As China’s new vehicle market opens up to global competition, at least a third of local vehicle makers will be forced out of the business, the head of the country’s largest electric car maker has said.
Competition would intensify as China lowers import tariffs and allows foreign car brands to fully own their local units, resulting in consolidation, with some domestic manufacturers surviving and a third or more getting forced “out of the game at some time between 2020 and 2022”, BAIC Group chairman Xu Heyi said in an interview with Bloomberg Television.
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BAIC, whose joint ventures in China with Daimler include the highly successful Beijing Benz Mercedes Benz Cars manufacturing operation readying for new energy models, plus a car making JV with Hyundai Motor, is preparing to work with more companies to enlarge and ready itself for tougher competition in the world’s largest car market, Bloomberg said. The company is also diversifying by listing its Beijing Electric Vehicle unit, the biggest electric vehicle maker in China.
Though the opening of China’s car market happened sooner than expected, it isn’t a bad thing as the resulting intense competition will “help optimise the market structure,” Xu said on Bloomberg TV.
BAIC would collaborate with new partners in vehicle and component manufacturing, as well as in various parts of the new energy vehicle industry, he added.
“There will surely be new joint venture and joint collaboration projects coming – big ones,” Xu told Bloomberg.
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By GlobalDataAn announcement about a new car manufacturing joint venture was coming “really soon”, he said.
Bloomberg noted there were about 70 major vehicle manufacturers in China and other executives had also predicted consolidation with companies exiting the market.
Many of the car industry’s newer players were set to fail because they don’t understand the business’s complexities such as manufacturing technologies, Andy Palmer, chief executive officer of Aston Martin Holdings, said in an interview on Bloomberg Television at the Beijing show last April.
Xu told Bloomberg BAIC’s electric vehicle unit, known as BJEV, was set to start trading in two months. The business was on track to become the first car manufacturer that makes only electric vehicles to list on a mainland stock exchange.
The report noted BJEV would compete for attention from investors who have driven up the share price of BYD, a Warren Buffett backed car (and electric bus) maker that trades both on the mainland and Hong Kong.
Seeing further growth potential in China, Daimler and BAIC last February announced plans to further expand local production of Mercedes-Benz vehicles at their Beijing Benz Automotive (BBAC) JV. At a cost of RMB11.9bn (EUR1.5bn), BBAC would operate another factory for high-quality premium vehicles in addition to its established facility in Beijing’s Yizhuang industrial park.
The announcement followed news Geely Group, a company owned by Li Shufu and managed by Volvo Cars owner Zheijang Geely Holding Group, had acquired almost 10% of Daimler. Industry watchers said at the time the move appeared to be part of a long-term strategy by Li to position Geely for growth in e-mobility and possible access to Daimler technologies.
