BYD and FAW Group are aiming to invest in DJI’s automotive business unit – one of the few Chinese companies capable of developing partially automated driving software – as part of the latest effort by traditional automakers to catch up with rivals such as Tesla, local media has reported. 

Why it matters: The news comes at a time when a growing number of automakers and suppliers are expanding their alliances in hopes of accelerating progress in and sharing the cost of making partially automated driving passenger cars. In China, the technology is being popularized by the likes of Tesla, Huawei, and Xpeng Motors. 

• It is also the latest example of Chinese auto majors taking steps to turn their business partnerships with tech companies into deeper capital relationships. Changan Automobile recently announced it will invest in a new venture set to absorb Huawei’s car business unit. 

Details: BYD and FAW, a manufacturing partner of Volkswagen and Toyota in China, recently conveyed their message to DJI Automotive, the car business unit of the namesake drone maker, 36Kr first reported on Wednesday (in Chinese). Citing people with knowledge of the matter, the report did not put a figure on the planned investment.

• BYD is planning to roll out partially automated driving functions for future affordable models priced at RMB 200,000 ($27,920) or below in 2025 with assistance from DJI, a person close to the company told TechNode on Thursday. 
• DJI is appealing to original equipment manufacturers (OEMs) for its low-cost advanced driver assistance system, as they have been struggling to lower costs and repeatedly cut prices of their cars, another source with direct knowledge of the matter told TechNode. 
• DJI, China’s biggest drone maker, stated that its technology suite, including an affordable computing chip from Texas Instruments (TI) with only a few cameras, could enable cars with automatic lane changing and on-ramp to off-ramp functionalities on Chinese expressways. 
• Some EV makers, including NIO and Li Auto, have developed similar functions based on Nvidia’s more expensive DRIVE Orin processors, with each offering 254 trillion operations per second (or TOPS), compared with the 32 TOPS offered by a top-end TDA4 chip from TI. 
• “While BYD is not the forerunner in autonomous driving, it has the ability to be a fast follower which will likely meet the needs for the majority of Chinese consumers,” Bernstein analysts wrote in a Jan. 22 note, citing economies of scale, which allows it to collect more data for software training from its large fleet, as one of the reasons.
• BYD and DJI did not respond to TechNode’s requests for comment. 

Context: Shenzhen-headquartered DJI separated its car business into an independent company in late 2022 and became open to external funding with a target valuation of $1.5 billion, Chinese media outlet Leiphone reported in August. 

• The drone giant has worked with SAIC-GM-Wuling (SGMW), a General Motors China joint venture, since 2019, with the first model integrated with its automated driving technology, the Baojun Kiwi EV, going on sale with a price tag of RMB 102,800 in September 2022. 
• BYD showcased a Yangwang luxury off-roader that integrates an unmanned aircraft on the car’s roof in a collaboration with DJI during a press event on Jan. 16. It also announced plans to release at least 10 new models this year featuring advanced driving technology.

READ MORE:  BYD’s Denza launches cheaper driver assistance system with Nvidia amid rising competition

Just as German majors once did in the gasoline-powered vehicle segment, Chinese carmakers are beginning to jointly build a reputation for luxury in the electric vehicle segment in their home country, according to Paul Gong, head of China autos research at UBS.

Why it matters: The comments point to a dramatic shake-up in the world’s biggest auto market as once-dominant foreign car brands lose ground while Chinese counterparts such as BYD and Li Auto have risen over the past year, often in step with each other. 

• Notably, Chinese status-conscious buyers are coveting local luxury-styled cars which have enjoyed a medium-to-high single-digit increase in average selling prices each year over the last decade, Gong told reporters in Shanghai on Tuesday. 

Details: China’s new cohort of EV makers have tended to sell pricier than average cars packed with high-tech features, inspiring their more established counterparts to improve their offerings and resulting in a positive net effect on all of the companies’ profiles, Gong said, pointing to “synergies” similar to those of the German majors in the fossil-fuel car era. 

• The “glass ceiling” of China-made car prices is being shattered, according to the Swiss bank, as Chinese EV models have gained popularity, especially models in the price range between RMB 200,000 and RMB 300,000 ($27,880-$41,820).
• However, it remains challenging for them to go further upscale into the super-premium segment where a car could be priced at RMB 1 million ($140,000), Gong added, citing a lack of confidence in luxury Chinese brands among older Chinese consumers.
• UBS projected that Chinese automakers will account for close to two-thirds of China’s passenger car sales in 2024, up from 56% a year ago, while absorbing 41% of the overall profit pool, compared with 17% in 2022, boosted by higher selling prices. 
• Gong envisioned China could be big enough to allow 10-12 domestic carmakers to sell significant volumes with different success stories by 2030 in the best-case scenario, rather than just three to five as some had previously expected.
• Tesla, Volkswagen, General Motors, and BMW were the only international car makers last month to record sales of more than 10,000 new energy vehicles, mainly all-electrics and plug-in hybrids, according to figures from the China Passenger Car Association on Tuesday.

Context: Having struggled to cope with the ferocious competition of repeated price cuts, Chinese car brands such as the established BYD and new entrant Xiaomi have sometimes turned to collaborations to generate buzz and support on social media. 

• BYD showcased a dozen Chinese-branded EV models, including those of rival Li Auto, in a show of solidarity at its headquarters in Shenzhen last August, TechNode reported. Meanwhile, a video clip posted by BYD has racked up nearly 24 million views on Twitter-like platform Weibo, which looked back at the developments of major domestic carmakers. 
• Xiaomi launched an advertising campaign on several digital outdoor billboards in China’s four top-tier cities to show its respect to competitors including BYD, Huawei, and Xpeng Motors, before the pre-launch event of its first EV model last month. In a post on his Weibo account, chief executive Lei Jun called his rivals “pioneers of China’s new energy vehicle industry.”

Geely on Jan. 5 launched the first battery electric sedan under its mainstream luxury marque Galaxy, which the Chinese automaker hopes will take the crown from the likes of the BYD Han to become China’s best-selling model in the mainstream sedan segment. 

“We are aiming to see the Galaxy E8 take pole position as a top-seller against the backdrop of increasing competition in the Chinese mainstream car segment,” Jerry Gan, chief executive of Geely Automobile Group, said in an interview after the launch event (our translation). The company did not provide specific sales targets, citing fluctuations in the market. 

Volvo’s parent is looking to carve out a significant piece of China’s increasingly crowded medium-to high-end car segment. Approximately 65% of the new EV models debuted at November’s Guangzhou Auto show were priced between RMB 200,000 and RMB 300,000, including the Galaxy E8, its sibling Zeekr 007, and BYD’s Sea Lion, Jefferies analysts wrote in a research note dated Nov. 28. 

BYD’s Han was 2023’s most popular electric sedan in the price segment with sales of more than 200,000 units. Geely posted sales of 83,497 vehicles under its Galaxy marque as of December, after deliveries began last June. It began deliveries of the E8 on Jan. 5 and has two other plug-in hybrid models for sale in the lineup, the L7 crossover and the L6 sedan, priced from RMB 138,700 and RMB 115,800, respectively. 

Below are five key factors that Geely hopes will carry the Galaxy E8 sedan to success:

Pricing: The Galaxy E8, a five-meter-long flagship sedan, starts at RMB 175,800 ($24,612), which is RMB 34,000 below the base price of the BYD Han EV, and RMB 6,000 lower than the smaller, hybrid Toyota Camry. Its all-wheel drive version is priced at RMB 228,800 and additionally features an 800-volt system for fast charging and acceleration from 0 to 100 km/h (62 mph) in 3.49 seconds. 

Smart cabin: Like its homegrown rivals, Geely has packed the luxury-styled but affordably priced sedan with technologies such as Qualcomm’s latest five-nanometer cockpit processor 8295, as well as a massive 45-inch wide 8K dashboard screen made by Chinese display manufacturer BOE. This makes the E8 probably the cheapest model that enables users to play hit gaming titles such as Asphalt in-car. By comparison, the 2025 Toyota Camry hybrid, which started pre-sales at RMB 181,800 in China on Jan. 1, is powered by Qualcomm’s previous 8155P processor. 

Performance: The single-motor E8 has a power output of 200 kW and is equipped with a 62-kilowatt-hour battery pack, offering a driving range of 550 kilometers (342 miles), while the entry-level BYD Han is fitted with a 60.5 kWh battery and a 150 kW motor. The top-end version of the E8 boasts 800-volt fast charging that potentially adds 180 km on a five-minute charge; for comparison, all the variants of the more premium Zeekr 007 offer an additional 610 km from a 15-minute fast charging session. 

Exterior: The capacious midsize sedan comes with a “ripples of light” design element, featuring an aesthetic front end with a 1.1 square foot illuminated graphics area comprising 158 micro-lights that can be programmed to display “over 100 different light shows,” according to Geely. It also has an aerodynamic design with frameless doors and concealed door handles, on  a 2,925-millimeter-long wheelbase, making it slightly larger than the BYD Han.

Satellite assistance: The E8 is one of the incoming models that could provide satellite call services in areas with no cellular or WiFi signal. Geely said it will launch a further 11 telecommunication satellites into low orbit in February, following the successful launch of its first nine satellites more than a year ago, geared towards offering high-precision navigation for its self-driving cars, reported Reuters.

Top Chinese automakers BYD and Geely on Monday reported record sales of electric vehicles in 2023 on the back of year-end momentum from their home turf and strong shipments to overseas markets, as China’s booming industry ramped up its push for global expansion.

Why it matters: The latest sales figures come at a time when China is set to surpass Japan to become the world’s largest car exporter, according to estimates by the China Association of Automobile Manufacturers (CAAM)  as reported by Nikkei, buoyed by a growing demand for green energy vehicles worldwide.

• Exports of new energy vehicles, mainly all-electrics and plug-in hybrids, grew 83.5% year-on-year to almost 1.1 million from January to November, while internal combustion engine vehicles remain the major export commodity, accounting for 75% of China’s total car shipments abroad, according to CAAM.

Details: BYD posted record sales at more than 3.02 million EVs in 2023, marking 62% growth from a year ago and putting the Chinese carmaker in pole position to retain its title of the biggest-selling EV brand in the country. In particular, exports surged 334% to 242,765 units compared with the previous year, with the company now having established its footprint in more than 70 countries.

• Sales of SAIC-GM-Wuling, General Motors’ minicar joint venture in China, also reached a record high of 1.4 million units, of which 211,512 were overseas exports, representing a 9% year-on-year growth. The automaker currently sells its budget models including Mini EVs in Southeast Asian countries such as Thailand, Vietnam, and Indonesia. 
• Geely said its EV sales rose 48% year-on-year and were also record-breaking last year, at 487,461 units, including 274,101 gas-powered and green energy vehicles abroad. Its premium EV brand Zeekr delivered 118,685 units over the year, up 65% year-on-year but missing its delivery goal of 140,000 units set earlier this year. 
• GAC’s EV unit Aion was also around 20,000 units short of its annual delivery target of 500,000 EVs, closely followed by Changan Automobile at more than 470,000 units. Huawei’s manufacturing partner said overseas shipments grew 35.4% to roughly 230,000 units, as construction of its overseas production base started in Thailand last month. 
• Li Auto maintained its solid momentum throughout the year as it reported deliveries of 50,353 plug-in hybrid crossovers in December, bringing the company’s total deliveries for the year to 376,030. Young EV makers such as NIO and Xpeng Motors are catching up with annual deliveries of 160,038 and 141,601, respectively. 
• SAIC-Volkswagen, the joint venture of the Wolfsburg-based automaker and China’s state-owned automaker, said it became the most visible player among its peers with sales of almost 110,000 units of its China-made ID family electric models. The German automaker in July reportedly cut the price of its ID.3 hatchback by more than 20% to RMB 125,900 ($17,500).

Context: CAAM expected car sales in China to reach the threshold of 30 million units for the first time in 2023 and that number will be further increased to 31 million in 2024, Caixin reported. NEV sales are set to total 9.4 million units in 2023, up 37% from a year earlier. The growth rate could slow to 22% in 2024, however, as the domestic EV market is maturing.

Xiaomi held its most significant media event of the year in Beijing on Thursday: the debut of its first electric car. With a size comparable to the BMW 5 Series and a shape similar to the Porsche Taycan, the four-door sedan boasts some of the Chinese car market’s highest specifications, as cut-throat competition from maturing rivals rises.

The sleek, gadget-full all-electric sedan is aiming to become a top choice for China’s increasingly tech-savvy consumers, and certainly aroused widespread curiosity judging by the more than 46 million people who logged on for the three-hour-long unveiling on the country’s Twitter-like site Weibo. Yet from journalists and insiders alike, the reaction was mixed. 

From the event, TechNode has selected some of the car’s highlights. 

Main specs

The high-performance SU7 can sprint from 0 to 100 km/h (62 mph) in 2.78 seconds, as it climbs to a top speed of 265 km/h. It is claimed to be the world’s most aerodynamic production car with a drag coefficient (Cd) of 0.195. By comparison, the Taycan Turo can hit 260 km/h and Tesla’s Model S has a Cd of 0.208. It also comes just a month after rival Huawei launched the Luxeed S7 sedan at 0.203Cd. 

Xiaomi said it uses two 9,100-ton mega casting press machines to produce the front and rear underbody pieces, giving the car a torsional stiffness of 51,000 Nm/degree, nearly twice the number of the Ford F-150 Raptor and higher than any other car on the road. The technology, first adopted by Tesla, has since been embraced by Chinese EV makers from Geely-affiliated Zeekr to Huawei-backed Aito.

Vehicle autonomy

Xiaomi’s chief executive Lei Jun presented aspects of the company’s self-driving initiative for public viewing, highlighting that the premium version of the SU7 will incorporate two Nvidia Drive Orin processing chips plus a laser sensor unit on the car’s roof to carry out certain partially autonomous driving functions. Xiaomi also showed a short video of the car drawing into a tight garage space autonomously.

The Chinese tech company has set a goal for its advanced driver assistance software to be available to drivers in 100 major Chinese cities by the end of the next year, according to Lei. Huawei and Xpeng Motors are for now the leaders of this booming market, with established carmakers from BYD to Great Wall Motor trying to catch up.

Smart cabin

The SU7 will be the latest Chinese car model powered by Qualcomm’s smart cockpit computing platform SA8295, after the Zeekr 001 FR and its sibling Jiyue 01, and its infotainment system will turn on in just 1.5 seconds. It is also integrated seamlessly into the Xiaomi ecosystem with the adoption of the company’s self-developed operating system, the HyperOS, which takes only 30 minutes or so to carry out important updates, according to the company. 

CEO Lei said the SU7 would create the same smooth experience that anybody with a Mi Phone is used to, as various apps are pushed from their phones to a 16.1-inch in-car dashboard once they sit in the car. Other devices, from tablets to home appliances, also seamlessly work with the vehicle, an integration trend led by auto and tech majors such as Huawei, Geely, and NIO.

Conclusion

Xiaomi will have to pick an appropriate price tag, given it starts with a somewhat broad, unclear positioning, said You Xi, a seasoned economic and financial writer and co-founder of Chinese online media platform Communication Planet. “It remains challenging for the company to extend its brand into EVs,” You added, citing similar offerings from multiple competitors among his reasons (our translation).

The smartphone giant plans to introduce two variants of the SU7 to “contemporary elites with taste in lifestyle and technology” in China over the next few months, said Lei. Some experts have predicted the premium version of the car, with an estimated driving range of 800 kilometers (497 miles), could cost consumers at least RMB 300,000 ($41,124).

