BUSINESS Foreign carmakers step up investment in nation

BUSINESS

Foreign carmakers step up investment in nation

China Daily

07:55, July 26, 2022

LU PING/CHINA DAILY

Leading brands aim to further explore country's potential

China has held the distinction of being the world's largest market for cars since 2009.

According to the China Association of Automobile Manufacturers, more than 26 million new vehicles were sold in the country last year, over 11 million more than in the second-placed United States.

The huge number of new vehicle sales in China captivated major carmakers worldwide, who are increasing investment to further explore the nation's potential. China is one of the largest markets for these companies.

Back in 1988, Audi, a luxury brand of German car giant Volkswagen, started to produce vehicles in Changchun, Jilin province, in partnership with China FAW Group, which produces Hongqi vehicles, its premium brand.

To date, Audi has sold more than 7 million vehicles in China, most of which were produced at plants in the nation. Last year, some 40 percent of Audi's global sales were in China.

Late last month, Audi began construction of a plant in Changchun designed to solely produce electric vehicles, in the hope of securing a future as bright as that in the age of gasoline-powered cars.

The plant is owned by Audi's joint venture with China FAW Group, the Audi FAW NEV Co, the first Chinese joint venture in which Audi holds a majority stake.

Audi said it is investing 2.6 billion euros ($2.72 billion) in the overall project, including the creation of the joint venture and construction of the plant.

The investment marks the German manufacturer's latest attempt to explore the burgeoning new energy vehicle, or NEV, market in China. Sales of such vehicles accounted for 57 percent of the world's total in the first five months of this year, according to the China Passenger Car Association.

The Changchun plant, which is due to be completed by the end of 2024, is designed to produce more than 150,000 vehicles a year based on the Premium Platform Electric, or PPE, platform Audi has developed with Porsche, another Volkswagen premium brand.

Markus Duesmann, chairman of Audi's board of management, said: "We are bringing PPE to China. This means electric Audi models from China, for China."

The first models expected to roll off the assembly line include the A6 e-tron sedan and the Q6 e-tron SUV, said Duesmann, who is also responsible for the carmaker's China business.

"Audi has a clear road map for the electric future, and the Audi FAW NEV Co is an important part of our strategy for China," Duesmann added.

A total of 20 buildings will be completed at the Changchun site by the end of this year, according to Audi. The technical crews housed at the site will cover the entire value chain required for automotive manufacturing.

The site will also house a battery assembly facility, where Audi will manufacture high-voltage batteries produced specifically for China as part of the PPE platform.

Growth strategy

Audi China President Juergen Unser described the joint venture as an important part of the carmaker's new growth strategy in China, its largest market globally.

"In the years to come, we want to put an even stronger emphasis on China. The goal of our new strategy is to make Audi in China even more Chinese," he said.

Unser added that one of the main aims is to intensify localization in terms of production and research and development, or R&D.

"We will increase our budget for R&D, hire new talent especially for connectivity and electronics development, and invest heavily in new technologies," he said.

Audi is just one of the many international carmakers who are stepping up efforts to seize opportunities in China's new energy vehicle, or NEV, market, the largest worldwide for the past seven years.

Last month, NEV sales in China reached a record 596,000, a rise of 132 percent year-on-year, according to the China Association of Automobile Manufacturers, which estimates that such sales could reach 5.5 million this year, compared with overall vehicle sales of 27 million.

Last month, BMW, also from Germany, unveiled a new plant in Shenyang, capital of Liaoning province-its third car factory in China operated with domestic manufacturer Brilliance Auto.

The plant mainly produces electric cars, including the i3, a mid-size sport sedan designed by BMW exclusively for the Chinese market.

Construction of the plant started in 2020, with BMW investing 15 billion yuan ($2.22 billion) in the project, its largest investment in China for 19 years. BMW Brilliance's annual output will rise to 830,000 vehicles, up from 700,000 last year.

Shenyang is now home to the biggest production base in BMW's worldwide network.

Jochen Goller, president and CEO of BMW Group Region China, said, "The expansion of our production footprint in China shows that we are preparing for further growth in the world's largest electric car market and are confident in China's long-term prospects."

Since 2010, BMW Brilliance has invested about 83 billion yuan on building a production system integrating R&D, procurement, and vehicle output.

When the new plant was unveiled, Wang Xinwei, Party secretary of Shenyang, said, "The years of in-depth cooperation between Shenyang and BMW have made us realize that the best relationship between a city and an enterprise is common growth and creating the future together."

BMW has set down firm roots in Shenyang, while in Shanghai, United States carmaker General Motors has built plants and set up research facilities since arriving in the city in 1997.

Last year, GM expanded the GM China Advanced Design Center in the city and reached an agreement with domestic startup Momenta on a $300 million investment to develop autonomous driving technology.

Launches planned

GM launched the Cadillac Lyriq SUV for Chinese customers last year, the first model based on the company's Ultium electric vehicle platform. It also set up the Ultium Center in Shanghai to assemble battery packs for the domestic market.

