Magna reckons the anticipated significant growth in China’s new electric vehicle (NEV) makers will present ‘huge challenges’ as suppliers look to provide the necessary components.
China’s well-documented pollution issues are driving adoption of, and research into, NEVs with sales quadrupling to 300,000 last year while forecasts peg the potential market at 1m vehicles by 2020.
“The [Chinese] government has never [set] targets for NEVs – that is putting a lot of pressure on current OEMs,” said Asia Magna EVP, Frank O’Brien, at the Global Automotive Forum (GAF) in Chongqing.
“We have a lot of brand new players coming into the NEV market – that is a huge challenge for us. It is going to be a huge challenge when it gets to supplying parts. Which one of the 18 [NEVs] companies that have contacted us [will] go into production?”
Magna is a major player in China with 33 facilities and a further seven in the pipeline and all its main product groups are represented.
O’Brien also echoed some observations made by other speakers at GAF – that China’s previous runway growth rate was starting to slow while over-capacity remained a concern.
“China is coming down to lower levels,” he added. “Whether that is slow or slower is the question – slower is the answer.
“Excess capacity continues to be a huge challenge in China – that is going to get even worse. If I had a crystal ball, I don’t think the market will be slow in the normal definition until we reach around 35m units per year in production and sales.
“The impact on the OEMs of the slower market [will be], eventually, there will be pressure to export, to sell that excess capacity.
“Domestic suppliers, smaller suppliers, will have great difficulty surviving because prices come down and demand to meet CAFC targets increases dramatically between now and 2020.
“Many Tier 2 and Tier 3 suppliers will not be able to keep up and will consolidate or merge.”