Every third car is sold in China. At “Auto China” in Shanghai, German manufacturers are pinning their hopes on the growth market – and on e-cars.
In the pandemic, China is the “great ray of hope” for German carmakers. The world’s largest car market is expected to grow by at least six percent this year. Sales of electric cars are particularly booming, and could increase by 70 percent, industry experts predict. After a slow start in electric mobility in China, Volkswagen is looking to catch up strongly with billions in investment and new models.
The ID.6 large urban SUV, unveiled Sunday ahead of the Shanghai International Auto Show, is expected to turn things around as a “flagship” model. This year, Europe’s largest automaker aims to sell more than 100,000 e-cars in China.
Already the second trade fair after the corona virus epidemic
With about a thousand exhibitors, “Auto China” in Shanghai, which begins Monday, is now the world’s largest auto show. Hundreds of thousands of visitors are expected in the twelve exhibition halls until April 28. Since China has had the corona virus largely under control since last summer, it is already the second major auto show in the country in just seven months, after Beijing in September. However, visitors must present negative corona tests, have their body temperature measured and use a cell phone app to prove that their participation is safe and that they have not been to high-risk areas.
In the Corona crisis, China is once again becoming more important for automakers. Industry expert Ferdinand Dudenhöffer sees the “great locomotive.” “China is driving away from everyone,” says the director of the Center Automotive Research (CAR) in Duisburg. He adds that things are also getting better in the U.S., as the huge stimulus package of the new administration of U.S. President Joe Biden is also promoting cars. “But that will be nowhere near as strong as China,” Dudenhöffer believes. South America, he said, is drowning in chaos. “Europe will tend to stagnate or have small increases.”
High growth in new registrations in China
Rapid economic development in China is driving sales. In the first quarter, the second-largest economy experienced record growth of 18.3 percent compared with the same period last year. The government is forecasting “more than six percent” growth this year, and the International Monetary Fund (IMF) is even predicting eight percent. That’s how fast the overall market is expected to grow. And that’s how fast Volkswagen and the other automakers want to grow.
In the first three months, new registrations actually rose by 76 percent to 6.48 million passenger car sales. The big jump can be explained by the low basis for comparison a year ago, when the country was at a standstill at the start of the Corona crisis. Nevertheless, a real increase of “a good 20 percent” remains.
Chip shortage causes problems for auto industry
But the chip shortage is putting the brakes on. “When you already have bad luck, bad luck adds to it,” quotes Volkswagen’s China boss Stephan Wöllenstein, a figure of speech. He still expects “considerable impact” in the second quarter. The problem will persist until 2022, he said. That semiconductor production is not in the hands of the auto industry “is a fatal problem that cannot be solved so easily,” said Jia Xinguang, director of China’s Association of Auto Dealers. At the same time, he said, cars have increasingly complex problems to solve, such as autonomous driving and energy management – especially electric cars.
Volkswagen wants to drive the transformation: In two to three years, the core brand wants to have a similarly high market share in China for alternative drives as it has today for gasoline-powered cars, with just under 15 percent, says VW manager Wöllenstein. “Volkswagen has a good tradition of coming a little later in some cases, but all the more fiercely.” Currently, VW has a market share of only three to four percent for electric cars, but that is expected to reach double digits by this year.
New manufacturers – enormous competition for electric cars
In order to break the dominance of Chinese brands and the American manufacturer Tesla, Volkswagen is investing 15 billion euros in e-mobility in China alone over the next four years. “It will take us two to three years to overtake Tesla,” Wöllenstein hopes. The e-car business in China is being made easier by the fact that many Chinese cities are limiting car registrations for fear of smog and gridlock.
It’s not so much growing environmental awareness as the fact that it’s easier, cheaper or simply the only way to get a license plate for electric cars. Alternative drives already have a market share of more than five percent today. For pure battery cars, the figure is still around four percent. but the competition is enormous. Chinese startups like Nio, Xpeng or Lynk & Co are jostling for market share. Technology giants like Huawei and Xiaomi are also sniffing out the business and now want to build cars – also because software and connectivity are increasingly important.