Chinese EV maker NIO on Dec. 23 unveiled a long-wheelbase executive sedan model, the ET9,  with a price range of $112,160. The model boasts its own self-driving chip, marking the first utilization of the five nanometer process technology in China’s auto industry. 

The four-door executive flagship, equipped with proprietary technologies such as a sophisticated yet lightweight chassis system and a superfast-charging battery pack, reflects NIO’s commitment to redefining the upper premium vehicle market, William Li, the company’s founder, chairman, and chief executive, told press at the annual NIO Day event on Dec. 23. Li further referred to the target segment as ”a spiritual home base“ for international luxury carmakers (our translation). 

With a pre-sale starting price of roughly RMB 800,000 ($112,160), NIO’s answer to the Porsche Panamera could serve as a low-volume halo car and is scheduled for delivery in the first quarter of 2025. Larger rivals from BYD to Geely have also launched similarly-priced offerings, indicating their aspirations to upscale and grab a slice of the luxury market.

Here are some of the key specifications of the ET9 presented by NIO at the company’s annual gathering held in the northwestern Chinese city of Xi’an. 

Design highlights: Different from old-money cars that Western brands typically offer, the NIO ET9 features a sleek and contemporary look with high ground clearance, large 23-inch wheels, and cutting-edge gadgets such as laser sensors on the roof and sides for an all-round view of the car’s surroundings. 

• The interior boasts a modern design language. The car features an almost two-meter (six-feet) console that extends through the length of the cabin and is integrated with equipment such as a 10L fridge and folding tables, offering passengers first-class-style seats and comfort.
• The grand tourer measures 5.3 meters in length and 1.6 meters in height with a wheelbase of nearly 3.3 meters, making it longer than the Bentley Flying Spur and almost as tall as a regular off-roader. The back seats can be reclined as much as 45° and come with full-body massage programs. 

Autonomous driving: The ET9 will be powered by NIO’s first self-developed system on chip (SoC), the Shenji NX9031, for partially automated driving. NIO stated it will be the first Chinese automaker to use chips with five-nanometer process technology, providing its vehicles a computing power comparable to the combined total of that created by four industry-leading processors. 

• By comparison, NIO’s existing lineups are equipped with four Nvidia DRIVE Orin chips that handle up to 1,016 TOPS on seven nanometers. The purpose-built chip is a strategic move as it could improve processing efficiency and machine learning algorithm coupling for autonomous driving, Jefferies analysts said on Monday. 
• Li declined to provide further details about the semiconductor. Tesla has reportedly turned to Taiwan’s TSMC to produce its next-generation full self-driving (FSD) computer on 4/5 nm processes. Homegrown rivals Li Auto and Xpeng Motors are also developing their own chips for vehicle intelligence. 

Large cylindrical battery: The ET9 will incorporate NIO’s in-house developed, 46105-type cylindrical lithium-ion battery cells. This implies a size of 46 millimeters in diameter and 105 mm in length with a cylindrical shape, a technology also embraced by Tesla in the hopes of increasing ranges and lowering costs. 

• NIO asserts that its new batteries have a cell-level energy density of 292 watt-hours per kilogram (Wh/kg), and a 120 kWh pack can provide a range of 255 kilometers (159 miles) after five minutes of charging at a 5C rate, facilitated by a 900-volt electrical system. By comparison, CATL’s latest Qilin battery would allow Li Auto’s Mega van to cover 500 km on a 12-minute charge at a 5C rate. 
• NIO did not reveal many further details, except for Li’s comments to investors during a Dec. 5 earnings call stating plans to outsource battery manufacturing for reduced investment and improved margins. The EV maker is reportedly in talks with Great Wall Motor-backed Svolt to set up a joint venture for making batteries in its car manufacturing base of Anhui. 

Smart chassis: NIO also launched an intelligent chassis suspension system which the company claimed would provide a refined driving experience featuring a steer-by-wire system, rear-wheel steering, and adjustable suspension altogether for the first time in a mass-produced consumer car.

•  NIO said the so-called SkyRide Intelligent Chassis System, in combination with hydraulic components, could be raised or lowered by 50 millimeters in one second to help passengers in and out of the car. In April, BYD introduced a similar offering that could automatically adjust to different road conditions and driving styles.
• In a 50-second video clip presented by NIO on Dec. 23, an ET9 prototype offered an apparently smooth ride when driving over multiple speed bumps and showcased a four-tier tower of Champagne glasses on the front body panel which remained in place despite the road surface. The flagship sedan is also highly maneuverable with a turning radius as low as 5.45 meters, a record also achieved by Xpeng with its upcoming X9 van.

Huawei is doubling down on electric vehicles with plans to run as many as 800 showrooms in China next year dedicated to the joint car brands that it has launched with manufacturing partners, aiming to become a more visible player in the world’s biggest auto market. 

Why it matters: The new shops, expected to present a broader portfolio with larger spaces compared to Huawei’s current policy of showcasing vehicles in its regular appliance stores, will allow Huawei to display models and arrange test drives for more potential buyers. They will also be part of a branding overhaul to enhance Huawei’s brand image as a major car tech company. 

• Huawei began selling EVs powered by its technologies and manufactured by partners via its sales network for smartphones in early 2021 under its “Smart Selection” approach, in which Huawei reportedly provides sales channels and has more control over vehicle development.

Details: In what could be the tech giant’s fastest period of growth in its history, Huawei is planning to operate 800 car showrooms next year and increase that number to 1,000 in 2025, people familiar with the matter told Chinese media outlet 36Kr. 

• Those new shops will feature a new brand called the Harmony Intelligent Mobility Alliance (HIMA), a collaborative initiative for carmakers and a rebranding of Smart Selection based on Huawei’s proprietary Harmony operating system. 
• Some of the smaller locations could start from 2,500 square meters, allowing six cars to be displayed in-store while also doubling as a delivery center with another six for-sale vehicles in parking spaces outside, according to a franchise disclosure document obtained by 36Kr. 
• Huawei’s preferred flagship stores require a wider area of 8,000 square meters or more, and the company is renovating some existing retail shops to showcase the new HIMA brand with improved layouts, according to the report. 
• Some existing locations do not showcase the newly launched Luxeed S7 due to limited space, the report said. Huawei currently has three models on sale in partnership with Chongqing-based manufacturer Seres and state-owned carmaker Chery. 
• Huawei did not respond to TechNode’s request for comment. 

Context: Sources added that a retail and distribution network of 800 shops next year will be comparable to that of Huawei’s major rival Li Auto, which operates nearly 400 direct-sales stores and 320 maintenance centers as of November. 

• Huawei is quickly expanding its EV lineup in collaborations with existing partners, which also include Changan and JAC. It is set to launch the M9, a full-size sports utility vehicle, with Seres at a price range of between RMB 500,000 and RMB 600,000 ($69,972-$83,966) on Dec. 26. 
• Aito, an EV brand set up by Huawei and Seres in December 2021, delivered nearly 19,000 vehicles in November on the back of strong order volume for its redesigned M7 crossover. It operated a network of 1,000 retail locations and service centers in 230 Chinese cities as of June. 
• Meanwhile, long-time rival Xiaomi is on track to launch its first EV model, the SU7, and is reportedly preparing showrooms for car sales with the first batch of display models expected to arrive early next year.

Xiaomi said on Tuesday that it had sacked three employees for “spreading rumors” about plans for its electric vehicle business, as the company also said it was planning legal action over photos of its first car model leaked online by two media outlets. For months, multiple reports have circulated on Chinese social media featuring unauthorized confidential information about the smartphone maker’s EV business.

Why it matters: The news comes as Xiaomi, known for its low-cost pricing advantage in the smartphone market, has captured growing attention from Chinese netizens due to speculation of an imminent launch of its inaugural EV model, potentially heightening competition in the already low-margin sector. 

Details: The three employees were found by the company to have spread inaccurate information without permission during conferences hosted by brokerages and investment firms, severely misleading the markets and disrupting operations at Xiaomi’s EV division, the company said in a post on the Chinese Twitter-like platform Weibo. 

• Xiaomi is taking legal action against the trio, who have been dismissed for breaching the company’s code of conduct. 
• In addition, the smartphone maker is taking legal measures against two Chinese media outlets over allegations that their employees leaked images of its upcoming EV and violated their non-disclosure agreements with Xiaomi. 
• The Beijing-headquartered tech giant said it will continue to take action to ascertain liability for the alleged wrongdoings, including leaks and rumor-spreading. 

Context: A research note recently circulated on the Chinese internet and obtained by financial news agency Jiemian published what it said was “key information” regarding Xiaomi’s first EV, naming some of the suppliers for components such as the head-up display. 

• Xiaomi is also rumored to be set to debut the car at a press conference on Dec. 28, an influencer with the handle “Dianwankeji” wrote earlier this month on social e-commerce app Xiaohongshu. The company later said (in Chinese) that it has not decided yet on the event date.
• On Nov. 15, images of Xiaomi’s first consumer car along with key specifications were posted online for public review, as required by China’s Ministry of Industry and Information Technology, TechNode has reported. 
• More information revealed by China’s industry ministry last week showed that the premium version of the SU7 sedan will have a driving range of 800 kilometers, powered by a 101 kilowatt-hour (kWh) battery pack sourced from CATL. 

Volkswagen’s software unit Cariad and Chinese auto tech startup Horizon Robotics expect to recruit 300 employees by the end of this month for a newly established joint venture called Carizon, in an effort to meet growing local demand for advanced driving technology. 

Why it matters: The hiring spree marks the German auto major’s latest effort to develop its own in-vehicle software following an announcement last year of a $2.3 billion investment deal for a 60% stake in the JV in partnership with Horizon. 

Details: The two companies have not officially provided details of the recruitment plan, but Horizon’s co-founder and technology chief Huang Chang, leading a team of more than 100 engineers, has reportedly joined the JV. 

• Su Jing, a former head of Huawei’s autonomous driving team who has been on board at Horizon since earlier this year, will lead the development of advanced driving systems based on Horizon’s next-generation computing solution Journey 6. 
• Beijing-headquartered Carizon was officially set up on Nov. 20 with a registered capital of RMB 6.8 ($940 million), with VW and Horizon taking 60% and 40% stakes in the entity respectively, according to Chinese corporate data site Tianyancha.
• The JV will focus on rolling out automated driving technology powered by Horizon’s Journey series processors and integrated into VW’s upcoming battery EVs in China, according to an announcement dated Dec. 8. 
• VW and Horizon are on track to deliver their first collaborative development effort as early as 2025, Cariad China’s chief executive Chang Qing told Chinese reporters last month. This will allow VW vehicles to function independently on Chinese highways and certain urban streets, a feature popular with Chinese consumers.

Context: VW has made a series of moves to step up the pace of its software development for the Chinese market, including a $700 million deal for a 5% stake in Chinese EV maker Xpeng Motors unveiled in July.

• The German carmaker is also forming a JV with China’s ThunderSoft to improve its infotainment systems and car cockpits, Reuters reported in April, while partnering with smartphone maker Vivo on a similar effort.
• VW sold roughly 2.3 million cars in China for the first nine months of 2023, recording a year-on-year decline of 3%, of which roughly 117,100 units were EVs, up 3.9% from a year ago. It delivered 341,100 EVs in Europe over the same period, an increase of 60.9% from last year.
• Horizon said in April it has shipped more than 3 million computing solutions for over 120 car models from prominent Chinese automakers ranging from BYD to Geely. Self-driving startups such as Pony.ai and Qcraft are developing assisted driving technology based on its processors.
• US chip powerhouse Nvidia is also ramping up its self-driving car efforts in China with plans to expand its workforce locally after recently hiring Wu Xinzhou, a former vice president at Xpeng Motors, TechNode has reported.
• Speaking to Chinese media outlet LatePost in July, Wu said that foreign companies would need to establish research and development teams of “at least several hundred people” locally to be able to compete with Chinese carmakers and self-driving car companies (our translation).

Tesla is preparing for a major expansion of the Gigafactory Shanghai, its core electric vehicle production facility in China, in a move that looks set to enable the US automaker to bring out its long-rumored budget compact hatchback, local media has reported. 

The company is also said to be readying to supply Chinese clients with its large-scale utility batteries known as Megapacks from next year, having begun searching for a head of local sales. The availability of the Megapack in China will step up the pace of Tesla’s entry into the country’s energy storage market.

Why it matters: The news comes after Tesla CEO Elon Musk had dinner with Chinese president Xi Jinping, alongside other American company executives, on the sidelines of the Asia-Pacific Economic Cooperation Summit in San Francisco on Nov. 15. 

• In a statement published on the Chinese Twitter-like platform Weibo the next day, Tesla said it looked forward to joint developments with China in areas such as green energy vehicles, energy storage, and artificial intelligence, citing Xi’s support for Tesla’s operations in the country. 
• The moves are expected to help Tesla almost double its local production capacity and diversify its revenue sources at a time when the EV giant sees slowing sales due to growing competition from domestic players. 

Details: The so-called phase-three expansion could facilitate the production of Tesla’s upcoming car, dubbed the “Model 2” or “Model Q” with a price tag as low as RMB 150,000 ($21,800), people with knowledge of the matter told LatePost on Wednesday. 

• The expansion was put on ice early this year, according to a Jan. 12 report by Bloomberg, after apparent concerns from the Chinese government over data security issues related to Starlink, the satellite internet unit of SpaceX, Elon Musk’s rocket company. 
• Details of the plan remain unclear, but if it proceeds, Tesla is expected to be able to nearly double its manufacturing capacity in China to 2 million EVs a year. Analysts expect volume production of the lower-priced, next-gen Tesla vehicle no earlier than 2025.
• Meanwhile, Tesla in April announced plans to build a new facility in Shanghai – capable of making 10,000 large-scale, energy-storage battery systems, or 40 gigawatt-hours-worth (GWh) of the Megapack – scheduled to commence operations in the second quarter of 2024. 
• Sources told LatePost that the China-manufactured Megapack batteries will be delivered locally and overseas. 

Context: Tesla sold 771,171 China-made EVs in the first 10 months of the year, up 39% from a year ago, of which 308,816 were overseas exports, according to figures compiled by the China Passenger Car Association (CPCA). The annual growth rate saw a drop compared to 50.3% last year. 

• The US firm said in January that it deployed 6.5 GWh of energy storage in 2022, representing year-on-year growth of 64%. It estimated that the world requires a total capacity of 2,310 GWh per year of electric-chemical battery storage systems such as the Megapack in order to achieve a 100% global clean energy transition, according to estimates from the EV maker’s Master Plan 3.

Major Chinese electric vehicle makers from BYD to Xpeng Motors have collectively posted strong delivery figures in November as they attempt to hit their annual targets and as competition shows no signs of subsiding in the world’s biggest auto market. 

Why it matters: Jefferies analysts wrote in a Dec. 1 note that they estimated sales of China’s new energy vehicles (NEVs), mostly all-electrics and plug-in hybrids, to reach 1 million units in November with a solid month-on-month growth rate of 10% from a high base. 

• However, analysts warned of an intensified price war as 2023 comes to a close, as major EV brands including BYD and Li Auto have either cut prices or increased the royalties for customers since late November to boost year-end sales. 

Details: BYD on Dec. 1 revealed monthly sales figures of its premium Fangchengbao and Yangwang marques for the first time following their launches earlier this year, announcing it handed over 626 and 408 units to customers, respectively. Delivery of the RMB 1 million ($150,000) Yangwang U8 and the Bao 5, with a price range of RMB 289,800 to RMB 352,800, began in late September and November separately. Overall, the EV giant outsold its October figures by 70 units in November. 

