“Tesla is definitely the pioneer of this field, but we are becoming stronger and stronger,” said Nio executive Izzy Zhu, sitting among customers in the dealership’s second-floor cafe.
For all the success China has had conquering other industries, it never really mastered the art of manufacturing cars with internal-combustion engines. Foreign brands have dominated since the 1990s, when General Motors, Ford, Volkswagen and others began ramping up sales, turning China into the world’s largest auto buyer.
But the electric-vehicle era means, in Zhu’s estimation, that “the chance has come again." China’s government and companies are investing vast resources to pursue it — setting the stage for another U.S.-China economic rivalry even after the signing of a trade truce.
The Chinese government has spent at least $60 billion to support the fledgling electric-car industry, including research-and-development funding, tax exemptions and financing for battery-charging stations, according to the Center for Strategic and International Studies, a Washington think tank. That’s encouraged a whopping 400-plus Chinese companies to get into the electric-car business, CSIS said.
Few of those companies have cars on the market, however, and many will fizzle, analysts say. Even those selling vehicles are encountering problems that leave the future of China’s experiment uncertain.
After several years of booming electric-car sales, driven by generous government subsidies for buyers, the government last year started cutting those funds, causing sales to fall.
Unreliable batteries and other quality problems have also dampened consumer enthusiasm. Nio last year recalled 4,800 car batteries after reports of several fires, worsening the unprofitable company’s already precarious finances. The startup lost $1.2 billion in the first nine months of 2019 and recently warned it could run out of cash this year unless it raises new funding.
But some Western analysts still worry that China’s investment could ultimately threaten foreign auto company sales in China and beyond.
One particular concern: that an oversupply of battery-powered vehicles in China could prompt the country to export at cut-rate prices. American officials and companies have long complained that China’s hefty government subsidy of industry leads to excess production of goods such as steel and solar panels, which spill into global markets and make it hard for U.S. companies to compete.
“A rush of Chinese exports could create challenges not only for individual competitors abroad but also put pressure on the entire auto industries of other countries,” Scott Kennedy, a China expert at CSIS, wrote in a report on China’s electric ambitions.
or now foreign car companies continue to see gold in China and are boosting local production of their own electric vehicles. Chief executive Elon Musk traveled to Shanghai this month to christen Tesla’s new factory, breaking out his dance moves before a raucous audience. The plant delivered its first Model 3 sedans to buyers during his visit and has the capacity to produce 250,000 cars a year.
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