Auto industry highlights of 2017
China is expected to maintain its status as the world’s largest auto market this year, with a record-high 29 million cars sold, according to the Ministry of Commerce.
That’s just over a third of the cars expected to be sold worldwide this year, according to the website Statista.
Despite the top-line figures, sales growth of cars in China — once entrenched in double digits — has been slowing and that trend is forecast to continue. Sales in 2018 are predicted to rise about 3 percent, lagging the estimated 5 percent growth rate this year, according to the China Association of Automobile Manufacturers.
While the numbers of cars driving out of showrooms may be decelerating, changes in the auto industry are not. Stiff competition among carmakers is producing an almost constant flow of new models. Electric cars, under benevolent government policies, are making inroads in public acceptance. Internet and car technologies are merging, with the advent of “smart” cars that can sense traffic hazards, provide in-cabin entertainment and even drive themselves.
It’s a dizzying array of new horizons for both automakers and consumers. For car manufacturers, it’s a stark reminder that they have to be quick on their feet to adapt to a fast-changing market. For consumers, it means more choices and often cheaper prices.
The younger generation, who are avid consumers, online addicts and enthusiast embracers of new technologies, will play a defining role in shaping the future of the auto industry in the next five years. The Chinese government, which wants to clean up the skies and reduce dependence on fossil fuels, will be pulling the policy levers.
So where have been and where are we going? The end of another year and the advent of a new one is the perfect time to stop and take stock. This issue of AutoTalk is devoted to that endeavor.
Dual credit policy to boost green vehicles
China issued a regulation in September requiring automakers to produce a minimum number of nonpolluting vehicles. Known as the dual credit policy, it forces carmakers to generate new-energy credits equivalent to 10 percent of the sales in 2019, rising to 12 percent in 2020. Car manufacturers that fail to meet minimum production targets must “buy” credits from other companies. The regulation will take effect next April.
The regulation also includes targets for fuel economy and a credit-trading system aimed at saving energy and promoting green cars. The new policy is part of the government’s campaign to reduce dependence on fossil fuels and clean up the skies in major cities.
“The policy will affect the future of China’s auto industry and the strategies of automakers, especially foreign original equipment manufacturers,” said Xu Qian, China head of automotive practice at AlixPartners.
Some foreign manufacturers are stepping up alliances with domestic partners, such as green car pacts between Volkswagen AG and Anhui Jianghuai Automobile Group, and between Ford Motor Co and Anhui Zotye Automobile Co.
Online car sales
The Internet has become a prime channel for Chinese consumers seeking information about car brands and the latest models. Car buyers can now also purchase vehicles or car accessories through online channels, such as Alibaba’s Tmall shopping site and JD.com, China’s second-largest e-commerce retailer.
Consulting firm J.D. Power said in a report that online vehicle shopping is a fast-growing trend that is expected to continue. The proportion of online shoppers among all new car buyers has increased from 8 percent in 2015 to 17 percent this year, the report said.
Car manufacturers are closely watching the trend. Earlier this month, Ford Motor Co and Alibaba Group signed a letter of intent to collaborate in online car sales. It calls for the two companies to conduct a study of digital solutions for new retail opportunities, from pre-sales to test drives and leasing options.
Internet giants and electric car start-ups
China’s Internet giants Baidu, Alibaba and Tencent — also known as BAT — are investing in electric car companies.
Alibaba took a 10 percent stake in Guangzhou Xiaopeng Motors Technology. Baidu and Tencent have invested in Shanghai-based electric carmaker NIO. Baidu also invested in Shanghai-based WM Motor Technology Co Ltd, which works on intelligent electric vehicles.
The three companies are betting that more new cars will be connected to the Internet in the coming years, giving their technologies an edge in the development of future vehicles that will feature software, data, settings and algorithms inside cars.
Connectivity that links vehicles and other online systems also will become extremely important for vehicles.
Tesla in China
US electric carmaker Tesla said the company is in talks with the Shanghai government on setting up a plant in the city. Elon Musk, chief executive officer of Tesla, said he expects to start manufacturing cars in China in about three years.
“Tesla probably will make the smaller and cheaper Model 3 sedans and upcoming Model Y crossovers in China, but won’t build the pricier Model S or Model X there,” Bloomberg News reported.
Tesla is actively setting up more charging stations and charging poles in China in order to meet the demands of electric car owners in the world’s biggest auto market.
In October, Tesla opened a charging station in Shanghai with the capacity to charge 50 electric cars at a time. Tesla said it is the company’s largest supercharger station anywhere in the world. The company opened another large charging station in Beijing in November.
With the rise of the “sharing economy,” more people are participating in programs that share cars. The business model is similar to that of bike-sharing. Consumers rent cars for a short period of time with the use of their smartphones. They can drop off the cars in parking lots near destinations, instead of returning them to the points of departure. All payments can be made digitally.
Beijing-based car-sharing company TOGO and Shanghai-based Global Carsharing & Rental Co are among those expanding their networks into more cities in China. Earlier this month, BMW launched its own car-sharing service, called ReachNow, in the southwestern city of Chengdu in Sichuan Province.
Consumers typically use car-sharing services for commuting to work, business trips and recreational outings. The system is especially popular with younger drivers, who find it a convenient, low-cost way to get to and from work.
The Ministry of Transport issued a guideline in August to standardize the development of the car-sharing industry. It requires car-sharing companies to improve customer services and ensure that safety mechanisms are in place.