Chinese shifting to electric and from owning to sharing cars
In 2018 the Chinese car market has suddenly flipped over from growing to the skies for decades to a 2,8% decline. Major EU and US car manufacturers dedicate half of their planned 300 billion dollar investment in electric cars to China. EV is the only niche still booming. Meanwhile, more and more Chinese shift rapidly from car ownership to car sharing.
Nobody saw storm coming
Apparently nobody has seen the storm coming. In June 2018, Jaguar-Land Rover (JLR) and its Chinese partner, Chery, were still optimistic. They pumped up the capacity of their factory with 50%. Four months later they had to close the factory for one month to absorb stocks after sales dropping fast.
Ford inaugurated a new one billion dollar factory in 2017. One year later sales went down with 37% and capacity had to be reduced rapidly.
Shooting up like mushrooms
China represented 70% of the world’s growth of the car market. Car factories shot up like mushrooms last decade. As a result overcapacity is looming. In a way even Chinese government felt compelled to put a stop to proliferation in September.
It wanted to stop the building of new car factories for conventional cars, but also for electric cars. Only well established companies with a more than average capacity utilization will be allowed to build on. Like Tesla, which laid the first stone of its Chinese giga-factory in Shanghai last week.
Market flipping over
However, suddenly the market flipped over like a pancake in the last months of 2018. While in 2016 still growing with 16%, in June 2018 still 3% was expected for that year. Apparently it became a decline with 2,8% over the year. Production has slowed down to 27.809.000 units. That’s a decline with 4,8% on a year-to-year base. Analysts even expect a further decline with 5% this year.
Apart from the uncertainty created by the trade war with the US, air pollution and traffic congestion in the cities have forced local authorities to limit car usage. As a result, private individuals are shifting from car ownership to car sharing massively.
Two million shared cars
According to an analysis by the Bloomberg news agency, this type of services could pass from 70.000 shared vehicles in 2017 to two million in 2020. Like in other sectors, the ease-of-use of a service available at the touch of a (smartphone) button seduces Chinese.
It could be a trend that is predicted by some experts for Europe too. According to German future mobility expert, Enno Däneke, from FutureManagementGroup AG “nobody will buy its own car anymore within 15 years“. By 2032-2034, Mobility-as-a-Service (MaaS) will become an extreme cost-effective service and the dominant means of transport, he believes.
On the other hand, still 28.081.000 vehicles were sold in the world’s biggest car market last year, of which 1.256.000 electric cars, according to automotive industry portal Marklines. It’s clear that EVs are still growing in popularity with a 61,7% increase compared to 2017.
The major reason for this are the goals the Chinese government has set. For 2020 five million electric cars must be sold, and 7 million by 2025. In order to convince people, China gave different incentives. In 2017 the maximum purchase bonus, for instance, was the equivalent of 8.300 euro.
Apart from that, Beijing threatens to fine car manufacturers. They have to get the target of at least one EV (pure electric or hybrid) out of ten cars of its portfolio sold in 2019. The following year, that rate should go up to 12%.
300 billion dollar investment
It’s one of the reasons why China is leading in today’s electric car development. Meanwhile, EU and US car manufacturers bet in a hurry almost half of their planned 300 billion dollar investment in electric cars for the next five to ten years in China, the Reuters press agency analyzed.
Volkswagen, for instance, will dedicate to China almost a third of its 91 billion dollar investment in electrification of its fleet. The German car maker wants to spread its production over three continents. Target is to build 15 million vehicles by 2025.
50 completely electric models
VW wants to launch at least 50 completely electric models by that time and 30 hybrids. Final goal is to have at least one electric version of its 300 models of all brands in the group, including Audi and Porsche.
Earlier this week Volkswagen CEO, Herbert Diess, told a select group of Chinese journalists he sees China becoming one of the world’s principal forces in the automotive sector. One of the reasons is the “very clear policy” from Chinese authorities to enforce a switch to the electric car.
“What we find in China”, he told the journalists, “is a good environment to develop the next generation of cars. We also find good competence and skills, we only have partly in Europe and elsewhere”, Diess added. Volkswagen has a long-time partnership with Chinese SAIC Motor and FAW Car.
Volkswagen aims at investing 91 billion on its own. That’s almost a third of the 300 billion dollar in EV development of all EU and US car manufacturers together. Others follow at large distance with Daimler being the closest, at 42 million dollar.
GM, America’s biggest car manufacturer, only spends 8 billion dollar to this conversion. The French, on the other hand, show a divided picture with Renault announcing 10 billion dollar investments and PSA less than one billion so far. According to the Reuters’ analysis, 45% of all investment projects, totaling 135 billion dollar, will be done in China.