• Geely’s NEV sales increased 4.7% month-on-month to 65,034 units last month thanks to a wide product portfolio under a multi-brand strategy. Volvo’s parent said it delivered 13,770 units under the Galaxy marque and 13,104 Zeekr-branded battery EVs, while sales of its Lynk & Co 08 extended-range hybrid EV surpassed the 10,000 mark over the month. The numbers of GAC’s Aion and Great Wall Motor rose 0.15% and 0.23% from a month previously, respectively. 
• Huawei-backed Aito posted its best-ever month by delivering 18,827 units, which is nearly 50% higher than its deliveries in October and surpassed the top end of the guidance provided by Huawei’s head of consumer business group a week ago. The number is expected to exceed 23,000 this month and to hit 30,000 in January, as the EV maker said it has secured more than 100,000 non-refundable orders for the revamped M7 crossover over the last two months or so.
• Growth momentum has been sustained for both Li Auto and Xpeng Motors which once again reported record-setting deliveries of 41,030 and 20,041 vehicles last month respectively. Li Auto’s founder Li Xiang said it is aiming for deliveries of 50,000 EVs this month, while Xpeng on Nov. 15 forecasted the fourth quarter delivery of up to 63,500 units. NIO‘s November delivery of 15,959 vehicles is basically flat from the previous month. 

Context: China’s NEV sales were partly boosted by the opening of the annual Auto Guangzhou show on Nov. 17 with dozens of debuts of all-new cars, as major players try to enhance their presence among a crowded field. 

• More than 5.9 million NEVs were sold during the first ten months of this year, representing a year-on-year growth of 34.2% and accounting for 34.1% of total car sales in China, according to figures from the China Passenger Car Association. 
• Miao Wei, former minister of Industry and Information Technology, expects the NEV penetration rate to exceed 50% of all new car sales as early as 2025. That would be 10 years ahead of Beijing’s schedule. Miao made the comment on Nov. 29 during this year’s China Automotive Industry Forum, reported media outlet The Paper.

More Chinese automakers are planning to adopt NIO’s battery swap technology as two giants join the program – Changan and Geely. NIO on Wednesday said it will partner with Geely to develop a common standard for electric vehicle battery packs and create a sprawling network of swap stations for both consumer cars and commercial fleets, just a week after Changan said it had become NIO’s first ally in a similar effort. 

The move could give a further boost to NIO’s long-term plan to split its money-losing recharging infrastructure unit into a standalone business with financing from outside investors, two people with knowledge of the matter told TechNode on Wednesday. Meanwhile, Geely and NIO will explore the possibility of establishing a shared battery swap network in overseas markets, said one of the people, without elaborating further. 

NIO and Geely declined to comment when contacted by TechNode on Thursday, referring instead to the announcement published by the two companies.

Car industry experts foresee the acceleration of the Chinese EV industry’s migration to a more unified standard for battery specifications and swap techniques originated by NIO. Still, the EV maker and its bigger allies could face a bumpy road despite their eagerness for a unified swapping standard until a number of business and technical hurdles are cleared. 

A common standard? 

It is clear that Chinese authorities are behind the move given that Changan is state-owned and given Geely’s position as the poster child for the Chinese privately-owned car industry, said Lei Xing, former chief editor at China Auto Review. Xing expects no real progress to be made within the next 12-18 months given the challenges in achieving a clear consensus for designing new batteries compatible with their recharging networks. 

A market-wide standardization may also not happen without government intervention. It’s one thing to require a certain plug type, and quite another to force standardization of batteries and chassis configuration, said Daniel J. Kollar, head of automotive and supply chain at business development consultancy Intralink Group. 

“This could have major effects on several design aspects and possibly even lead to certain limits on innovation and supplier choice,” Kollar added.

NIO may also find the need for considerable back and forth with its partners in order to get its swap technology closer to becoming the industry standard. It’s going to be NIO dictating its intellectual property to swapping partners, but Geely and Changan may want to have a say as well, said Tu T. Le, founder of business intelligence firm Sino Auto Insights. 

“There’s a lot that needs to be settled still,” Le added, citing Geely running its own swapping system as one reason. Volvo’s parent began operating its first battery swap station for commercial fleets in the southwestern municipality of Chongqing in late 2020, with plans to run 300 more by the end of this year.

A big relief?

Although it is too early to predict where NIO’s power business may end up, it is possible that a new entity jointly invested in by NIO and multiple other carmakers could be in play – something akin to what Huawei recently announced for its vehicle business unit, according to Xing. “This would ease the financial pressure on NIO and make them de facto outside investors of the startup.” 

The partnership would probably shoulder some of the investment burden for NIO with cash injections, although it may not help them sell cars, Le said. The increase in adoption of swapping will likely result in short-term improvements to their bottom line, but the big question is if it will result in more vehicle sales. 

The Shanghai-headquartered EV maker has built up a nationwide network of more than 2,100 swap stations, each reportedly costing more than RMB 3 million ($420,000) on average. That number is expected to surpass 2,300 by year-end. It delivered 126,067 vehicles for the first ten months of this year, in line with the industry’s average growth rate but lagging behind rivals such as Li Auto. 

“It’s hard to see how this is going to change NIO’s fortunes in the long run to a significant degree without added help from their new partners – either via providing a boost to their marketing reach or supporting the development of mid-market solutions,” said Kollar.

Huawei is spinning off its automotive business unit, enabling Changan Automobile and other manufacturing partners to invest, in a move aimed at turning the loss-making car division into a profitable operation amid fierce competition. 

Why it matters: The reorganization is a rare move for Huawei – a company under 100% ownership of founder Ren Zhengfei and its staff since 2003, according to its official website – as the Chinese telecommunication giant puts a date of 2025 on its target of profitability for its as-yet loss-making auto business. 

• Deemed by Citic Securities analysts as “a milestone” for the Chinese auto industry, the move is expected to help Huawei court new industry allies and gain investment to pursue intelligent vehicle technology. Established automakers such as SAIC have reportedly voiced concern about Huawei’s move into electric cars. 
• The equity structure of the new entity may be comparable to that of the United Automotive Electronic Systems, a joint venture formed by German auto supplier Bosch and several Chinese carmakers including SAIC, FAW, and Dongfeng in 1995. This would allow more automakers to benefit from collaboration, and not just Changan, analysts wrote in a Nov. 26 note. 

Details: The new joint venture will focus on areas already covered by Huawei’s Intelligent Automotive Solution (IAS) business unit, including the development of intelligent driving software, digital cockpit systems, and digital platforms, among others, according to a regulatory filing published by Shenzhen-listed Changan dated on Monday. 

• Huawei will take at least a 60% stake in the new entity but will no longer directly compete against the new company in principle. Changan and its relevant parties will acquire no more than a 40% stake in the JV. The two companies plan to discuss the details of the transaction and sign an agreement within six months, the filing said. 
• The establishment of the new entity will have no impact on the ongoing collaboration between Huawei and Chinese car manufacturer Seres, according to a Nov. 26 statement. Seres, which makes Aito-branded EVs for Huawei, added it has been asked to participate in the investment and is in discussions to jointly develop intelligent electric vehicle architecture.
• The entity will prioritize diversified ownership, said the filing. It is anticipated that various parties will engage deeply in the development of the open vehicle platform, said Richard Yu, CEO of Huawei’s consumer business group and chairman of the IAS BU, who compared the platform to “a train engine.” 

Context: Huawei, state-owned Changan and Chinese battery maker CATL announced a partnership to establish EV brand Avatr back in late 2020. The companies have sold roughly 20,000 units of the Avatr 11 battery electric crossover since delivery began last December, launching their second premium model with a starting price of RMB 300,800 ($41,240) earlier this month. 

• Huawei has also been selling EVs since mid-2021 with lesser-known Seres, formerly the Chongqing Sokon Industrial Group, followed by the launch of the first Aito-branded EV last September. Huawei said in early October that it had secured more than 50,000 non-refundable orders for the redesigned version of the M7, Aito’s second model, less than a month after its launch. That number was updated to more than 100,000 as of Monday.
• The Chinese tech giant is also partnering with domestic manufacturers Chery, BAIC, and JAC, showcasing the first model under the new Luxeed marque jointly set up with Jaguar Land Rover’s manufacturing partner Chery on Nov. 9. The Luxeed S7 sedan will be officially launched on Tuesday and the respective new models co-built with BAIC and JAC are set to hit the market in 2024. 
• Huawei reportedly invested $1 billion in its automotive business in 2021 and has since maintained its push into the Chinese intelligent EV market in an effort to diversify its revenue sources and offset the impact on its core businesses from US trade restrictions. The IAS BU recorded revenue of RMB 1 billion during the first half of this year, accounting for around 0.3% of its total revenue. 

READ MORE: Xpeng and Huawei-backed EV maker set new delivery records as demand grows for self-driving tech

GAC Group and Changan Automobile, two of China’s biggest automakers by sales volume, detailed their respective timelines to manufacture solid-state batteries on Nov. 17, entering a global competition to bring the potentially transformative technology to play in electric vehicles (EVs). 

The moves resonate in an industry that has long attempted to commercialize the technology, widely seen as a next-generation energy storage device because of its superior performance and safety compared with the current batch of liquid-state electrolyte lithium-ion batteries. Several international carmakers have bet on solid-state batteries, with leading promoter Toyota reportedly projecting adoption by 2027. 

The news also indicates a growing trend among automakers of developing their own batteries, parts that comprise at least 40% of overall vehicle costs, to establish a self-sufficient supply chain. “Few companies have so far profited from making new energy vehicles [mostly battery EVs and plug-in hybrid EVs in China],” said Changan president Wang Jun during a press conference, citing a goal of achieving “sustainable, high-quality development” (our translation). 

Here’s what the two automakers said on Nov. 17 during the ongoing Auto Guangzhou show in southern China’s Guangdong province.

GAC: The Guangzhou-headquartered automaker is hoping to see an EV in production with its own in-house developed solid-state batteries as early as 2026. For now, the batteries have achieved a cell-level energy density of 400 watt-hours per kilogram (Wh/kg) and have proven effective under extreme conditions, according to an announcement. By comparison, the maximum energy density of CATL’s latest Qilin battery is 255 Wh/kg (per pack level).

• The state-owned manufacturer added that it is working on several other new battery types including cobalt-free and sodium-ion packs, without revealing further details.
• Meanwhile, the Chinese partner of Toyota and Honda expects its first wholly-owned battery plant to start rolling out conventional lithium-ion batteries later this month. The RMB 10.9 billion ($1.5 billion) plant, Guangzhou’s biggest ever, will produce an annual capacity of 36 gigawatt hours (GWh) by 2025, enough for 600,000 EVs. 

Changan: China’s fifth largest automaker’s plans include commercializing its first solid-state batteries by 2027 at a cell-level energy density of up to 500 Wh/kg, while large-scale vehicle application is scheduled for 2030 with the launch of several new battery products, said president Wang.

• As part of an RMB 10 billion investment plan, the Chongqing-based manufacturer will more than double its number of research and development employees from 1,200 to 3,000 by next year. It has also set its sights on making lithium-sulfur and other new battery types next decade.
• Ford’s manufacturing partner also projected its timeline for mass-producing lithium-ion batteries, starting as soon as next year. The product features a design in which battery cells are integrated directly with the vehicle body rather than segmented into several modules. This technology has enabled CATL’s Qilin batteries to promise a driving range of over 1,000 kilometers (621 miles) on a single charge. 

Context: Established automakers worldwide have been rushing to get solid-state batteries commercially ready for their green energy cars, which is intended to give them an upper hand as they navigate increasing competition in the global EV market. 

• In addition to Toyota, Nissan plans to launch a production EV with a solid-state battery pack by 2028 and BMW by 2030. China’s SAIC said in May that it has increased its investment in local battery startup Qingtao as part of its ambitious goal to sell 100,000 EVs with solid-state batteries in 2025.
• CATL in April unveiled a so-called condensed matter battery, a semi-solid state product using a condensed electrolyte, with plans to start mass production for aviation by year-end, Reuters has reported. The battery giant controls more than a third of the global market, according to figures compiled by South Korea’s SNE Research on Nov. 7. 
• The world’s second-biggest battery maker by shipment, BYD initiated its battery efforts two decades ago and accounted for 15.8% of global EV battery sales in the first nine months of 2023. Having benefited from its vertically integrated supply chain, the EV giant recorded a net income of RMB 10.4 billion in the past quarter.
• ​​A solid-state battery uses a solid electrolyte instead of liquid electrolytes, boasting a theoretically higher thermal stability and energy density than existing offerings. However, the batteries still suffer interface instability between electrodes and solid-state electrolytes, among other design issues.

As automakers continue their struggle amid an unrelenting price war in China, both established brands and startups are showcasing their latest products at the Auto Guangzhou 2023 show in a bid to take pole position ahead of what promises to be another year of tight competition. 

Traditionally one of the country’s largest car shows, this year’s Auto Guangzhou offers a glimpse of how intense competition in China has been, and how successful it has been at flushing out weaker foreign marques as domestic rivals fall over one another in a mad rush to crack the market. 

“Joint car manufacturers are faced with unprecedented challenges against the backdrop of the current situation,” said Wen Dali, a deputy general manager of GAC-Toyota, a joint venture between the Japanese automaker and its Chinese partner (our translation). More than 20% of the JV’s new car sales over the next three years in China are set to be new energy vehicles, mostly battery-run electric vehicles (BEVs) and plug-in hybrid EVs (PHEVs), Wen added at a press event on Friday. 

Here’s a quick roundup of some of the highlights from the Guangzhou International Automobile Exhibition, which kicked off on Friday in the capital of China’s Guangdong province. 

BYD – Sea Lion 07

The BYD Ocean family of electric cars on Friday welcomed a new sibling and its latest answer to the Tesla Model Y, the Sea Lion 07, crafted by Wolfgang Josef Egger, BYD’s design chief and a former head designer at Audi Group. 

The mid-size crossover boasts distinctive design elements with its muscular fenders, bold air inlets, and clean character lines on all four corners, while the high shoulder lines and the dual, through-type waistlines give the vehicle a sporty vibe. The features are intended to make the car look unique from miles away, Fan Jihan, a deputy director of BYD said on Friday during the show.

Slightly larger than Tesla’s Model Y at 4.8 meters in length and with a 2,900-millimeter-long wheelbase, the top-end all-electric car is expected to have a driving range of more than 700 kilometers (435 miles), compared with the 688 km claimed by the long-range version of its US rival. Scheduled for official launch later this year, it will be equipped with BYD’s latest advanced driver assistance system (ADAS), according to the company.

Geely – Zeekr 007 

This year’s Auto Guangzhou saw the debut of the long-awaited Zeekr 007, the first electric sedan under the premium marque of auto major Geely. 

The latest model from Stefan Sielaff, formerly a head of design at Bentley, the 4.9-meter-long all-electric vehicle comes with 1,711 high-intensity lamp beads powered by 75 automotive chips. This enables the car’s LED headlights to display a dazzling, customized lighting sequence with animation about 90 inches wide, showcasing some of the most advanced lighting technology by a Chinese carmaker. 

Meanwhile, the Zeekr 007 features an 800-volt battery system, which offers a driving range of up to 870 km on a full charge and can travel another 610 km on 15 minutes’ extra charge. Zeeker claims it to be the quickest accelerating road car of the same class ever made, going from 0 to 100 km/h (62 mph) in 2.84 seconds, while also being one of the earliest models to use Qualcomm’s latest 5-nanometer cockpit chip 8295. 

