Chinese new energy vehicles: what it takes to go global?

According to this trend, the total export volume of Chinese cars will exceed 3 million units this year. Europe is also the main destination for China's new energy vehicle exports, with global auto companies BMW, Renault, and Tesla all using China as a manufacturing base for new energy vehicles. Can China hammer and form a global fighting force in the European market?

From the data, European cars are also accelerating their run toward electrification, including pure electric car sales of 1.003 million units in Europe from January to September and 688,000 units of the plug-in hybrid. Chinese companies currently going to the sea include SAIC (M.G.) and BYD. Tesla and BMW also use Chinese manufacturing capabilities to provide cost-effective pure electric vehicle products to overseas markets.

SAIC MG Europe has sold more than 100,000 units in the first 11 months of this year, up 106% year-on-year. Among them, sales in mainland Europe exceeded 50,000 units, an increase of 160% year-on-year, while sales in the U.K. reached nearly 50,000 units, an increase of 64% year-on-year. Europe has become the first overseas "100,000-unit" market for the M.G. brand, with product footprints in 38 countries, including the UK, France, and Germany.

How long can the excellent results of China's new energy vehicle exports last? The next step is to consolidate the advantages of Chinese cars and expand the market influence of independent brands, which has become a hot topic of public opinion.

For example, the nameplate models, such as the Magnolia Pure Electric, are not explosive in the Chinese market. In leading to the global market, there are cost advantages in relying on China as the world's largest market for new energy vehicle production and seizing opportunities. The M.G. Motor brand has encountered a vacuum in the global new energy vehicle market, that is, the current state where European, Japanese, and Korean cars have relatively few new energy vehicle models in the market.

Part 1

What Chinese cars need to do to enter Europe

We see that the Chinese auto industry can systematically enter the advanced auto market, start to learn the market rules, understand the European market demand, and truly achieve global design and development.

Access to European and American markets differs from domestic ones and requires targeted development to meet the requirements. The E.U. requirements for electric vehicle imports include design, environmental impact, functionality, electricity, and overall safety. Therefore, domestic production and manufacturing of pure electric vehicles exported to Europe must pass the technical standards set by the E.U., including the entire vehicle type certification, components, and system safety.

The first is the whole vehicle certification.

The E.U. is one of the most stringent markets in the world in terms of import and export regulations and has stringent access standards and regulatory systems for product consistency, quality control systems, vehicle end-of-life recycling, etc. EWVTA (European Whole Vehicle Type Approval) certification involves vehicle safety, performance, environmental protection, range, and other testing items. EWVTA (European Whole Vehicle Type Approval) certification involves vehicle safety, performance, environmental protection, range, and many other testing items, and is the most "gold" certification system in the international. Type Approval is the verification of the same design and manufacture of a batch of equipment samples, and the certification is valid for the batch of equipment.

The E.U. certification and the U.S. and Japanese certifications constitute the world's three major automotive certification systems in the automotive industry. The European Commission compels its member states to use the entire vehicle, safety parts, and systems certification. Only through the certification of automotive products can they be sold in the E.U. market. In this regard, the E.U. is also constantly adjusting and improving standards.

The second is the battery requirements.

On the one hand, Europe's safety requirements for batteries are based on the United Nations Economic Commission for Europe (UNECE) Regulation No. 100, which details the unified requirements for battery-driven road vehicle electric systems. On January 1, 2022, the E.U. began to implement the new battery law, repealing the current E.U. battery directive (2006/66/E.C.), the implementation of the way from "directive" to "regulation" to ensure that the battery placed on the E.U. market throughout the life cycle is sustainable, high-performance and safe.

There are mandatory requirements for sustainability, hazardous substances, carbon footprint, recycled raw materials, electrochemical performance, etc., especially for power batteries over 2kWh.

The new battery law also puts forward the management requirements for battery waste, recycling efficiency, and recycling targets; batteries must establish information exchange systems and passports. In the new energy field, Europe is mainly on the battery side to set the entry threshold.

 

Part 2

China's new energy vehicles need full support to go global.

China has a long preparation for this. On November 28 this year, the China Institute of Automotive Standardization was established in Tianjin, a scientific research institution specializing in the research and application of automotive standardization. The China Institute of Automotive Standardization will be responsible for the technical management of national and industry standards in the automotive field. It will represent China in coordinating and developing regulations for the United Nations and other international automotive standards, focusing on standardization research of more than ten automotive forward-looking technologies, and promoting the development of more than 80 new standard projects.

We hope that in future exports of China's auto industry, our national standards will dovetail with the international auto standards of developed countries in the auto industry and countries along the "Belt and Road" to take the lead. We are strengthening the forward-looking technology and standardization of basic research around autonomous driving, network security and electric vehicle safety, fuel cells, and other key areas of automotive research and development to accelerate the development of new standards and actively promote the coordination of international automotive standards and regulations.

In the past development, we see that the automotive industry was a typical globalized industry. Each vehicle manufacturer has its own standard system and the underlying technical standards to form national standards. In Germany, for example, the federal government has a unified standard for the cars that hit the road yearly. Only when the standards set by the national administration are met first can we highlight the characteristics of our own brand within this base and scope.

The industry is familiar with the VDA6.1 standard, the first part of the quality standards for the automotive industry developed by the Federation of the German Automotive Industry (VDA) in 1991, developed and formed by the German Automotive Manufacturers Association and its major manufacturers and suppliers, and only companies and products that have met this standard are eligible to enter the German auto parts market. Germany's influence on European automobiles constantly adds new elements and systems.

At present, the global standard for electric and smart cars has added many new things to the original quality system, such as functional safety and information security, and these requirements are also a big issue for Chinese cars leading to globalization.

 

Part 3

How will the Chinese auto industry develop in the future?

Chinese car companies use the European market as a springboard to find a breakthrough in automotive standardization and Chinese car companies. With a high total number of exports in 2022, most auto companies export in a relatively single way and are in the primary stage of direct export of auto products mainly.

There are also investments overseas among Chinese brand car companies, but the scale of investment is small, and the degree of localization is not high. For example, Geely, Great Wall, BAIC, and SAIC-GM-Wuling have invested in overseas factories, mainly in CKD (full bulk assembly) and SKD (semi bulk assembly) assembly production, providing technology and process equipment, collecting certain technology royalties and exporting bulk parts, with low participation in plant-specific operations and product sales and other operational management. Such an investment strategy, still mainly on a small scale, faces management and operational risks for long-term sustainable development.

In addition, there are problems with overseas sales and service system construction and a lack of support, such as consumer credit and financing. Because of the high risk of overseas investment, it leads to an unreasonable layout of sales and after-sales service network, and most enterprises adopt the cooperation method of entrusting agents, which generates problems such as long parts supply cycle, relatively late after-sales service, and little publicity, resulting in low brand influence.

The long-term direction of the global development of China's auto industry is direct investment and production overseas. With the establishment of the overseas production system, the management model, supply chain, corporate culture, and brand should be exported to complete the system construction.

The core issue is that our new energy vehicles still revolve around the needs of the Chinese market, for example, according to the policy of subsidies. With the shift from a policy-driven market to a purely market-oriented one, Chinese auto companies must begin to learn to collect demand, merge and manage market demand in China, Southeast Asia, the Middle East and Australia, and Europe, and then create new energy vehicle platforms and models for the world. This is how China's auto design and engineering capabilities take the world stage.

I think it is long-term and systematic work for the Chinese auto industry to break the game globally, and it is an excellent opportunity for Chinese manufacturing to go global and change its original reputation. I believe Chinese car companies can seize this once-in-a-lifetime opportunity.