traditional Automobile, Volkswagen is caught in a price war In China, slashing prices in a desperate bid to hold on to its Market position because competition has become fierce in the country, and its foreign car makers are at a huge loss, their sales are slowing, and their market share is shrinking. Now, Chinese car companies are on the rise and preparing to shop their electric models around the Globe.
traditional Automobile, To understand what’s going on in China, it helps to know how things began, and one company in particular is worth a closer look at Volkswagen. Let’s go back to 1978. China had just emerged from the cultural revolution, and it was still quite poor, but it needed vehicles, so it turned to Germany.
One day, a Chinese delegation led by the country’s Minister for Industry showed up at Volkswagen headquarters in Wolfs Burg. In 1984, German Chancellor Helmut Cole flew to China for the ground laying of a new joint venture, shanghai Volkswagen Automotive. Company up to that point in time, only one other car company, jeep, had attempted a joint venture in China after the communist takeover.
A lot of Chinese thought that their car was because Volkswagen was so dominant at the beginning of the economic rise, and of course, this was a big advantage. However, China carried its risks for car companies a growing dependence, and no company was that truer than Volkswagen. Over time, more and more sales were tied to one country.
traditional Automobile, China wanted its own car companies, but after years of struggling to produce gas engine models, it didn’t have much to show for its efforts. Then came a new technology; in 2001, China funded research and development projects for battery vehicles alongside fuel cells and high hybrid. However, the real move to Electric only gained traction years later in 2008.
The Kong’s ministry introduced China’s first consumer subsidies for electric vehicles and just like Volkswagen, it connected EV companies to taxi fleets and government deals. Electric, in other words, was finally getting scale. The entire supply chain for electric vehicles had emerged, and it benefited from China’s industrialization.
traditional Automobile, Older companies like BYD, which used to make batteries for phones, suddenly found new purpose in electric vehicles, and ups like Leap Motors and Neo Quickly gained prominence. Beijing was there to help its companies every step of the way, not just with subsidies and Big government purchases. The local governments openly supported the Automobile industries.
There was just one problem with China’s new EV Market: the equality wasn’t still good enough to compete globally like Tesla, but that soon changed when Beijing allowed Tesla to build in Shanghai, and this really started to shift In the market, and then production started to scale up and then 2020 when Giga Shanghai was Running that’s really when the EV market took off.
Tesla raised the level of competition in China’s EV market, but importantly, it also increased the standard of Chinese suppliers; now, they had to produce electronics and components according to Tesla’s Specifications, which meant that they could offer the same quality to Chinese car makers.
Suddenly, Chinese cars had checked off all the major boxes. They were faster to build, less expensive than their competitors, and the equality was comparable. In 2021, sales of passenger EVS in China soared by a whopping 170% from the year before to about 3 million vehicles, and that year, half of EV sales worldwide took place in China.
Traditional Automobile, Still, none of the traditional car makers appeared worried; Volkswagen, Toyota, and Honda, for example, have the benefit of scale over the Chinese car makers in Tesla, so eventually, they dominate the volume market for EVS, which is not true. The thing is that big car makers had several problems when it came to electric vehicles—the battery cost for one.
It’s fear to say that the big car companies have learned a painful lesson: don’t rest on your past accomplishments and be careful about understanding Beijing’s industrial policies.