The company aims to begin delivering the car in January at a lower-than-expected pre-sale starting price of RMB 224,900 ($31,059). 

Xpeng Motors – X9

Xpeng on Friday was on its home court when it unveiled details of its first flagship multi-purpose vehicle (MPV) the X9, which the Guangzhou-headquartered electric vehicle maker expects will stand out from existing offerings with superior comfort and top-notch performance. 

With a competitive pre-sale starting price of RMB 388,000 ($53,544), the seven-seater has a claimed interior space of 7.7 square meters, which makes it 12% bigger than the Toyota Alphard, a worldwide top-seller in the chauffeur-driven luxury people mover category, according to chief executive He Xiaopeng. 

The family van is also said to have the best third-row seats on the market that can be adjusted for recline to a desired angle of nearly 180 degrees and folded down flat to increase cargo capacity. Meanwhile, the luggage compartment offers space for seven suitcases. 

The Xpeng X9 is claimed to be the world’s first MPV equipped with rear-wheel steering as a standard configuration, which reduces the car’s turning diameter to an industry record of 10.8 meters (35.4 feet), making it easy to maneuver. 

Li Auto – Mega

Li Auto has finally made available the details of its long-anticipated MPV, the Mega, with an exterior echoing the bullet-style look of China’s high-speed trains. The seven-seater van boasts the world’s fastest charging speed among electric vehicles of all kinds, capable of traveling up to 500 km on 12 minutes of charge powered by CATL’s next-iteration Qilin batteries. 

It has a drag coefficient (Cd) of 0.215, which the company claimed is the lowest Cd rating for an MPV, while it will consume 15.9 kilowatts (kWh) of electricity for every 100 km of travel, also among the lowest in the industry. 

The company, which has delivered more than 500,000 plug-in hybrid SUVs as of September, confirmed plans to build 300 supercharging stations in China by year-end. Pre-sales of the Mega started on Friday with a price tag of around RMB 600,000 ($82,800) and delivery scheduled for February 2024.

READ MORE: Chinese carmakers showed up big time at Auto Shanghai 2023

Images of what could be Xiaomi’s first electric vehicle model have leaked online ahead of the car’s expected launch next year. The photos from the Chinese Ministry of Industry and Information Technology show a large sedan with styling similar to the Porsche Taycan, adorned with a Xiaomi logo. 

Why it matters: Automakers are required by Chinese regulators to apply for registration before officially selling vehicles in the country, and the government ministry’s post indicates that the debut of the first Xiaomi car is approaching. 

• Xiaomi has begun trial production of its first EV at its facility on the outskirts of Beijing, with the vehicle expected to hit the market as early as February, a person with knowledge of the matter told Chinese media outlet National Business Daily on Wednesday. 
• A Xiaomi representative declined to comment when contacted by TechNode on Thursday, but in late October, chief executive Lei Jun reaffirmed the company’s plan for the car to go on sale in the first half of 2024, according to an Oct. 25 post published on the Twitter-like platform Weibo. 

Details: The Xiaomi SU7 is around five meters long and spans a 3,000-millimeter-long wheelbase, making it bigger than many mid-size sedans such as Tesla’s Model 3. It has a total mass of 2,430 kg and a curb weight of 1,980 kg, based on the registration details revealed by the MIIT on Wednesday. 

• The car features a sleek, athletic low profile with Xiaomi’s logo on the front and its name on the rear hatch, similar to the Porsche Taycan, a likeness brought to light by a Chinese auto influencer. The images also show a couple of wheel options and a choice of yellow brake calipers.
• The SU7 will be able to reach a top speed of 210 kilometers per hour on a relatively affordable, iron-based lithium-ion battery from BYD. The top speed of the premium SU7 Max will be 265 km/h, with the higher-end model equipped with a more expensive, nickel and cobalt-based battery pack from CATL. 
• An electric motor will provide a power output of 275 kW and 220 kW respectively, while the top-end version will integrate laser sensor units on the roof to enable partially autonomous driving capabilities, according to images released by MIIT.
• The five-seater sedan will be manufactured at Xiaomi’s factory in the Beijing Economic and Technological Development Zone, which has an initial annual capacity of 150,000 units, although its production application was filed in the name of a subsidiary of state-owned automaker BAIC.
• This appears to confirm speculation that BAIC, a manufacturing partner of Mercedes-Benz in China, has joined hands with Xiaomi, meaning the smartphone maker is still waiting for final approval to begin manufacture from the Chinese authorities. 

Context: Xiaomi and Huawei are among the Chinese technology giants with the potential to become major players in the EV space with advanced intelligent capabilities and a broad sales network, which remain difficult for many carmakers to replicate, Morgan Stanley analyst Tim Hsiao commented on an earnings call held by Xpeng Motors on Wednesday. 

• Huawei said on Oct. 6 that it had secured over 50,000 non-refundable orders for the revamped M7 sports utility vehicle less than a month after its launch. The number was updated to more than 90,000 as of Wednesday, local media outlet IT Home reported. 
• The telecoms giant started pre-sales of the first electric sedan under the new Luxeed brand with automaker Chery on Nov. 9, followed the next day by the launch of the Avatr 12, a premium crossover co-developed with partners Changan Automobile and CATL. 

READ MORE: Five things to know about Xiaomi’s new electric car company

Huawei on Thursday revealed its first electric sedan under the new Luxeed marque in collaboration with automaker Chery, saying it will compete with Tesla and Mercedes Benz’s premium offerings at a price comparable to the cheapest models of its international rivals.

“After some deliberation, we will make all versions of the Luxeed S7 available for purchase despite making a loss,” Richard Yu, the chief executive of Huawei’s consumer business group, told the media during a press conference in Shenzhen (our translation). This will allow more customers to try Huawei’s smart vehicle technology at an affordable price, said Yu.

The aggressive pricing strategy unveiled at the Luxeed S7’s launch marks the latest push by the Chinese technology giant to crack the world’s biggest and most competitive electric vehicle market. Huawei hopes it will be a new revenue source to offset the negative impact of US restrictions on its smartphone business. 

Here’s what we know about the newly-launched Luxeed S7 sedan:

Pricing: The sedan comes at a minimum price of RMB 258,000 ($35,381), RMB 2,000 lower than Tesla’s entry-level Model 3 in China. Pre-sale started on Thursday and the official launch is scheduled for Nov. 28.

Automated driving: The Huawei-Chery electric sedan is the first model to use the tech giant’s latest proprietary Harmony operating system. Its autonomous valet parking feature enables the car to park itself in lots and then return to a designated spot using a remote-control assisted function.

The premium versions of the Luxeed S7 will include Huawei’s laser sensor units and its Advanced Driving System (ADS) that uses deep learning networks and computer vision algorithms, including one called the General Obstacle Detection network, for navigating its surroundings. 

Huawei has claimed its partially autonomous driving technology will be accessible on major city roads across China by the end of the year, potentially ahead of rivals including Xpeng Motors. 

Main specs: Yu specifically identified Tesla’s Model S as Huawei’s major competitor, claiming that Huawei and Chery’s full-size luxury sedan outperformed its rival’s in terms of range, energy efficiency, and luxury. 

The top-end Luxeed S7 will have a driving range of more than 800 kilometers (497 miles) and be capable of driving another 400 km on 15 minutes of supercharging using Huawei’s facilities. By comparison, the dual-motor Tesla Model S has a 715 km range and can add 347 km in 15 minutes. 

The car also impresses with high energy efficiency, consuming an estimated 12.4 kWh per 100 km, compared with 13.2 kWh and 17.5 kWh achieved by the rear-drive Model 3 and the dual-motor Model S respectively. “This is far ahead of our rivals,” said Yu, using a phrase that has become a Huawei-related buzzword on the Chinese internet. 

The S7 slightly beats out the Model S with a drag coefficient of 0.203. Meanwhile, it offers a 0 to 100 km/h (62mph) acceleration of 3.3 seconds, just under the 3.1 seconds reported by the Model S performance version but faster than the Porsche Taycan 4S, according to Yu. 

Interior: The sleek, aerodynamically favorable sedan boasts of a larger cabin space than its major luxury competitors with an interior length of 1,910 mm. The Mercedes E300L and the Tesla Model S measure 1,898mm and 1,816mm in interior length respectively, according to figures cited by Huawei during the press conference. 

The S7 also comes with a sporty design concept for the inside, featuring a wide dashboard, a 12.3-inch smart screen, as well as an oval-shaped steering wheel, allowing drivers to see the whole display, rather than having to view it through the steering wheel. 

In addition, it has adopted so-called zero gravity seat technology for the front passenger seat. This allows the human body to take on a neutral spinal posture, reducing the amount of stress placed on bones and joints, while the backs of the rear seats are heated, ventilated, and 27/32° adjustable.

READ MORE: Huawei-backed Aito now has 50,000 orders for its redesigned M7 model

Xpeng Motors said on Nov. 3 that it will offer some existing owners of its P5 sedan discounts on new purchases after hundreds of customers accused it of failing to deliver promised advanced driver assistance features, which were supposed to be available across the country. 

Why it matters: The complaints, which went viral on Chinese social media last week, mounted after Xpeng on Oct. 24 unveiled plans to roll out its latest advanced driver assistance system (ADAS), the XNGP, nationwide by next year. The company said it will be applicable to existing models including the G6, G9, and P7i, without mentioning the P5. 

Details: Xpeng said in a statement issued on Nov. 3 that it will offer an RMB 20,000 ($2,747) coupon for people who have subscribed to Xpilot, its previous generation driver-assist software, along with their purchases of the premium version of the P5 sedan. The benefit could be used for a new purchase of one of Xpeng’s most popular models, including the G6, G9, P7i, or its upcoming X9 van. 

• The announcement comes after more than 700 P5 owners recently published an open letter, obtained by National Business Daily, asking the company for an explanation as to why its partially autonomous feature for urban driving has remained unavailable to them in most domestic cities, despite the company’s promises.
• Xpeng further explained that the availability of its previous-generation ADAS feature “relies heavily on” high-definition maps, which has reportedly required automakers to secure approval for using mapping data in their vehicles, partly resulting in slow progress in adoption (our translation). 
• The EV startup released the so-called City Navigation Guided Pilot (NGP) function first to Xpilot users in the city of Guangzhou last September and has since expanded the adoption to five major cities including Beijing, Shanghai, and Shenzhen. 
• “We will strive for more new features and improved user experience, despite many challenges,” Xpeng said in the statement, adding that more functions will be available to P5 owners through over-the-air updates next year, including steering assist and more music streaming apps. 

Context: Xpeng began delivery of the P5 electric sedan back in October 2021, with its premium versions featuring two lidar sensors to facilitate more reliable automated driving functions at a price range of between RMB 199,900 and RMB 223,900 ($27,453-$30,749). It sold 19,618 units of the car over the last 12 months, according to figures from the auto services portal Dongchedi.

• The automaker is shifting to a more affordable approach for autonomous driving, which will reduce its reliance on technologies such as lidar and HD maps as part of a plan to roll out its XNGP system in 50 domestic cities by December. 
• The Xpilot system, formerly Xpeng’s rival to Tesla’s Autopilot system as reported by CNBC, is unavailable for driving scenarios without the support of HD maps, according to a Q&A document published by the company last November.

Chinese electric vehicle makers Xpeng Motors and Aito on Wednesday posted record-breaking figures for monthly deliveries, as the pace of adoption of self-driving technology accelerates among local customers despite slowing growth in China’s electric vehicle segment as a whole. 

Strong orders for Huawei, Xpeng, and DJI’s city NOA (Navigation on ADAS) products mark the start of the commercialization of smart driving, Jefferies analysts wrote in an Oct. 24 note. They added that Chinese automakers are becoming more willing to “test the waters” with chips by Huawei on some of their vehicles.

Why it matters: The latest figures highlight a brutal price war that has been continuing for months in the market, and the struggle automakers are facing in having to choose between lower prices or losing market share. 

• Xpeng in June unveiled the G6, its crossover answer to Tesla’s Model Y, at a price tag 20% lower than its US rival in China. Aito’s all-new M7 sports utility vehicle now costs RMB 40,000 ($5,468) less than the version launched a year ago.

Riding the self-driving boom: Xpeng Motors handed over 20,002 electric cars to customers in October, crossing the 20,000 unit milestone, nearly a threefold increase from a year ago and  31% growth from September. 

• Aito also reported a record delivery number of 12,700 units last month. The Huawei-backed brand does not report its delivery figures consistently, but its Shanghai-listed manufacturer Seres posted sales of 40,389 EVs for the first nine months of the year. 
• The two companies appear to have taken an early lead in an emerging battlefield for partially autonomous technology among consumer carmakers. More than half of the orders of Aito’s redesigned M7 SUV were placed for versions with Huawei’s Advanced Driving System, Chinese media outlet Caixin reported on Oct. 7, citing company insiders. 
• The Max versions of Xpeng’s G6 crossover, which features the company’s XNGP assisted driving technology, accounted for 70% of total orders in the first month after the launch, chief executive He Xiaopeng said in August. Both companies said their vehicles would be able to travel autonomously most of the time in dozens of major Chinese cities by the end of the year. 

EV startups: Li Auto also accomplished a delivery milestone last month, distributing 40,422 vehicles, making its year-to-date deliveries 284,647 units, the highest among the country’s nascent EV startups. The company has upped its goal to 50,000 units for the remaining two months of the year, CEO Li Xiang said on Wednesday on the Chinese Twitter-like platform Weibo.

• NIO’s October delivery of 16,074 units represented a 59.8% growth from this time last year and a slight 2.8% increase month over month. The company has delivered 126,067 vehicles as of October this year, still far from the annual goal of 245,000 units revealed by CEO William Li in March. It is now aiming for monthly delivery of more than 20,000 units in the fourth quarter of 2023. 
• Leapmotor’s delivery of 18,202 EVs last month comes after the Zhejiang-based EV maker recently announced a deal with European major Stellantis for a $1.6 billion war chest and turned its negative gross margin into a positive for the past quarter. Rival Hozon delivered 12,085 units, representing a decrease of 32.9% year-on-year and 8.5% month-on-month. 

Established majors: BYD’s growth momentum continued to some extent in October as the company saw sales surpassing 301,000 vehicles with a mild 5.2% rise from a month earlier. Analysts expect China’s biggest EV maker to achieve its annual goal of selling 3 million cars this year, as the company on Monday launched a wagon version of its popular Song SUV and readied to sell its long-anticipated Bao 5 off-roader.

• Sales for Aion declined 19.6% from a month earlier to 41,503 units, as the GAC subsidiary ramps up production of its new models, company insiders told financial media outlet CLS. Changan-affiliated Deepal delivered 15,513 vehicles in October, a 10.7% decrease from September. 
• Zeekr delivered 13,077 vehicles last month, up 29.2% from a year ago and 8.5% from September. On Aug. 11, the two-year-old premium EV brand, set up by Volvo parent Geely, cut the price of its 001 hatchback by up to RMB 37,000 to RMB 269,000 for a limited period until the end of this year. 
• Voyah saw its deliveries grow 21% on a monthly basis in October after the Dongfeng-backed EV maker launched its redesigned Free SUV in August, with the model arriving 15% cheaper than the previous version and equipped with Baidu’s advanced driver-assist system. 

Context: Retail sales of new energy passenger vehicles, including all-electrics and plug-in hybrids, are expected to reach 750,000 units in October, up 34.6% year-on-year and 0.9% month-on-month, according to estimates from the China Passenger Car Association. The past two months, known as “Golden September, Silver October,” are traditionally peak seasons for auto sales in China.

