During the late 1980s, the place to see the future of the auto industry was the Tokyo Motor Show. Toyota, Honda and Nissan were running circles around the Motor City Three automakers. In 1989, they used their home-market auto show to put on an era-defining display of creative designs and innovative technology funded by their manufacturing cost and quality advantages over Western rivals.
The event was a turning point, driving home to Detroit executives just how far behind they were and spurring a decade of catch-up efforts.
Fast forward to this week’s Beijing Auto Show – another bright line moment for the global auto industry.
Everyone in the World of Cars is aware of the ascent of China’s best domestic automakers as the world’s largest market has gone electric. But it packs a wallop to see all in one place what BYD, Xiaomi, Xpeng and other domestic Chinese brands have accomplished since the pandemic put China behind a curtain in 2020.
Xiaomi, with its Porsche-inspired SU7 EV, and BYD, with its fleet of ultra-cheap EVs now augmented by more upscale models, are stars of the show.
So is China’s EV battery king, CATL, which previewed a new, low-cost lithium iron (LFP) battery it said could deliver 1000 km/621 miles of driving range. That’s a gamechanger – assuming CATL can manufacture such batteries at scale and at lower cost than comparable nickel-cobalt batteries.
The Chinese EV industry’s breakout isn’t just about better batteries or bargain-prices. China’s digital tech powers – Huawei, Tencent, Alibaba, Xiaomi – as well as Western companies such as Bosch and Nvidia – are jumping in as Chinese authorities clear paths for automated driving.
Huawei, the telecoms tech giant that is anathema to many Western governments, highlighted investments in automated driving at the Beijing show. Care to compete with Huawei on its home turf where the government has its back? Elon Musk said Tesla will give it a shot. Pass the popcorn.
Having mastered cheap cars for the home market, China’s EV makers are aiming their engineers and designers at more premium models and markets overseas. They are zooming up the learning curve charted by Japanese and South Korean automakers, who started with cheap and cheerful econoboxes and graduated to building Lexus and Genesis luxury vehicles that compete credibly with Cadillacs and BMWs.
In China, legacy global brands such as Chevrolet and Volkswagen are in retreat. Foreign automakers that once assumed the role of teachers to China’s young automakers are now scrambling to sign up Chinese partners to stay in the game.
How long will U.S. and European automakers be able to hide behind tariff barriers as confident Chinese rivals go global? Not long, given how easy to jump the moats are.
Reuters reported on Friday how Volvo is using exports from its U.S. factory to pry open the door to the U.S. market for its newest, Chinese-built electric SUV, the EX-30.
BYD is able to offset loss-leader pricing in China by selling the same vehicles in Europe and other markets at much higher prices – which still undercut incumbent automakers.
Here comes the Big Caveat: The Chinese auto industry is ripe for a shakeout. There are already 400 “new energy vehicles” on offer in China. Another 110 models will debut at the Beijing show or later this year.
Even with government support and a huge home market, that’s more entries than will likely succeed.
