Howes: China moving deliberately into global auto club
Anyone who cares about the financial health of Detroit’s three automakers will get a quarterly look this week at their performance — revenue, profit, pre-tax margins and more evidence the sales boom of the past nine years may be peaking.
But the real story in the global auto industry that should make the Motor City think twice is unspooling this week at Auto China 2018 in Beijing. The message it sends is ominous for traditional automakers and their constituencies, accustomed as they are to a global pecking order dominated by the triangle of Detroit, Germany and Japan.
Nothing is guaranteed. China and its auto industry are making moves into foreign markets with battery-powered buses, electric vehicles and gas-powered SUVs in the United States. They’re planning to build hybrid SUVs in Belgium and EVs in South Africa even as their own double-down on electric vehicle development subsidized by the Communist Party-controlled government.
The Beijing show is expected to showcase 174 electric vehicles, Bloomberg reports, 124 of them engineered and produced in China. China’s Zhejiang Geely Holding Group owns Volvo Cars Ltd. of Sweden and Lotus of the United Kingdom. It’s the largest shareholder of Mercedes-Benz parent Daimler AG, a cornerstone of German industry. And Geely’s billionaire chairman, Li Shufu, has a message of his own:
“I want the whole world to hear the cacophony generated by Geely and other made-in-China cars,” he told Bloomberg. “Geely’s dream is to become a globalized company. To do that, we must get out of the country.”
Grab the wheel. A promise like that gives new meaning to the word interesting. Engineers of the largest market in the world, its auto industry built by government-ordered joint ventures, now are leveraging their accrued knowledge into a global push that threatens to upend the industry’s balance of power.
And that Chinese disruption comes as technology is transforming the way the industry communicates, where it gathers (or increasingly doesn’t, as the incredible shrinking Detroit auto show attests), and how its products will move people. Even though the rich (and still large) American market shows scant interest in EVs, the industry is committing to substantial investments in electrification.
The biggest reason is China. Seems like everywhere this industry turns, it points to China — even if that’s not where most of its profits are booked. General Motors Co. and its two upscale brands, Cadillac and Buick, each sell more cars there than they do in the United States. Ford Motor Co.’s Lincoln is betting a chunk of its revival on China. Tesla Inc. is angling to build a plant in China to evade import tariffs.
Global players like GM are focusing much of their electric vehicle development there. The Detroit automaker used this week’s Beijing show to unveil two electrified Buick Velite 6 models and the Buick Enspire EV, a concept SUV that GM says will run 375 miles on a single charge. And it said “a substantial share” of the 20 EVs it expects to unveil by 2023 will be sold in China.
That’s because Chinese regulators, emboldened by their country’s official “Made in China 2025” strategy unveiled in 2015, are using their power to move the world’s No. 1 vehicle market to zero-emission electrics from internal combustion engines for three reasons.
First, to reduce pollution, especially in large, crowded urban centers. Second, as a geo-strategic move away from imported fossil fuels and toward energy independence. And, third, to create a new kind of vehicle market in which indigenous Chinese companies — private and state-owned — theoretically could compete successfully against the Americans, Germans, Japanese and the South Koreans.
One way to achieve that? Buy your way in, as Geely is doing with Volvo and Daimler. Another? Use government power to shape the market to benefit technologies and partnerships partly or wholly owned by Chinese players — especially now that at least some of those players are mature and better able to deliver quality products.
Amid this Great Power game sit Detroit’s automakers and global industry rivals. They’re balancing the desires of paying customers in the United States, Europe and Asia, the government-driven influence of China and the speed of next-generation autonomy and electrification with investor expectations for growth and profit.
No matter what the financials of GM, Ford and Fiat Chrysler Automobiles NV show this week, those demanding conditions won’t change anytime soon. They’re the new normal.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.