Xpeng Motors teased how it sees the future of electric vehicles on Tuesday with the debut of its first multi-purpose vehicle model and a new timeline for the expansion of its self-driving software, as it faces an unprecedented offensive from major rivals like Huawei in a hotly competitive battleground.

Chief executive He Xiaopeng also revealed that the company has made significant progress in bringing flying cars closer to reality, while showcasing a working prototype of its humanoid robot, in a move reminiscent of Tesla’s introduction of its Optimus bot last September. 

Here are the key highlights from Xpeng’s annual 1024 Tech Day event. 

First MPV 

Navigating within a sharp and narrow turn at low speed on the stage at Tuesday’s event, Xpeng’s X9 is claimed to be the world’s first multi-purpose vehicle model equipped with rear-wheel steering as a standard configuration. This would allow the seven-seater, three-row van to handle “just like” a regular-sized sports utility vehicle, said He (our translation). 

Xpeng’s next-generation smart cabin system, the XOS, will also be available first to the owners of the X9, which is set to be formally launched at the upcoming Guangzhou Motor Show on Nov. 17. Powered by Qualcomm’s five-nanometer 8295 processor, the in-car software will offer a split screen mode, allowing drivers and passengers to run different applications simultaneously side-by-side for efficient multitasking.

Marking Xpeng’s entry into the Chinese MPV segment, the all-electric X9 will have to compete with an increasing number of similar offerings by established makers including BYD’s Denza brand, Great Wall Motor, and Dongfeng’s Voyah marque. Huawei-backed Aito and Li Auto are also set to launch their first MPVs later this year, targeting China’s growing three-generation families with larger interior car spaces.

Self-driving availability

Xpeng has also begun its switch to a more affordable hardware suite by removing some sensors from its incoming X9 model, betting more on cameras and artificial intelligence for its XNGP advanced driver assistance system, according to He. 

The Chinese automaker has updated its self-driving technology with what it described as some of the most advanced occupancy networks in the industry, comprising a deep neural network that reconstructs barriers and vehicles and predicts occupancy in a three-dimensional space for collision avoidance. 

A similar move has allowed Tesla to remove several ultrasonic sensors from its vehicles while enabling high-definition spatial positioning, longer range visibility, and the ability to differentiate between objects with its Full Self-Driving Beta software, which was announced by the US automaker last October. 

CEO He said Xpeng will deploy its XNGP system for urban traffic roads in 50 cities by December and make the functions available to drivers across China and Europe by 2024. It is competing with Huawei, which has quickly emerged as a rising player in the industry and previously announced a nationwide roll-out of similar features by year-end, while rivals BYD and Li Auto are playing catch-up.

Flying cars and robots

Experimenting with different approaches around flying cars, Xpeng also showcased two prototype aircrafts, or electric vertical takeoff and landing vehicles (eVTOLs). One of them boasts a two-in-one design that can fold up its wings and other components into the vehicle body, although He acknowledged that there are still some safety issues to be addressed. 

The 46-year-old serial entrepreneur sees greater potential for the commercial adoption of the other prototype, which is built on a modular system allowing the separation of the flight and automobile components. This model has a spacious interior with five seats while on the road and is powered by an extended-range hybrid engine, which can also recharge its aircraft component as it drives; up in the sky, the model is capable of carrying two passengers in an all-electric mode.

Xpeng further surprised the audience on Tuesday as its humanoid robotic prototype, the PX5, made its first public appearance. The company showcased the robot’s ability to navigate different terrain and pick up hand-held objects such as pens in a video. He envisions a near future where such AI machines could help look around in its factories or even mingle with customers at showrooms, hopefully by this time next year, he added.

Chinese electric vehicle maker Leapmotor said on Monday that it swung to a positive gross margin of 1.2% in the third quarter that ended Sept. 30 on the back of strong revenue growth, with the chief executive predicting a record performance for the remainder of the year. 

Why it matters: The quarterly results come as the Zhejiang-based and Hong Kong-listed automaker has continued its solid growth momentum in the highly competitive home market and recently announced an ambitious global strategy that covers major regional markets from Europe to Asia Pacific. 

• In addition, Leapmotor has reportedly been in talks with established automakers Volkswagen and Stellantis on potential collaborations that could include an investment deal, and on Monday expressed a willingness in its earnings report to “share” its technological capabilities with partners.

Details: Leapmotor on Monday posted a positive gross margin of 1.2% in the third quarter for the first time and “ahead of schedule,” compared with the negative margin of 8.9% it posted over the same period of last year and the negative 5.2% it achieved as of June. It initially aimed to achieve a positive margin by the end of this year. 

• The company attributed the growth to the strong deliveries of its pricier C01 sedans and C11 crossovers, which have starting prices of RMB 145,800 and RMB 149,800 ($19,933 and $20,481) respectively, significantly higher than that of its earlier model the T03, which is priced from RMB 49,900.
• Quarterly deliveries for Leapmotor increased by 24.5% year-on-year to 44,325 units over the past three months, a record high for the seven-year-old startup, with those of C01 and C11 accounting for more than 80% of total deliveries. 
• Revenue grew 31.9% year-on-year to nearly RMB 5.7 billion, with loss attributable to shareholders narrowing to RMB 986 million from the RMB 1.34 billion Leapmotor posted a year ago. Its research and development expenses of RMB 474 million during the quarter were up 17.3% year-on-year. 
• “Based on the current order volume, our deliveries in the fourth quarter are expected to record a new high,” CEO Zhu Jiangming said. The company delivered 15,800 units last month, still far behind larger rivals BYD and Tesla but slightly ahead of peers including Hozon, Xpeng, and Zeekr. 

Context: Leapmotor followed the suit of BYD and Li Auto earlier than most Chinese EV startups, betting on both pure EVs and plug-in hybrid EVs (PHEVs) with the launches of the extended-range C11 and C01 earlier this year. 

• PHEVs reported an impressive growth rate of 84.5% for the first nine months of this year in China, compared with battery EVs’ 18.1%, according to figures released by the China Passenger Car Association. 
• Meanwhile, on Aug. 1 the company announced a new round of price cuts of up to RMB 20,000 across its lineups, reversing its previous decision to keep prices stable along with several other EV makers in March.
• On Sept. 4 in Munich, Germany, Leapmotor unveiled the Leap 3.0, its proprietary vehicle architecture, and the C10, a mid-size SUV and the first model built upon it. Zhu said the company plans to launch five models in two years in markets including Europe, Asia Pacific, and the Middle East.

Chinese carmaker Guangzhou Automobile Group (GAC) is strengthening its alliance with ride-hailing platform Didi, investing up to $75 million into the latter’s autonomous driving unit. The move is expected to help GAC enhance its self-driving technological capabilities and sustain its sound growth momentum in the Chinese electric vehicle segment, according to an industry veteran. 

The deal, nearly clinched over three years ago, has recently been revived by the two companies as the impact from Beijing’s extended crackdown on Didi has waned, a person with direct knowledge of the matter told TechNode on Friday. It also comes against the backdrop of Didi’s renewed efforts to solidify its position as China’s biggest ride-hailing service with new incentives, putting smaller rivals under pressure. 

Self-driving push: Autonomous driving has proven to be among the most capital-intensive startup businesses on the current tech landscape, and the extended collaboration with Didi would allow GAC to share its costs and risks of making robocars, said Liu Guanghao, partner at Shanghai-based venture capital firm Befor Capital.

• The first robotaxi jointly developed by GAC and Didi is slated to join Didi’s ride-hailing network for commercial operation in 2025, the companies said earlier this year. GAC’s EV arm, Aion, announced a partnership with Didi back in May 2021 to develop a mass-produced car with Level 4 autonomous capabilities, indicating that the car can pilot itself without a human driver most of the time.
• Didi will also jointly test and operate autonomous vehicles for ride-hailing with OnTime, a mobility platform launched by GAC with partners in 2019, as disclosed by an anonymous source. OnTime, primarily active in the southern Chinese province of Guangdong where its parent company is headquartered, has been testing AVs with Toyota-backed Pony.ai, as well as Nissan-supported WeRide.

EV sales boost: The investment would also help GAC’s core carmaking business achieve sustained growth, especially in the Chinese commercial fleet segment, where its EV brand Aion has established a significant presence over the years, according to Liu. “Carmakers need more sales in order to survive in this highly competitive market,” he said. 

• Aion ranked second in sales among all-electric vehicles for ride-hailing, with approximately 49,000 units sold from January to October 2022, which accounted for 29% of its total sales, according to figures compiled by Shanghai-based consultancy LandRoads (in Chinese). BYD was the top-selling brand in the field, with sales of 35,000 more units during the same period, although this accounted for only 14% of its total volume. 
• GAC told investors last March that shipments of its Aion EVs for ride-hailing services only accounted for 12% of its total sales. The automaker, also a manufacturing partner for Toyota and Honda in China, reported sales of nearly 360,000 Aion EVs from January to September and is hoping to achieve 500,000 units for this year, which could almost double the number it sold in 2022. 

Context: GAC Capital, a wholly-owned subsidiary of the automaker, as well as state-owned Guangzhou Development District Investment Group, will invest the same amount of up to $149 million totally in Didi’s self-driving unit. GAC is set to inject no more than $75 million in the funding round, according to a Friday announcement (in Chinese). 

• OnTime is currently pursuing a public listing on the Hong Kong stock exchange, four years after it was launched by GAC along with a group of investors including Didi and Chinese gaming giant Tencent in mid-2019. It completed roughly 60 million rides last year and has operated in 21 domestic cities in the country’s Greater Bay area as of June. 
• GAC declined to comment when contacted by TechNode on Friday. Didi did not respond to TechNode’s request for comment. 

China’s Didi has recently set new growth targets in the three years to 2025, with new incentives for drivers and riders, in its latest move to recapture lost market share in the country’s ride-hailing sector, LatePost reported Monday. 

Why it matters: The move comes after Didi received a permit in January to resume new user registration and downloads through Chinese app stores for its ride-hailing service, marking an official end to a long-running regulatory crackdown on the company. 

• The development also puts competitors such as Meituan and Alibaba’s Amap under pressure, although industry insiders warn of a bumpy road ahead for Didi in the face of softening market demand due to weakening economic conditions, according to the report. 

Details: Didi recently informed investors that it is aiming for a 45% year-on-year growth in daily orders in 2023 and expects to keep the pace between 10% and 15% over the next two years, individuals familiar with the matter told Chinese media outlet LatePost. 

• This implies that the company is expected to complete more than 29 million rides per day for the full year, rebounding from its lowest point of around 20 million last January, and increasing the number to nearly 40 million by the end of 2025. 
• The annual target for this year is achievable, according to company insiders, with Didi starting from a low base in 2022 when major Chinese cities were repeatedly placed under Covid-19 lockdowns, dealing a blow to the country’s ride-hailing sector.
• The company delivered roughly 28.2 million rides per day on average in the first quarter of 2023, representing a 42% growth from a year ago, and increased its average number of daily rides to 29.4 million in the second quarter, according to its filings. 
• However, Didi’s ambitious objectives for 2024 and 2025 may face significant hurdles amid shrinking demand. By the end of 2022, ride-hailing app users in China totaled 437 million, down around 15.5 million on the total from the year before, according to figures compiled by the China Internet Network Information Center. 
• China’s biggest ride-hailing platform has increased its efforts to subsidize drivers and riders in recent months. A source estimated that the overall amount of subsidies could reach RMB 26.6 billion ($3.6 billion) this year, which would be equivalent to 14.8% of its total revenue at home, surpassing its previous level of 14%. 
• Didi did not respond to TechNode’s request for comment.

Context: Didi has been scaling back its efforts in developing cash-bleeding, emerging new businesses, and refocusing on its core business over the last two years after the Chinese government launched a cybersecurity probe into the company in July 2021. 

• Chengxin Youxuan, Didi’s community group-buy grocery unit, reportedly shut down more than 60% of its service locations shortly after the probe began, only a year after the launch of the service. 
• The company announced the sale of its smart electric vehicle business to Xpeng Motors in August. It had previously launched an all-electric hatchback for ride-hailing with BYD in November 2020.
• Chinese authorities announced a RMB 8.02 billion fine for Didi last July, closing its 18-month crackdown on the mobility giant, which was initiated following its mega public listing in New York in June 2021. 
• Didi had previously set big targets back in 2020. Notably, it had set its sights on overall daily orders surpassing 100 million globally for the next three years, with its four-wheel businesses in China, including ride-hailing and private chauffeurs, intended to account for half of this figure.

READ MORE: Didi app ban ignites race for ride-hailing market share

Aito, a Chinese electric vehicle brand backed by Huawei, has received more than 50,000 non-refundable orders for its redesigned M7 in less than a month. The orders follow the Sept. 12 public launch of the sports utility vehicle, which features Huawei’s Harmony operating system and assisted driving technologies. 

Why it matters: The latest sales figures, as revealed by a senior executive at Huawei, show tentative signs of a bounce-back for Aito from a months-long slump and could be a boost to the confidence of Huawei’s car manufacturing partners. 

• Aito has also been buoyed by Huawei’s comeback in the smartphone market with the recent launch of its Mate 60 Pro series, following the US ban on exports of advanced semiconductor technology to the Chinese technology giant. 

Details: The revamped M7 crossover has racked up more than 50,000 pre-orders with non-refundable deposits of RMB 5,000 ($685) as of Friday, Richard Yu, the chief executive of Huawei’s consumer business group, said in a post on Chinese social media app WeChat. 

• Yu described the growth momentum of the new M7 as “a miracle,” adding that more than 10,000 customers placed their orders over the past two days. He called on sales employees to ramp up delivery to meet the growing demand (our translation). 
• Accumulative orders per store averaged more than 80 following the launch on Sept. 12, according to figures posted Saturday by Sun Shaojun, founder of consumer behavior research agency CarFans. Aito said in June it operated a network of around 1,000 retail locations and service centers in 230 Chinese cities. 
• Sun added that a surge in store traffic for Huawei’s new smartphones has boosted the sales of the Aito-branded EVs, produced by Chinese manufacturer Seres, over the recent National Day holiday season. Huawei began selling EVs with its little-known partner via its retail network in 2021.
• Roughly 40-50% of the M7’s buyers are Huawei smartphone users and were coming to the stores for the Mate 60 handsets, Jefferies analysts wrote in an Oct. 5 note, citing an executive of a Chinese auto dealership. Customers compare the six-seater with Li Auto’s L7, BYD’s Tang, and the Ford Edge, analysts said.

Context: Huawei on Sept. 12 unveiled the redesigned version of the M7 SUV, featuring Huawei’s Harmony operating system at a starting price of RMB 249,800 ($34,299), which is around RMB 70,000 lower than the initial version launched a year earlier.

• The vehicle also comes with Huawei’s latest assisted driving software, ADS 2.0, which will allow it to travel by itself on busy urban streets nationwide as early as December, making it one of the most ambitious players in the Chinese self-driving car space.
• Huawei has offered future owners of the new large-sized plug-in hybrid early access to purchase its Mate 60 smartphones. The Mate 60 Pro flagship handset reportedly incorporates a self-developed 5G processor, a breakthrough for the Chinese tech giant following US sanctions in 2019. 
• Two-year-old Aito has seen sales slump during most of 2023 amid fierce competition from more established rivals such as BYD and Tesla. Seres, which produces Aito-branded EVs, recorded sales of around 33,000 units for the first eight months of this year, representing a 15.6% decline year-on-year. 
• Meanwhile, Huawei has partnered with several other domestic automakers including Changan and BAIC. It is also on track to launch the S7 with carmaker Chery in November, the first sedan under a new marque called Zhijie in Chinese that will compete against Tesla’s Model S.

