Green cars to shift China market

The Trumpchi GS4 electric car from GAC Group displayed at the Shanghai Auto Show in April.
The Trumpchi GS4 electric car from GAC Group displayed at the Shanghai Auto Show in April.PHOTO: REUTERS

The segment is booming, thanks to increased interest in new energy vehicles and support from the Chinese government

CHANGCHUN • Discounts are visible everywhere at the ongoing China Changchun International Automobile Expo in Jilin province, as competing auto firms scramble to make sales.

Slower growth was seen in car sales in the first half of this year in China than last year and, faced with the increasingly competitive market, many carmakers are channelling time, effort and money into new energy vehicles.

Statistics from the China Association of Automobile Manufacturers (CAAM) show that China's auto output and sales in the first half of the year rose 4.6 per cent and 3.8 per cent year on year respectively - 1.9 and 4.3 percentage points lower than the same period last year.

"Buyers are concerned about more than just the price nowadays. As well as having an increased interest in new energy vehicles and smart cars, many buyers want after-sales services," said Mr Wang Enze, a sales consultant for Trumpchi, a brand produced by domestic carmaker GAC Group.

In addition to adjusting to the new demands of customers, carmakers need to reduce their high inventories. Thus, they have turned to creative methods to shift stock, such as promotions or discounts, and begun to incorporate the demands of the market into the design and production of smart, electric or hybrid models.

"In the current environment, carmakers must look for opportunities in second- and third-tier cities, and continue to develop new energy and smart cars," said Mr Xiao Zhengsan, secretary-general of the Chinese Automobile Dealers Association.

While the slowdown has hit traditionally fuelled vehicles, the new energy auto market is thriving, thanks in part to central government support in the way of financial incentives and favourable policies.

According to CAAM, China produced 146,000 pure electric passenger vehicles in the first half of the year and sold 132,000, up 70.3 per cent and 60.9 per cent year on year.

"The positive signs in the new energy and smart automobile sector is one reason why global auto giants remain confident in the Chinese market," said Mr Fu Yuwu, head of the Society of Automotive Engineers of China.

A market the size of China offers opportunities few auto producers can afford to miss. Industry giants such as Volkswagen, Toyota and Ford have released new energy car development strategies, featuring plans to increase production and upgrade products and services.

Volkswagen China has signed agreements with China's JAC Motors that will see it channel six billion yuan (S$1.2 billion) into a new joint venture. The partnership will produce new energy cars under a new brand and include a factory capable of churning out 360,000 cars annually. It also plans to cooperate in areas such as big data and second-hand car sales.

Meanwhile, Beijing Benz Automotive, BAIC Motor's joint venture with Daimler, has gone from strength to strength. The two sides will pump in five billion yuan to support the establishment of facilities capable of producing pure electric cars and batteries.

In addition to increasing production, new car models are being designed and tested.

FAW-Volkswagen plans to introduce 30 new car models by 2020. By 2025, new energy cars will account for about 25 per cent of the company's car output.

Domestic brands are not content with playing second fiddle, as statistics published on newenergy.org.cn show. By 2020, nine Chinese brands propose that almost four million new energy cars in circulation will have been produced by them.

Minister of Science and Technology Wan Gang said hydrogen fuel and electricity would coexist and complement each other in the future. This will be supported by the central government, and controls on the number of petrol and diesel vehicles produced.

Mr Fu believes that as Chinese car brands innovate, they will reduce their dependence on government policy and become strong competitors in the market.

XINHUA

A version of this article appeared in the print edition of The Straits Times on July 22, 2017, with the headline 'Green cars to shift China market'. Print Edition | Subscribe