Shakeup Looms for China’s Electric-Vehicle Makers

China’s breakneck push to lead the world in electric-vehicle adoption may cause collateral damage among the legion of domestic carmakers deemed superfluous to that mission.

A flurry of manufacturing and technology alliances plus an investment in Daimler AG by auto magnate Li Shufu valued at 7.3 billion euros ($9 billion) point to the urgency among Chinese carmakers to bulk up their new-energy vehicle businesses before the rules of the road change.

President Xi Jinping’s administration is implementing NEV production quotas, targeting a seven-fold increase in NEV sales and considering a ban on gas guzzlers as China tries to clear the air in polluted cities and cut its reliance on imported oil. Carmakers that can’t keep pace may not be around for long, and that applies to the biggest state-owned companies as well as smaller, regional manufacturers.

“Ultimately, if you cannot compete in NEVs, you will have difficulty surviving,” said Janet Lewis, a Tokyo-based analyst at Macquarie Group Ltd. “SOEs are likely to be under pressure to acquire weaker players.”

A December partnership between state-owned carmakers China FAW Group Corp., Dongfeng Motor Corp. and Chongqing Changan Automobile Co. may be the start of consolidation, according to JSC Automotive Consulting. The trio signed a pact to cooperate on technology development, seeking new business models and outbound investments.

Add that trio to SAIC Motor Corp., China’s largest by sales; Guangzhou Automobile Group Co.; and BAIC Group, and the government has enough carmakers to meet its goals, according to Jochen Siebert, Singapore-based managing director of JSC Automotive Consulting.

That means a separate quartet of domestic rivals — collectively worth more than $17 billion — has no independent future and likely will be folded into other government-owned companies, Siebert said. The companies at risk include China’s biggest passenger-car exporter, Chery Automobile Co.; Hong Kong-listed Brilliance China Automotive Holdings Ltd.; Anhui Jianghuai Automobile Group Corp.; and Jiangling Motors Corp.

“They will be merged with big SOEs at some point,” Siebert said. “From the central government point of view, there is no need for any other SOE automakers.

Courtesy : Bloomberg

Photo : Autonetmagz

[social_warfare buttons=”Facebook,Pinterest,LinkedIn,Twitter,Total”]