Chinese premium electric vehicle brand Denza on Tuesday revealed a cheaper version of its advanced driver assistance system (ADAS) in collaboration with US chipmaker Nvidia, as the BYD affiliate ramps up efforts to compete against leading self-driving players such as Xpeng Motors and Huawei. 

Denza is also eyeing overseas expansion, having established its presence in the China market with year-to-date deliveries of nearly 80,000 EVs as of August. The company expects overseas sales to begin as early as next year, including in Australia, Southeast Asia, the Middle East, and Europe. 

Why it matters: The companies said the launch of the affordable assisted driving technology could reduce the barrier to a transition to intelligent mobility. The system facilitates Denza’s vehicles to navigate most highways in China as well as some busy urban streets in major domestic cities. 

• BYD launched the N7 crossover under the Denza marque in July, with the top-end version powered by Nvidia’s ​​DRIVE Orin processor, which offers 254 trillion operations per second (or TOPS). Now all N7 models can be equipped with Nvidia’s DRIVE Orin chips for automated driving, according to a Wednesday statement. 

Details: The new autonomous driving system will enable on-ramp to off-ramp driving, as well as automatic lane changing on Chinese highways, for Denza’s flagship N7 SUV. It has a price tag of RMB 15,000 ($2,053) and is powered by Nvidia’s DRIVE Orin processor, which can handle up to 84 TOPS. The N7 SUVs that feature the technology will have two lidar sensors removed to reduce costs. 

• The companies say that the higher-end version, priced at RMB 23,000, will allow the vehicles to function by themselves on bustling city streets for the daily commute, using a feature named City NOA (Navigate On Autopilot). Denza’s general manager Zhao Changjiang said the company would release its Highway NOA feature to N7 owners starting in December, followed by an over-the-air update of the City NOA early next year. 
• Tong Liu, vice president and general manager of China auto business at Nvidia, said that he was “impressed” by the efforts made by BYD in developing intelligent cars over the course of their three-year collaboration, calling BYD/Denza a “strong advocate” of commercializing self-driving technology (our translation). BYD’s Dynasty and Ocean lineups are also using Nvidia’s semiconductor. 

Context: Several Chinese auto and tech companies have announced ambitious plans for the adoption of assisted driving technologies for urban driving, akin to Tesla’s full self-driving (FSD) function that has yet to be made available in the country. 

• Volkswagen-backed Xpeng Motors in June launched its City Navigation Guided Pilot feature in Beijing and is on track to expand the capability in at least 50 domestic cities by the end of this year, while Great Wall Motor has set a target of covering 100 cities by 2024.
• In the meantime, Li Auto vehicles will be able to navigate on fixed routes for daily commuters in 100 major Chinese cities by year-end, following weeks of training with its collection of datasets. Rivals Nio and Geely’s Zeekr are also planning to roll out similar features later this year. 
• Huawei is by far the most ambitious company in the field in China, with its head of consumer business Richard Yu stating on Sept. 12 that Huawei’s self-driving system would be applicable nationwide for both highway and urban driving with Aito-branded EVs by December, Caixin reported. 
• BYD has made a series of moves in recent months to enhance its research and development capacity, especially for autonomous driving, including organizational restructuring and talent hiring. More than 80% of the 30,000 fresh graduates recruited by the company this year were research personnel. 

READ MORE: Baidu and Huawei take on global giants with new in-car software offerings at Auto Shanghai 2023

Nio took a giant leap into the smartphone arena on Thursday with the much-anticipated launch of its Nio Phone, the first handset designed by a Chinese automaker. The new device is hitting the market at a price comparable to the latest flagship offerings by Apple and Huawei. 

Having developed its own phone from the ground up, the electric vehicle maker expects to create an ecosystem across vehicles, devices, and services, which will provide a seamless experience for Nio users. The handset offers the purest form of the Android experience without any pre-installed apps or banner ads, chief executive William Li said during a press event in Shanghai on Thursday.  

Some of the standout features Nio highlights are a master remote control for vehicles with options to control everything from windows to seats, as well as seamless streaming of videos, music, and meetings from smartphone to car infotainment screen. Here’s what impressed us most about Nio’s first Android phone. 

Ultra wideband technology

Nio said the phone offers remote control for in-car devices which differs from most competitors by using Ultra Wideband (UWB) technology, an emerging wireless communication protocol that enables precise, speedy, and secure location tracking.

During a hands-on session where TechNode was present, a Nio ES8 SUV “greeted” the phone by turning its lights on when a Nio employee approached and automatically unlocked shortly before he reached for the door handle without taking out his phone. The smartphone also serves as a central hub to remotely operate the car’s air conditioning among other options at the touch of a single button. 

The short-range, high-bandwidth digital radio technology allows fast data transmission with increased security compared with other wireless standards such as NFC and Bluetooth, which are often absent from existing phone models produced by domestic makers such as Huawei and Xiaomi, according to Nio staff. The first initiative of this kind was announced by Geely-backed rival Meizu a month earlier. 

Several global automakers are also investing in the technology in collaboration with Apple. The US smartphone maker has reportedly been allowing BMW’s iX owners to unlock their cars using select iPhones or wearables since 2021, although most carmakers are currently unable to leverage the technology with Apple’s devices, Nio CEO William Li previously told Chinese reporters.

In-car connectivity

TechNode reporters also played the hit racing game title Asphalt on the in-car display with a Microsoft Xbox wireless controller. It offered a smooth experience which did not freeze or crash, as it runs in the smartphone’s background enabled with 5G services and a Qualcomm semiconductor. 

Nio’s in-car experience also allows users to stream videos on Bilibili, follow turn-by-turn navigation on Amap, or transition to live meetings on Dingtalk from their phones through the car’s infotainment screen. Huawei earlier announced a similar Super Terminal feature, while Geely claimed such capabilities with the recent launch of its new Meizu flagship series and operating system, Flyeme Auto.

It is worth pointing out that the feature is different from screen mirroring, as it actually creates a “doppelganger” of the Nio Phone on the in-car dashboard so that users can use the smartphone and the in-car system simultaneously yet separately. 

With its first self-branded device, Nio is one of the few Chinese automakers capable of integrating users’ smartphones with their car’s infotainment system at the operating system level. Such integration for Aito and Geely was enabled by their respective smartphone partners Huawei and Meizu. 

Specifications and prices

The Nio Phone is powered by a Qualcomm high-end Snapdragon 8 Gen 2 processor, the same as existing flagship offerings such as Xiaomi’s Mi 13, Oppo’s Reno 11 Pro, and the Meizu 20. It also comes with a 6.81-inch 2K+E6 Samsung screen, providing a resolution of 3,200 x 1,440 pixels, a 120Hz refresh rate, and a peak brightness of 1,800nits.

The device features a triple-camera system that includes three 50MP cameras and has a large battery of 5,200mAh, supporting 50 W wireless charging and 10 W reverse charging. An entry-level version weighs 212 grams and measures 165.19 x 75.54 x 8.9mm. 

The Nio Phone’s three versions come in seven colors, and are priced between RMB 6,499 and RMB 7,499 ($890-$1,027). Shipment is scheduled for Sept. 28. For comparison, Huawei’s latest Mate 60 Pro flagship phone costs from RMB 6,499, while Apple on Sept. 15 began selling its iPhone 15 series with a starting price of RMB 5,999 in China. 

China’s Great Wall Motor (GWM) will bring its next-generation in-car operating system to market next year, and stick to the ambitious goal of rolling out its semi-autonomous driving function nationwide by the end of 2024, according to a press event held on Tuesday. 

The company is undertaking a targeted push to create a scalable and unified software platform for future vehicle models across multiple different brands, a concept that has become mainstream in the years since Tesla entered the market. A significant increase in the number of software updates, aimed at improving the driving experience, is expected from next year, vice president Nicole Wu told TechNode at the event, held in the northern city of Baoding, where the company is headquartered. 

China’s third biggest private automaker by sales volume, GWM had a relatively early start in autonomous driving and in-car technologies. It began testing self-driving cars with the creation of a dedicated division called Haomo.ai in 2019 and became the second Chinese automaker after Xpeng Motors to build a supercomputing center, this January. Now, the company has set up a new artificial intelligence research lab to bring generative AI tools into play in future car models. 

Here are some of the highlights of TechNode’s interview with GWM executives, including vice president Nicole Wu, senior director Jiang Haipeng, director She Shidong, and Yang Jifeng, head of the AI lab. 

Major digital cockpit progress

GWM will roll out an app store and implement it across all brands, as part of its upcoming in-car operating system, Coffee OS 3.0, scheduled for release in the first half of 2024. The store will give users access to common third-party services and infotainment apps fine-tuned for car-friendly usage, as more customers expect a smartphone-like experience in the car. 

By working with smartphone makers such as Huawei and Xiaomi, the new system will allow drivers to use a handset while operating their vehicle. She Shidong added that owners will be able to play video games and watch movies in their cars by connecting gaming consoles, augmented-reality glasses or other devices, with the car dashboard using wireless or bluetooth connections.

By making constant updates of driving and infotainment features possible, the Coffee OS 3.0 is intended to take the in-car experience to a new level. Wu envisions each new GWM model getting a major software update every two to three months. Tesla and Nio released 2.8 and 1.3 software updates per month on average respectively in China during the first half of 2022, according to figures from domestic consultancy Ways. 

Ambitious self-driving goal

GWM has maintained its goal of launching Navigate on HPilot (NOH), a function similar to Tesla’s full self-driving (FSD) technology, to drivers in 100 cities around China by 2024. The software will first be available to owners of its Blue Mountain flagship SUVs in Beijing and Shanghai by next March, according to Jiang. 

This will enable vehicles to change lanes, overtake, and make turns automatically on Chinese city streets without high-precision maps. Jiang added that a set of common middleware plays an important part in creating a platform for assisted driving software that is updateable and scalable at a reasonable cost. 

Chinese auto and tech companies have been competing for a leading position in this space at a time when Tesla’s FSD function has yet to become available in the country. Xpeng’s XNGP advanced driver assistance system is set to be available in 50 major cities by the end of this year, while Li Auto’s EVs will be capable of traveling on fixed routes by themselves after training for weeks in 100 cities. 

Bring generative AI to vehicles

GWM is also looking to greatly expand its in-car system capabilities through the integration of emerging technologies such as generative AI tools. Its first aim is to use AI to anticipate user preferences and create high-quality infotainment content in some new car models in the fourth quarter of this year.

The company’s newly established AI Lab has been exploring the use of large language models in GWM vehicles. Yang expects significant improvement with the upcoming Coffee OS 3.0, especially in voice recognition and natural language understanding, expecting that the latest operating system will be able to give detailed, relevant responses to users’ queries using AI.

Rival players are all developing ChatGPT-like virtual assistants for use in future car models. Geely is scheduled to launch its RMB 128,000 ($17,600) Galaxy L6 SUV on Saturday with a proprietary AI model that can read children’s picture books. Both GWM and Geely-affiliated Ecarx earlier partnered with Baidu to develop AI assistants based on the latter’s GPT-style large language models.

Lynk & Co, a brand jointly owned by China’s Geely and Volvo Car, launched the 08, its long-anticipated plug-in hybrid crossover on Sept. 8. The automaker says the car has a starting price of RMB 208,800 ($28,815) and is powered by an in-house designed seven-nanometer (nm) chip, claimed by the company to be China’s first.

The compact sports utility vehicle is the first model under Lynk & Co which is exclusively plug-in hybrid. This marks a significant shift for Geely and Volvo as they make a determined move away from the internal combustion engine.

Having grappled with slowing growth in an increasingly competitive market, Lynk & Co expects the mid-sized 08 to be a high-volume model in the mainstream luxury SUV segment, competing against rival offerings including BYD’s Tang, Li Auto’s L7, and the Aito M5.

Why it matters: The Lynk & Co 08 is equipped with two SE1000 automotive chips, which is the first high-performance seven-nanometer semiconductor for cars designed by a Chinese company. The car can perform over 16 trillion operations per second (TOPS), Geely said in a statement. This is twice the number of Qualcomm’s Snapdragon SA8155P, the US tech giant’s flagship automotive cockpit platform. 

• It is also the first model to use Flyme Auto, an operating system jointly developed by Chinese smartphone maker Meizu and Ecarx, an auto tech startup backed by Geely’s chairman Eric Li. This offers an infotainment system that seamlessly connects users’ smartphone apps to the vehicle’s navigation screen.

Details: The Lynk & Co 08 uses a 1.5-liter four-cylinder engine along with a large 39.8-kilowatt-hour battery pack, providing a maximum driving range of 205 kilometers (127 miles) in all-electric mode and 1,400 km on a full tank plus full charge. Delivery is scheduled the begin later this month. 

• It uses little energy on short trips and ensures cost-competitive travel for daily commutes. By comparison, BYD’s Tang hybrid seven-seater and the Li Auto L7 extended-range hybrid run for up to 189 and 170 km, respectively. 
• The SUV boasts fuel consumption of 5.5 liters per 100 km, comparable to the 5.3L/100km of the BYD Tang DM-i, one of China’s best-selling hybrid models, and surpassing the Li Auto L7’s 7.6L/100 km. It can accelerate from 0 to 100 km/h (62 mph) in 4.6 seconds.
• The five-seater compact offers passengers a relatively large interior space measuring 4.8 meters in length and spanning a 2,915-millimeter-long wheelbase, close to the bigger but more expensive Nio ES6 and Li Auto L7, which are priced from RMB 338,000 and RMB 319,800, respectively.
• Priced between RMB 208,800 and RMB 288,000, the SUV is packed with advanced technology and luxurious design features, such as a 92-inch, augmented reality-based display, the largest of its kind in the industry, as well as a Harman Kardon audio system and frameless doors. 

Context: Lynk & Co reported a modest 6% year-on-year growth in sales for the first half of this year, while its peer Zeekr, a premium electric vehicle brand launched by Geely in early 2021, posted a remarkable 124% annual growth over the same period. Seven-year-old Lynk & Co, which formerly focused on China’s gas-powered vehicle segment, sold 180,127 vehicles last year, representing an 18.3% decline from a year ago.

• Ecarx announced the incorporation of the Flyme Auto into the Lynk & Co 08 SUV in March, followed by the public debut at this year’s Auto Shanghai show a month later. 
• Ecarx was founded by Geely chairman Eric Li and close associate Shen Ziyu in 2016, and set up a joint venture, SiEngine, to develop auto chips with Arm China two years later, Reuters has reported.
• Geely entered the smartphone industry with the establishment of a venture called Xingji Shidai in 2021, and renamed it Xingji Meizu after it acquired smartphone maker Meizu in mid-2022. 

BYD’s most credible competitor to the Tesla Model 3 would have a 25% cost advantage over models produced by European automakers even if it were manufactured locally in the continent, UBS said on Tuesday, taking costs resulting from protectionism into account.

Why it matters: The findings demonstrate the growing competitiveness of Chinese automakers led by BYD in making centralized, unified, and up-to-date car systems with highly integrated components and self-run supply chains, UBS analyst Paul Gong told reporters in Shanghai on Tuesday. 

• This could help Chinese brands maintain their cost competitiveness even as they transition from exporting to local production in some of the world’s most developed markets. Gong made the comment after the investment bank completed a tear-down analysis of the BYD Seal, calling it “a good balance” between technological advancement and cost optimization.  

