Chinese automakers must adapt quickly or lose out on the electric vehicle boom.

BEIJING – Chinese automakers, including state-owned auto giant GAC Group, cannot afford to relax amid the country’s electric vehicle boom if they want to survive.

China has seen a surge in adoption of battery-powered and hybrid vehicles, but the onslaught of new models has sparked a price war that has become forced. Tesla also reduce prices. While Chinese automakers are also looking to grow overseas, other countries are increasingly wary of the cars’ impact on the domestic auto industry, demanding investment in local production. It is now survival of the fittest in China’s already competitive EV market.

“The speed of liquidation will only increase,” Feng Xinya, general manager of GAC, told reporters on the sidelines of the Beijing Auto Show in late April. That’s according to CNBC’s translation of his remarks into Chinese.

GAC cut the prices of its cars a week before China’s May 1 holiday, Feng said, noting that a price war contributed to the drop in sales in the first quarter. The automaker’s first-quarter operating revenue fell year over year for the first time since 2020, according to Wind Information.

To stay competitive, GAC partners with technology companies like Huawei while working on its own research and development, Feng said. The automaker is a joint partner of Honda and Toyota in China and owns the Aion electric vehicle brand.

“In the short term, if your product is not of good quality, consumers will not buy it,” Feng said. “You need to use the best technology and the best products to meet consumer needs. In the long term, you have to have a core competitive advantage.”

Like other automakers in China, GAC is also targeting overseas markets. Domestic sales of new energy vehicles, including battery-powered and hybrid-powered vehicles, slowed in March from December, according to the China Passenger Car Association.

GAC updated its overseas strategy last year, with the ultimate goal of selling 1 million electric, hybrid and fuel-electric vehicles overseas, Wei Haigang, general manager of GAC’s international vehicle sales and service business, told CNBC last week.

The company still has a long way to go. It exported only about 50,000 vehicles last year, Wei said. But he said the goal is to double that to at least 100,000 vehicles this year and reach 500,000 units by 2030 – with sales targets and strategies for different regions of the world, starting with the Middle East and Mexico.

“We are now doing everything we can to speed up our overseas expansion,” he said in Chinese, translated by CNBC.

Overseas car sales in China rose sharply last year, putting the country on par with Japan as the world’s largest car exporter. The EU and US last year announced investigations into Chinese-made electric vehicles amid efforts to encourage consumers to switch away from fuel-powered vehicles.

Part of GAC’s international strategy is to localize production, Wei said, noting that the company is pursuing various approaches such as joint ventures and technology partnerships. He said GAC opened a plant in Malaysia in April and plans to open another in Thailand in June, and is also considering opening plants in Egypt, Brazil and Turkey.

GAC plans to open eight subsidiaries this year, including in Amsterdam, Wei said. But the U.S. is not part of the company’s short-term plans to expand overseas, he said.

U.S. and European officials in recent months have stressed the need to address China’s “overcapacity” problem, which can be loosely defined as state-backed production of goods in excess of demand. China has dismissed such concerns, and its Commerce Ministry has said that from a global perspective, new energy faces capacity shortages.

“There has always been excess capacity in the Chinese auto industry,” said Stephen Dyer, co-leader of Greater China at consulting firm AlixPartners and an Asia leader in automotive and industrial practice.

“The difference today is that excess capacity is now combined with very competitive cars,” he told CNBC on the sidelines of the auto show. “So in our EV survey, I was surprised to find that about 73% of U.S. consumers can recognize at least one Chinese EV brand. And Europe was not far behind.”

Dyer expects this will boost demand for Chinese electric vehicles overseas. The AlixPartners survey showed that BID had the highest brand awareness in the US and major European countries, followed by Nio And Motor Jump.

BYD exported 242,000 vehicles last year and is also building factories overseas. The company’s sales are roughly split between hybrid and battery-powered vehicles. BYD no longer sells traditional fuel-powered passenger cars.

Beyond prices, this year’s Beijing auto show showcased how companies – Chinese and foreign – are competing on technologies such as driver-assistance software.

Chinese consumers place nearly twice as much importance on technical features as U.S. consumers, Dyer said, citing an AlixPartners survey.

He noted that Chinese startups are so aggressive that a car can be sold with new technology even if there are still problems with the software. “They know they can use over-the-air updates to quickly fix bugs or add features as needed,” Dyer said.

Interest in technology does not mean consumers prefer battery-powered vehicles. Dyer said that in the short term, consumers remain concerned about range – meaning hybrids are not only in demand, but are often used without charging the battery.

Even Volkswagen enters the race of “smart technologies”. The German auto giant unveiled at the auto show its joint venture with Shanghai state-owned SAIC Motor and the automotive division of Chinese drone company DJI to create a driver assistance system for the recently launched Tiguan L Pro.

The initial version of the SUV runs on fuel, for which the company’s slogan is: “Oil or electricity, both are smart,” according to a translation by Chinese channel CNBC.

Battery Manufacturer CATL The company had a more prominent exhibition stand this year, likely hoping to entice consumers to buy cars with its batteries as competitors’ market share grows, said Zhong Shi, an analyst at the China Automobile Dealers Association.

Automotive chip companies Black Sesame and Horizon Robotics also had booths in the main exhibition hall.

Lotus Technology, a British high-end car brand, acquired Gilifound in a survey of its customers that their top requests were automatic parking and battery charging that would allow drivers to remain in the car.

This was stated by Chief Financial Officer Alexius Kuen Long Li, who spoke to CNBC on the sidelines of the Beijing Auto Show. He noted that the company now has robotic battery chargers in Shanghai.

Lotus and Nio also announced last week Strategic partnership for replacing and charging the battery.

“I think there’s a passing of the torch, where Chinese brands are getting much bigger and stronger, and foreign brands are still trying to decide which energy route is the best,” said Li, who has been in China since 1998. Are they still deciding on PHEVs, are they still thinking about BEVs, are they still thinking about combustion engine cars? The whole decision making process becomes so complicated, with so much internal resistance, that I think they just don’t do it? productive”.

But he believes Lotus has found the right strategy by expanding its product line and going straight into battery-powered cars. “Lotus’s position today,” he said, “is similar to that of the international brands. [was] in China, probably as early as 2000.”