By 2025, the manufacturer plans to launch more than 30 electric vehicle models worldwide based on the Ultium platform, with over 20 models scheduled for the Chinese market. By that year, the carmaker is expected to have produced 1 million electric vehicles in China.

GM has also decided to resume imports into China. On June 30, the company signed an agreement with Shanghai Pudong New Area covering intended investment of $100 million for the carmaker's premium import business.

Julian Blissett, president of GM China, said, "The latest agreement demonstrates GM's long-term confidence in the Chinese market, and will address evolving demand in the niche market and complement GM's locally produced model and brand lineup."

Tailored for China, the new premium import business will feature a range of GM products-from SUVs and pickup trucks to performance cars, powered by either gasoline or electricity. GM will officially launch the business in the third quarter of this year.

Blissett said GM's imported models always attract much attention at the China International Import Expo in Shanghai.

The bestselling international carmaker in China is Volkswagen, which holds about a 20 percent share of the country's passenger vehicle market. It has some 40 plants in China, which are operated with local partners to produce vehicles and auto parts. In total, these plants employ more than 90,000 people-the vast majority of them Chinese.

However, Volkswagen CEO Herbert Diess has said the traditional way of introducing car technology from Europe to China is no longer applicable in the age of software-defined vehicles.

In a Sina Weibo post early this month, he said Volkswagen needs to catch up with Chinese carmakers who are "really fast" in terms of onboard experience and autonomous driving.

To do so, Volkswagen established the first subsidiary of its software company Cariad in China earlier this year.

Diess said: "We are going to have software kits in China, for China. I am convinced that we are going to be really, really fast, because China is so fast."

Edward Wang, managing director of syndicated research at J.D. Power China, said smart features and exciting onboard experiences are becoming increasingly important factors for car buyers.

"Buyers do not necessarily purchase a model solely because of these functions, but they certainly won't buy a car if it doesn't have them," Wang said.

He added that Chinese brands are leading in an age of smart vehicles based on software because they have a better understanding of what local customers want and are quicker to adopt new technologies and launch new models.

"Such innovation is injecting momentum into Chinese brands in a rapid, effective and continuous way," Wang said.

Efforts stepped up

In May, survey findings released by J.D. Power showed that 53 percent of respondents said they would choose Chinese marques. Some 67 percent of those who drive Chinese vehicles said they would choose domestic brands again.

This is most likely why international brands are accelerating efforts to localize their production as well as their design and development work in China.

Chang Qing, CEO of Cariad China, said in April the company had more than 600 software engineers in China, and this figure is expected to double by the end of next year, with over 90 percent of the engineers being Chinese.

"Our newly established China team will enable us to respond quickly to local needs. We will develop, update and continuously improve our products at 'China speed' based on local customers' expectations," Chang said.

Cariad China is also building a nationwide R&D network. Beijing, Shanghai, Chengdu, capital of Sichuan province, and Hefei, the Anhui provincial capital, have been earmarked as initial R&D hub locations.

Engineers will develop and adapt software in China for Volkswagen's marques, including Audi and Porsche.

Meanwhile, Tesla has set up a R&D facility in Shanghai, the company's first such premises outside the US.

Tesla's team in China is tasked with designing, developing and producing new vehicle models and products with Chinese elements, and selling them globally, according to the company.

The carmaker has made its Shanghai plant a major export hub. In the first half this year, a total of 97,182 Tesla Model 3 sedans and Model Y SUVs were shipped overseas from this plant.

Early this month, Germany's ZF announced a plan to build a plant in the coastal city of Rizhao, Shandong province, which will produce and sell air bags and other vehicle safety products. Investment in the plant, which is expected to be operational by the end of this year, will reach 60 million euros, according to the deal ZF signed with the local authorities.

Related R&D work will be carried out at the plant, which will occupy 14,000 square meters.

ZF said products manufactured at the plant will be sold to carmakers in China and will also likely be exported to countries such as Thailand, South Korea, the US, Japan and Vietnam.

In three years, annual sales revenue at the Rizhao plant is expected to exceed 1 billion yuan, according to ZF.

Holger Klein, a board member in charge of ZF's operations in the Asia-Pacific region, said, "China is the world's largest automotive market, a dynamic, resilient and attractive market, and one in which we have the fullest confidence."

Scheduled to serve as ZF chairman and CEO next year, Klein added, "As a multinational company, we are an integral part of China's social and economic fabric."

Since arriving in the nation in 1981, ZF has established some 50 production facilities in more than 20 cities.

Terms of Service & Privacy Policy

We have updated our privacy policy to comply with the latest laws and regulations. The updated policy explains the mechanism of how we collect and treat your personal data. You can learn more about the rights you have by reading our terms of service. Please read them carefully. By clicking AGREE, you indicate that you have read and agreed to our privacy policies

Agree and continue