Details: New research from UBS’s evidence lab that took apart the Seal electric car, BYD’s closest peer to the Tesla Model 3, reveals that the medium-sized sedan is 15% more cost-efficient than locally made offerings by the US automaker at its Shanghai facility. 

• This percentage would be extended to 35% when compared to Volkswagen’s similar offerings manufactured in Europe. This means it would cost BYD $10,500 less to produce each Seal in China than a Volkswagen ID.3 in Europe, UBS analysts wrote in a Sept. 1 note. 
• For Chinese-branded EVs, exporting from China to Europe is cheaper than manufacturing locally. Even so, Chinese EV makers would still maintain a 25% cost advantage over rivals if they produced in Europe, Gong added. 
• UBS attributed the gap primarily to BYD’s technological and engineering integration of vehicle components. Additionally, the investment bank noted that 75% of the auto parts, ranging from batteries to power semiconductors, were made in-house. 
• BYD could strike a balance between performance and cost by offering a relatively simple assisted driving system at a cost of less than RMB 3,000 ($411), significantly lower than the industry standard of around RMB 20,000. 
• The teardown, aimed at uncovering the secrets of BYD’s success, reinforced UBS’s confidence in the rise of Chinese EVs. The investment bank expects Chinese automakers to double their global market share to 33% by 2030 and increase their European market share to 20% from last year’s 3% over the same period. 

Context: BYD began deliveries of the Seal battery sedan, its closest competitor to Tesla’s Model 3, at a starting price of RMB 209,800 last July, followed by the launch of a cheaper version from RMB 189,800 in May.

• The Warren Buffett-backed EV major said on Monday that it has sold more than 100,000 units of the all-electric vehicle in a year. The vehicles are mainly produced in the eastern city of Changzhou. 
• On Tuesday, at this year’s IAA Mobility show in Munich, the company announced that it plans to sell the Seal to European customers at a starting price of €44,900 ($48,184) in the first half of 2024.

Tesla has released the long-anticipated, redesigned Model 3 with a sharper appearance and a range of new features in China, although at RMB 259,900 ($35,809), its starting price is higher than expected, according to a poll published on Friday on the Chinese Twitter-like social media platform Weibo.

Why it matters: The US automaker’s pricing strategy for the revamped sedan had attracted enormous attention from Chinese customers prior to its announcement, due to the car’s significant success in the electric vehicle market and Tesla’s recent policy of price cuts in the country.

• Although the launch price is not as low as some were expecting, the revamped Model 3’s arrival has still caused some rival EV makers to announce new deals for Chinese drivers. Xpeng Motors reacted immediately on Friday by offering zero-interest financing for up to 24 months or a price reduction of RMB 10,000 to buyers of its P7i. New owners of the electric sedan, priced from RMB 249,900, will be given a RMB 6,000 Dynaudio audio system for free by the end of this month. 

Details: In a poll conducted on social media site Weibo on Friday, more than 15,000 out of roughly 21,000 respondents said that they would not consider buying the newly-designed Model 3 due to “insufficient budget or an overly expensive price tag” (our translation). 

• Roughly 3,400 participants expressed their intention to purchase the new Tesla as of writing, attracted by a “competitive price or new features.” The poll was released on Friday morning by Chinese internet portal Sina, the parent company of Weibo. 
• The new Model 3 would “have no equal” if it were priced at around RMB 200,000, yet some domestic brands are more attractive at the RMB 260,000 price range, a Weibo user with the handle Kejigangzi in Chinese Pinyin commented in one highly-upvoted response. 
• In an announcement posted by Tesla on its official Weibo account, some internet users spoke critically of the car’s pricing not meeting their expectations, stating that they would be waiting for the price to go down. 
• The EV giant on Friday launched the reworked mainstream premium sedan in rear-wheel drive and all-wheel drive versions, priced from RMB 259,900 and RMB 285,900, respectively, compared with its previous base-version Model 3 at a price tag of RMB 231,900. 
• The revamp comes after Model 3’s initial launch back in 2016, and sees an improvement in driving range from 556 to 567 kilometers (352 miles) for the baseline version. The all-wheel drive version has a driving range of 680 km, reportedly powered by a new Lithium Iron Phosphate (LFP) battery sourced from CATL. 
• The all-new Model 3 gets a 15.4-inch infotainment screen, slightly larger than the 15 inch one seen in the previous version, in addition to an eight inch display for rear passengers. It also introduces new features and equipment such as ambient interior lights and ventilated seats. 
• However, the updated Model 3 removes a physical shifter, replacing it with an automatic system that may ask users to activate gear shifting on the touchscreen, a feature unfamiliar to Chinese EV owners, an analyst who asked not to be named told TechNode. 

Context: Tesla initially began selling locally-made Model 3s in China at a starting price of RMB 355,800 in late 2019. The company shipped 412,805 units of the vehicle from its Shanghai facility during 2020-2022, making it the best-selling premium electric sedan in the world’s biggest EV market, according to figures from the China Passenger Car Association. 

• Tesla sparked an EV price war in China at the beginning of 2023 when it slashed prices across its range. The carmaker announced significant price cuts for the Model 3 and Model Y lineup in China on Jan. 6, with the Model 3’s starting price dropping RMB 36,000 ($5,314) to RMB 229,900, and the Model Y dropping RMB 29,000 to start at RMB 259,900.

READ MORE:  China EV price war: Xpeng, Huawei-backed Aito join Tesla in cutting prices

Li Auto’s chief executive Li Xiang launched a series of business startup courses on Chinese audio content platform Dedao on Monday. With this move, the entrepreneur is aiming to tap a wider customer base and showcase his firm’s thought leadership, local media reported. 

Why it matters: During a livestream, Li mentioned that the target audience for his newly-launched online product development program significantly overlaps with Li Auto’s intended user base. He expects the marketing initiative to help the automaker further expand its influence in the electric vehicle market, media outlet Jiemian reported. 

Details: The program consists of 16 audio-based online courses, each lasting approximately 12 minutes, and aims to educate the audience about the fundamentals of product management, including the methodology for designing successful products, crafting powerful pricing strategies, and increasing operational efficiency and profitability.

• The program also offers insights into what makes a startup more competitive, including tips for building a collaborative and unified team, based on Li’s extensive startup business experience of over 20 years in the Chinese tech and auto industries. As of the time of writing, more than 15,000 users have subscribed to the paid program, priced at RMB 99 ($14), according to Dedao. 
• In one of the lessons observed by TechNode, Li recalled the initial challenges Li Auto faced while positioning itself as a manufacturer of EVs for Chinese families with children and grandparents, a potentially lucrative segment that was neglected by competitors, some of whom had voiced concerns that the customer base might be too small, Li said. 
• On the online education platform, some influential users have voiced their support for Li Auto and its founder. Li Auto’s success story is “worth learning and researching” (our translation), posted a user whose account was labeled as a manager at SAIC-Volkswagen, a Chinese joint venture of the German automaker.
• Li Auto entered a segment with high growth prospects and offered products at competitive prices for families, said another Dedao user, who labeled himself as a brand manager at Great Wall Motor. Li Xiang is already an outspoken and prolific user on China’s Twitter-like microblogging platform Weibo, with 2.2 million followers.

Context: Li Auto delivered 139,117 units of plug-in hybrid crossovers in the first half of 2023, surpassing last year’s total of 133,246 units. 

• The Beijing-based EV maker expects to deliver more than 100,000 units in the third quarter and anticipates posting monthly deliveries of 40,000 units during the last three months of this year, CEO Li told investors on Aug. 8.

BYD on Wednesday officially unveiled its newest premium marque with a performance-oriented plug-in hybrid off-roader. The Chinese automaker expects the new brand to signify personality and luxury, and is betting on it to help attract more of the country’s affluent middle-class buyers. 

With the launch of the Bao 5, BYD’s reply to makers of top-tier luxury off-roaders, China’s biggest electric vehicle maker is seeking to “redefine” a market segment that has been ruled by internal combustion engine cars (our translation), Chairman Wang Chuanfu declared during a press conference at BYD’s headquarters in Shenzhen on Wednesday. 

The name of the new brand, FangChengBao, translates literally to Formula Leopard. BYD said the new lineup responds to emerging and future demands for off-road travel with an edgy design, strong performance, and sophisticated personalized features. 

The architecture: The Bao 5, the first model under BYD’s new luxury lineup, is a large sports utility vehicle based on tailor-made PHEV architecture that is expected to underpin future EV performance. 

• BYD stated that its DMO (dual-mode off-road) PHEV platform splits up the car’s torque and delivers it to the wheels in a fluid way. This could provide enhanced traction and stability when driving on uneven and slippery surfaces and make the Bao 5 one of the most maneuverable SUVs on the market, with a turning radius of 3.4 meters (11.2 feet), according to chief scientist Lian Yubo. 
• The DMO platform has an in-house developed powertrain system that uses a 1.5/2.0-liter high-performance petrol engine along with a dual-motor rear-drive unit, delivering a combined output of more than 500 kW. This allows the spacious SUV to accelerate from 0 to 100 km/h (62 mph) in just 4.8 seconds, while its DiSus adjustable suspension system provides passengers with an improved experience on sideroads. 

Other details: The seven-seater SUV has a straightforward, boxy design with a lot of hard lines and angles. The car radiates a high-definition car-width strip of light in a rectangle ahead, and boasts luxury interiors including a high-quality stereo system provided by French audio engineering brand Devialet.

• The car comes with BYD’s blade battery, leveraging the company’s latest technology to place the cells in the chassis, allowing for single trips of up to 1,200 kilometers (746 miles) on a full fuel tank and a full charge. Lian added that the lineup’s upcoming models, ranging from sportscars to full-size SUVs, could travel between 800 and 1,500 km on one charge depending on powertrain and specifications. 
• No official pricing details have yet been released, but the new lineup is expected to have a price range of between RMB 400,000 and RMB 600,000 ($54,685-$82,028). The company will debut the car publicly at the upcoming Chengdu Motor Show on Aug. 25, with plans to open more than 100 direct-sales stores under the brand in 60 or so Chinese cities by year-end. 

Context: BYD first revealed its plans to develop a premium marque that “specializes in professional and personalized identities” last November. The company already operates two luxury brands, Yangwang and Denza, with price ranges between RMB 800,000 and RMB 1.5 million, and between RMB 300,000 and RMB 500,000, respectively. 

• In January, the automaker introduced the first two Yangwang-branded models, namely the U8 off-roader and U9 sports car, and is scheduled to begin delivery of the former in September. The two all-electrics come with four electric motors, have an 800-volt battery system, and can accelerate from 0 to 100 km/h (62 mph) in two and three seconds, respectively. 
• Denza’s general manager Zhao Changjiang wrote on the social media site Weibo that it has sold more than 100,000 D9 multi-purpose vehicles 10 months after delivery began last October. BYD on July 29 began delivering the N7 crossover with a starting price of RMB 301,800, the second model since its refresh of the brand in late 2021, and launched the larger N8 SUV on Aug. 5
• BYD sold 1.25 million pure electric and plug-in hybrid vehicles in the first six months of 2023, of which around 81,000 were exported EVs, representing a year-on-year growth of 94.3%. That number beat Tesla’s 476,539 units sold over the same period in China, of which nearly 40% were for overseas exports, according to figures from the China Passenger Car Association. 

In July, more than 10 Chinese automakers reported deliveries of over 10,000 units of their electric vehicles, signaling a significant shift in China’s car market as newer entrants and previously smaller brands continue to increase their sales. Notably, Nio saw remarkable growth, nearly doubling its figures from the previous month, while Xpeng Motors surpassed the 10,000 threshold following months of lackluster performance. 

Why it matters: The latest ranking of the best-selling EV brands in China reflects the changing landscape in the world’s biggest car market. Although BYD and Tesla are still miles ahead of their competitors, local rivals are capturing market share with new product launches and aggressive price cuts as the sector’s intense battle shows no signs of abating.

Bright spot: On Tuesday, Nio announced that it had exceeded the monthly delivery threshold of 20,000 vehicles for the first time in its nine-year history. The firm’s July deliveries reached 20,462 units, nearly doubling its figures from a month earlier. 

• This achievement follows the company’s decision to implement an RMB 30,000 ($4,199) price cut across its vehicle lineups on June 12. Additionally, Nio began delivering the redesigned versions of its popular ES6 crossovers and ET5 sedans starting late May, when monthly sales hit a record low. 
• Xpeng’s July deliveries of 11,008 units also marked an important milestone, one which the EV maker attributed to a smooth production ramp-up of the G6. The mainstream sports utility vehicle recorded shipment of more than 3,900 units immediately after its launch on June 29. 
• The Guangzhou-based automaker is aiming to deliver at least 15,000 units as early as September and has recently received backing from Germany’s Volkswagen. However, its year-to-date deliveries fell 35% year-on-year to 52,443 units as of July. 

Other results: While BYD maintained its dominant position in July with a new sales record, GAC’s EV arm Aion made progress with its new premium marque, Hyper. Aion sold 45,025 units during the month, with 2,011 of them being the Hyper GT coupe, which it began selling on July 3. 

• Li Auto said it has sold more than 30,000 plug-in hybrids for two consecutive months as July deliveries grew 5% month-on-month to 34,134 units. Great Wall Motor followed closely behind with sales of 28,896 units, representing an 8% increase from the previous month. 
• Leapmotor also posted impressive growth in July sales, with a notable increase of 8% to 14,335 units compared to the previous month. Additionally, the Zhejiang-based automaker is reportedly in discussions with Volkswagen’s Jetta brand regarding the licensing of its technologies. 
• This was followed by Changan’s subsidiary Deepal and Geely’s affiliate Zeekr which delivered 13,172 and 12,039 units last month, up 64% and 14% on a sequential basis, respectively. However, Hozon’s numbers declined for the third month in a row, reaching 10,039 units. 

Context: In addition to Chinese automakers, several global auto majors also revealed some details of their July sales in China.

• Volkswagen’s joint venture with state-owned SAIC reported securing more than 10,000 pre-orders of its ID.3 after the German auto giant slashed the price of the locally-made electric hatchback by RMB 37,000 to RMB 125,900 ($17,523). 
• General Motors announced that it shipped around 10,000 EVs with its local partner SAIC last month, of which 8,692 were Buick EVs. Furthermore, SAIC-GM-Wuling, another venture between SAIC, the US automaker, and Guangxi Automobile Group, sold 35,000 units, up from 31,246 units a month ago.

Chinese EV giant BYD is taking on a record 30,000 fresh graduates this year, with research personnel accounting for 80% of the total intake, in a move intended to shore up its research and development department, a company representative has confirmed. 

Why it matters: The hiring drive comes as BYD looks to retain its dominance in the Chinese electric vehicle market as rivals continue to offer a competitive challenge. The move contrasts sharply with general hiring trends as China faces soaring youth joblessness. 

• China’s unemployment rate for those aged 16 to 24 rose to a record 20.8% in May, according to the National Bureau of Statistics. One Peking University professor said she expected that number could rise to nearly 50%, according to a July 20 report by Reuters. 

Details: Around 31,800 fresh graduates have come on board at BYD since the start of 2023, more than 61% of whom have a master’s or doctorate degree, and over 80% of whom will work in R&D projects. State-owned newspaper People’s Daily was the first to report the story on July 29.

• The Chinese automaker has been hiring research employees in electronics and electricals, new energies, and semiconductors, to be mainly based in Shenzhen, Shanghai, and the northwestern city of Xi’an, according to a job post on its official website. 
• A BYD spokesperson confirmed the news when contacted by TechNode, without offering further details. 

