Luxury electric cars take center stage at the China Condensed Auto Show
The overall coronavirus pandemic has hit the wealthiest segments of the Chinese population the least, while altering some consumer habits that are driving demand for luxury car brands like Porsche.
Electric vehicles in the high-end segment are in particular demand, say several executives.
However, Thomas Ingenlath, chief executive of premium electric vehicle brand Polestar, says that even with growth in China, he expects the market to still account for less than half of global sales.
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BEIJING - Electric and luxury vehicles emerged as bright spots at this year's Beijing Auto Show, which kicked off this weekend after the coronavirus pandemic with about 200 fewer vehicles than before.
China is the world's largest car market, but car sales have plummeted in the past three years amid slowing growth domestically. The economic impact of Covid-19 earlier this year further affected the auto industry, which in 2018 accounted for about 10% of China's retail sales and a sixth of jobs, according to official figures.
Now, in a sign of some recovery, domestic and international automakers are reporting increased demand, at least in the high-end or electric vehicle segment.
Despite a 60% year-on-year drop in sales in February, German luxury brand Porsche predicts that its sales in mainland China and Hong Kong this year may at least match those of 2019, or even set a record, the CEO said. from China, Jens Puttfarcken, to CNBC. . Porsche said that sales in China increased 8% in 2019 to a record of more than 86,000 vehicles.
Covid-19 has affected consumer psychology, increasing the popularity of private transportation while leading many Chinese to splurge, Puttfarcken said. He added that consumers are now spending more on luxury cars than travel.
Expect demand to remain strong for at least the first half of next year. Orders in the country already hit a monthly record in June of nearly 10,000 and have since hovered above 9,000, Porsche said. China is the brand's largest market, accounting for 34% of global sales in the first half of the year.
Rapidly growing electric vehicle market
Like many international automakers at the Beijing Auto Show, Porsche is also entering the Chinese electric vehicle market.
The company's offerings in China in the segment have so far remained in the high price range of more than 1.1 million yuan, or about $ 160,000. By the end of the year, Porsche plans to offer a basic version of its Taycan electric sports car for 888,000 yuan. That is closer to the price range of Tesla vehicles in China.
"The electricity market in general, like the entire automotive market, is a highly competitive market," Puttfarcken said, "especially here in China, where we see here many brands that are unknown to the rest of the world, that are being built very interesting products. and very sophisticated technologies. "
When the coronavirus outbreak stalled, the Chinese government quickly announced its support for electric vehicles, which are strategically key to domestic innovation.
"This market is going to grow fast because in the end, the penetration of electric vehicles in China is going to increase, (and) the high-end segment will be the first to be penetrated," said Jing Yang, director of corporate research at Fitch Ratings. He pointed out that the cost of the battery needs to be lowered even further before electric vehicles can truly become a mass market product.
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New York-listed Chinese startup Nio says its battery rental scheme, which launched in August, already makes operating its electric vehicles cheaper than one comparable to gasoline.
Nio founder and chairman William Li told CNBC in an interview on Saturday that a very high proportion of users in China's largest cities have chosen to buy the battery service plan.
"In general, the demand (for our vehicles) is very strong", Li said, according to a CNBC translation of his comments in Mandarin. He said the entry of more automakers into electric vehicles would help consumers gain confidence in the shift from gasoline cars.
More moderate market outside of luxury
While the rebound in the high-end market is a positive sign for the industry, luxury car sales of the tens of thousands still account for only a fraction of the overall Chinese car market.
The Beijing Auto Show was delayed by about five months due to Covid-19, which first emerged late last year in the Chinese city of Wuhan. The outbreak stalled nationwide in April, but accelerated around the world. As a result, the New York Auto Show was postponed for the first time since World War II and subsequently canceled during the year.
a car on display: Porsche is working with outside operators for more than 200,000 charging points in China. © Provided by CNBC Porsche is working with third-party operators for more than 200,000 charging points in China.
Last weekend in Beijing, Wen Shuang, a Chinese social media influencer in the auto industry since 2012, said in an interview that the delayed auto show didn't have as many cars as she expected.
In contrast to the official tally of nearly 1,500 vehicles on display at last year's Shanghai Auto Show, the Beijing show featured 785 vehicles, with 82 global debuts, up from 129 in 2019. Just under 100 car brands participated. , up from around 125 at the end. Shanghai Auto Show of the Year, according to CNBC calculations.
Several of China's electric vehicle startups did not participate in the Beijing show, including Aiways and Li Auto, which were listed this summer on Nasdaq.
Digital Tool Test
The global pandemic also forced many automakers, including high-end brands, to use more digital platforms to reach consumers.
In China, brands such as Volkswagen have joined the Kuaishou live streaming and short video app. Platform users tend to be younger and live in less developed parts of China.
These consumers are still willing to spend money on cars, partly thanks to supportive policies, and there is significantly greater interest from the auto industry in the app, said Liu Limeng, director of content ecosystem at Kuaishou's auto unit. , according to a CNBC translation of his comments in Mandarin. He was speaking on the sidelines of the Kuaishou booth to broadcast interviews with executives at the Beijing Auto Show.
Feng Xingya, CEO and CEO of the state-owned carmaker Guangzhou Automobile Group (GAC), remained cautious about the industry outlook. In comments to reporters at the auto show, he said that the company's production and sales from January to August remain lower than a year ago, despite double-digit growth last month.
Overall, Feng said the automaker aims to achieve 3% growth this year.
Limits to growth
Despite all the opportunities China presents, it will hold closer to a third, rather than half, of global sales for the Chinese-Swedish premium electric vehicle brand Polestar, its chief executive, Thomas, told CNBC on Saturday. Ingenlath. He said his expectations for the growth of the Chinese auto market have become more "realistic."
Polestar was founded by Sweden-based Volvo Cars and Chinese automaker Geely. This summer, the startup said it began deliveries of its first fully electric vehicle, the Polestar 2, to customers in Europe and China, with deliveries in the UK and North America to follow.
"I don't think that the premium segment of the electric vehicle market in China is now much more advanced than in certain regions of Europe or America," said Ingenlath, who was Volvo's senior vice president of design. "There I see that the world is moving at the same speed."
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