturing, and would be able to fully own companies making other kinds of vehicles from 2022.
But most are sticking with local partnerships developed over decades, meaning profits from export markets will be shared with local companies.
China’s domestic automakers are reluctant to sell their shares in highly lucrative joint ventures, with Guangzhou Automobile’s head Feng Xingya saying he was “clear” that partners including Toyota and Fiat would not raise their JV stakes.
Volkswagen played down reports this month that it was seeking to buy out local partner JAC Automotive. “We are in very successful co-operation with Chinese partners. There is no general intention for the VW group to overcome this co-operation,” said Stephan Wöllenstein, VW’s China head.
BMW’s announcement in October that it would buy a majority stake in its venture with local player Brilliance Automotive for €3.6bn was eased because Brilliance is one of China’s weaker car companies, with limited funds for investing in new facilities.
For the production of an electric Mini in China, the German company is partnering with China’s Great Wall, one of the country’s largest domestic carmakers.
BMW executives said this was because the Chinese company had more experience making low-priced cars and because low initial sales volumes would make building a dedicated new facility more risky.
Sharing a platform with a Great Wall would “justify the production capacity set-up”, said Mr Nota. “The plan is to develop jointly this car with Great Wall engineers next to BMW engineers, so both companies will add knowhow.”
Additional reporting by Wang Xueqiao