Context: BYD has been expanding its R&D team for several years with the number of engineers hired by the company growing 31.5% year-on-year to around 40,400 in 2021. That number increased 72.6% year-on-year to nearly 70,000 as of last year. The company had around 570,000 employees in 2022, of which around 75% were production workers, financial media outlet Caixin reported.

• The Chinese EV giant, which had a relatively late start in the autonomous driving field, recently hired between 4,000 and 5,000 software engineers, Reuters reported on May 17, citing the company’s senior vice president Stella Li. It has also been running an intelligent driving research unit in Shanghai since last year, the Reuters article said, while reportedly restructuring its vehicle engineering institute. 
• The company is rushing to reach the top end of its full-year sales target of 3.6 million EV units, which would almost double last year’s total. It has sold nearly 1.3 million units this year, as of June. BYD spent RMB 20.2 billion ($2.83 billion) on R&D last year, up 90.3% from a year ago, and has developed key components in-house including EV batteries, electric powertrain systems, and vehicle control technologies. 

In a historic development, Volkswagen said on Wednesday it will make electric vehicles in a joint effort with Chinese EV startup Xpeng via a $700 million investment plan. The news sent Xpeng stock rocketing as much as 40% during trading on Nasdaq. 

The move is expected to create a win-win situation that will help the two automakers secure their market shares in a brutally competitive market. However, analysts expect big challenges for the partnership. 

Both Volkswagen and Xpeng are in a relatively weak market position when it comes to EVs and face sluggish sales in the world’s largest EV market. Also, cultural clashes and different mindsets could potentially lead to friction in the partnership. 

TechNode spoke to various analysts on the ground about what lies ahead. While some saw the collaboration as being beneficial to both automakers, most saw challenges in the unprecedented deal between a German auto giant and a rising Chinese EV maker. 

A happy union?

The Volkswagen-Xpeng partnership makes perfect sense as they complement each other’s strengths, according to Yale Zhang, managing director of Shanghai-based consultancy AutoForesight. “Xpeng’s vehicle platform is state-of-the-art compared with rivals, while Volkswagen definitely needs a helping hand in making intelligent EVs,” Zhang said.

Elliot Richards, a correspondent at the Fully Charged Show, believes Volkswagen knows how to build good quality affordable cars and has an advantage in terms of economy of scale, while Xpeng has top-of-the-line software stacks with a more lively, fun, and risk-taking brand image. He expects the collaboration to help both “efficiently grow together” in China by pooling their resources.

Volkswagen could accelerate the launch of new EV models with the latest tech in the Chinese market through the alliance, predicts David Zhang, a visiting professor at Huanghe Science and Technology University. Volkswagen has had a relatively late start in electrification and its ID series lacks competitiveness in China, despite a decent performance in Europe, added Zhang.

Looming challenges

Daniel J. Kollar, head of Automotive & Mobility Practice at business development consultancy Intralink Group, said the problem is that neither has been able to effectively differentiate themselves in the market, so it is unclear whether teaming up will allow them to change that. Both foreign and younger Chinese original equipment manufacturers (OEMs) are having a rough time lately, experiencing trouble with penetrating the mid-tier and entry-level markets and gaining the trust of average Chinese consumers, Kollar added.

Meanwhile, cultural fit will remain a challenge in this collaboration. Pitting a rigid process-oriented culture from Germany against a fast and furious startup culture in China, has the potential for problems, according to Lei Xing, former chief editor at China Auto Review. As Xing put it, “Is VW willing to sacrifice certain things for speed?” 

Tu T. Le, founder of business intelligence firm Sino Auto Insights, also expects culture clashes as VW’s careful checks and balances are challenged by Xpeng’s much faster pace. “Volkswagen will have to let go of its want to centrally control everything and do its best to learn from Xpeng if it truly wants success,” according to Le.

There might also be wounded pride on Volkswagen’s part, as global carmakers that used to enjoy the upper hand are now acquiring technologies from newcomers, rather than licensing to them, AutoForesight’s Zhang stated. “This could become an invisible barrier and lead to tension in day-to-day collaboration,” he added.

Reasons for skepticism

Experts have voiced concern about the sales prospects of the two automakers given a relatively late launch date of two new models.

“By virtue of the investment, VW is hopeful that its EV sales can be turned around with these two new products, but the 2026 launch dates could be too little too late,” said Le. His comments were echoed by Xing: “The tie-up does nothing to guarantee the success of VW badged EVs with Xpeng tech ‘inside.’ Also for the time being, at least until 2026, it does nothing to influence the market performance of Volkswagen and Xpeng as each controls their own destiny.” 

Meanwhile, they do not foresee the tie-up with Volkswagen as having a significant impact on Xpeng’s sales and presence in the market, although licensing its technologies is potentially a recurring revenue stream for Xpeng.

Volkswagen will likely have to shell out a huge amount of money as a transfer fee for accessing Xpeng’s technology, which has been a common practice in such collaborations, said David Zhang. “Chinese auto manufacturers used to pay tens of thousands of RMB per unit to their foreign counterparts for localizing a vehicle model that came from abroad.”

Zhang added that the collaboration with Volkswagen could be a significant endorsement of Xpeng to boost its credibility in the European market. Aware of Xpeng’s recent momentum following the launch of its G6 crossover last month, Le also believes the cooperation with VW could help it more in Europe than in China. “Xpeng is still two or three successful products away from becoming a sales leader in the Chinese market,” added Le.

“The game has changed”

Kollar sees the Volkswagen-Xpeng partnership as the latest sign that the Chinese market is now ready for consolidation, which means more young, domestic EV makers are either going to go bust or be acquired. The best way for foreign OEMs to regain their previous standing and catch up in the EV sector is to become an acquirer of some of the promising players, Kollar predicts.

The tie-up ushers in a new era where foreign legacy automakers now depend upon Chinese EV makers for their technologies and speed to market, noted Lei. In this context, Volkswagen can be seen as playing a “pioneering” role yet again, having been one of the first major foreign car brands to enter China, and has now opened the floodgates for similar deals involving other foreign legacy automakers and local firms in the future. The German giant on Wednesday also announced an extended partnership between its Audi brand and China’s SAIC.

Global brands are recognizing that Chinese EV companies have progressed to the point that foreign companies have something to learn from them, said Stephen Dyer, a co-leader for AlixPartners’s Greater China business. “We can expect to see more Chinese auto players become part of the global community of strategic collaboration going forward.”

Richards added that, “They now need their local partnerships more than ever, but the shoe is on the other foot.” 

READ MORE: Experts bullish on Chinese automakers’ global push as SAIC seeks EU foothold

Chinese EV maker Nio will roll out a single-motor version of its first mass-market Alps model, as part of a lineup scheduled for delivery in the second half of next year, Chinese media outlet 36Kr reported. 

Why it matters: The plan to produce a more affordable single-motor car marks a rare shift for Nio, which has so far insisted on a dual motor on all its offerings to date, as this is responsible for Nio’s impressive acceleration and premium performance. 

• The move is expected to help the Chinese electric vehicle maker adapt and appeal to a wider group of customers as the country’s months-long EV price war pushes down prices. 

Details: The upcoming sedan under Nio’s mass market Alps marque will come with the company’s self-developed electric powertrain featuring a next-generation induction motor, the 36Kr report said, citing people familiar with the matter. 

• The car, priced between RMB 200,000 and RMB 300,000 ($27,951-$41,927), will be built on the third generation of Nio’s NT vehicle architecture, which features an 800-volt battery system that allows much faster recharging than existing offerings, the report said. 
• The decision was, says the report, made after Nio announced an RMB 30,000 price cut across its lineup on June 12 in a move to defend market share as rivals reduce prices to boost sales. 
• Nio did not respond to TechNode’s request for comment. 

Context: Nio’s chief executive William Li on June 9 told investors that the company is on track to launch the first model under the Alps marque in the second half of 2024. 

• It is also reportedly in the development phase for another lower-end, budget sub-brand codenamed Firefly. The car has a target price range of between RMB 100,000 and RMB 200,000 ($13,985-$27,969) and is expected to first launch in Europe later next year. 
• Year-to-date deliveries of the Shanghai-based EV maker reached 54,561 units as of June, representing a year-on-year growth rate of 7.3%. It currently has eight models on sale, all equipped with dual motors. 
• China recorded sales of more than 3 million new energy passenger cars (a combined total of pure battery EVs and plug-in hybrids) over the same period, up 37.3% from a year ago, according to figures from the China Passenger Car Association. 

A Chinese joint venture between Volkswagen Group and SAIC Group will start building its own plug-in hybrid electric vehicles in a move to follow the growing adoption of PHEVs in the world’s biggest car market, Chinese media outlet Caixin has reported.

Why it matters: The move marks Volkswagen’s efforts to become more localized and step up its introduction of new electric vehicle (EV) models in China, where it is losing ground to electric rivals such as BYD and Tesla. Its premium brand Audi is also looking to develop EVs with the purchase of partner SAIC’s electric vehicle platform.

• The current offerings from global automakers’ JVs in China are not competitive on the EV and software side, resulting in continued market share loss and prices that remain under pressure amid overall lackluster demand, UBS analysts wrote in a June 16 note.

Details: According to the July 22 report by Caixin, SAIC-Volkswagen has yet to reveal detailed plans on any specifications or launch information for the new model.

• And yet, the move is expected to “unleash the power” of the joint manufacturer, and employees were fed a free meal to celebrate the decision, the report said, citing people familiar with the matter. SAIC-Volkswagen did not respond to TechNode’s request for comment.

Context: SAIC-Volkswagen currently has two PHEV models on sale, namely the popular Tiguan sports utility vehicle and the mid-sized Passat sedan, with a starting price of RMB 261,050 and RMB 233,150 ($36,268 and $32,392), respectively, according to its official website.

• Retail sales of the company declined 0.1% year-on-year to 532,509 units for the first six months of this year, while those of rivals such as BYD and Tesla grew 82.2% and 48.9% from a year earlier.
• Sales for FAW-Volkswagen, another China joint venture formed by the German automaker, were down 2.8% to 838,723 units in the same period, figures from the China Passenger Car Association (CPCA) show. VW Group delivered 321,600 battery EVs (BEVs) globally over the period, according to its filings.
• PHEVs have continued to gain momentum over the past few months in China, with year-to-date sales nearly doubling to around 995,000 units in China from a year ago, compared with a 19.8% annual growth rate of BEV sales, according to CPCA figures.
• A PHEV normally carries a smaller battery pack than BEVs with similar specifications, which could mean a lower purchase price. It also reduces owners’ concerns about their EVs running out of power by using both a battery pack and a gas-powered engine.

Nio announced on Thursday that it has updated its battery leasing program to allow drivers to replace their battery packs with a higher energy density one daily rather than after months or years, as was previously the case.

The Chinese EV maker also reaffirmed an earlier commitment to expanding its battery swapping and supercharging network, as a way to showcase what it sees as the superior experience offered to Nio owners, including easy access to recharging ports.

Why it matters: The daily package may present new challenges for Nio, given its already large and dispersed power infrastructure deployment across China. Despite this, it is expected to draw in revenue as it offers greater convenience to users and lowers the purchase prices of Nio’s EVs, senior company executives told reporters at a press briefing in Beijing. Nio has recently experienced cashflow pressure amid slowing sales.

Details: Customers who currently have a 70/75 kilowatt-hour (kWh) battery pack for their Nio EVs may now swap the battery for a so-called “long-range” one (100kWh) for an extra fee of RMB 50 ($7) per day and will be able to return it to any Nio swap station in China.

• The service option is part of Nio’s Battery-as-a-Service (BaaS) leasing program, which was launched in August 2021 and has since allowed Nio owners to upgrade their batteries for longer driving ranges with a monthly and yearly fee of RMB 880 and RMB 9,800, respectively.
• In the last two years to Thursday, Nio has provided 80,000 upgrades, according to the company’s president Qin Lihong. He added that number could surge by “several hundred thousand” over the next year, as customers take advantage of the flexibility afforded by a longer driving range at a relatively low cost.
• Still, senior vice president Shen Fei acknowledged that the move could put the company under “exponential” pressure to operate its consistently growing swapping network when it comes to the transport and allocation of battery packs across the nation (our translation).
• He cited an extreme case in which 100 kWh battery packs could be in short supply during hot weather in Beijing as owners travel to summer resorts. “I believe we’re well prepared, but we haven’t foreseen all the potential problems with this,” said Shen.
• Qin reaffirmed Nio’s efforts to double its number of swap stations to more than 2,300 by the end of the year, adding that the company has established 500 ultra-fast chargers since April, with a maximum power output of 500 kW and a maximum current of 660A.

Context: Nio owns and operates one of the largest recharging networks in China with 1,564 swap stations and 16,745 public chargers as of Thursday. It has swapped over 25 million EV battery packs, meaning a Nio car is starting up with a replenished battery pack every 1.6 seconds, said Qin.

• The automaker faced cashflow issues until recently when Abu Dhabi’s CYVN Holdings provided relief with a $1.1 billion investment. As a result it has scaled back production of its proprietary EV batteries. It cut prices of its vehicle lineups by RMB 30,000 ($4,199) on June 12, with year-to-date deliveries growing by 7.3% to 54,561 units as of June.

READ MORE: Nio bets big on battery swap stations amid growing EV price war

Denza, a luxury car subsidiary of Chinese electric vehicle maker BYD, released its first SUV model N7 on Monday, priced from RMB 301,800 ($41,705). The company said it has received more than 24,000 pre-orders since its public unveiling on April 18.

The N7 is also the first model equipped with BYD’s assisted driving technology and will be capable of navigating on complex urban roads in China early next year, general manager Zhao Chaojiang said during the press conference.

Why it matters: BYD’s latest launch shows its intention to elevate the brand and secure a foothold in the premium market. The budget-friendly automaker is hoping its sub-brand Denza will become a luxury marque, and the launch of the N7 is a crucial step towards achieving this goal.

• The N7 will also be seen as a test of the company’s aspirations and its ability to beat rivals like Tesla, Huawei, and Xpeng when it comes to autonomous driving features.

Intelligent driving: The top-end version of the N7 features a hardware suite of 33 high-precision sensors, including two 8-megapixel cameras and two lidar sensors, and is powered by Nvidia’s Drive Orin processor which offers 254 trillion operations per second (or TOPS). By comparison, Xpeng’s G6 features 31 sensors and Nvidia’s dual Orin chips.

• Denza also revealed that its advanced driver assistance system (ADAS) will cost RMB 23,000. It will allow cars to change lanes, speed up, and slow down on Chinese highways when it is updated in the last three months of this year and on city streets by next March.
• By comparison, Huawei-backed Aito and Avatr last week cut the price of their similar offerings in half to RMB 18,000. Both will roll out their assisted driving tech for urban scenarios in 45 cities by year-end, according to Richard Yu, head of Huawei’s consumer business group.

Other details: The N7 has a driving range of 702 kilometers (436 miles) and can be refueled with an additional 350 km of range in 15 minutes by BYD’s proprietary dual charging technology. For comparison, Xpeng’s G6 can travel 300 km on a 10-minute charge.

• The five-seater battery electric crossover is also among several new BYD models to adopt the company’s body control suspension system DiSus for a smooth ride on bumpy roads, with Zhao on Monday claiming the function can eliminate car sickness.
• Zhao also told Chinese reporters that around a third of the N7 reservations were from existing owners of German brands such as BMW, Mercedes, and Audi. Delivery of the vehicle is scheduled to begin later this month and the company expects monthly deliveries to reach 10,000 units as early as October.

Context: BYD and partner Daimler first unveiled the Denza brand in early 2012 two years after the set-up of a joint venture to develop EVs for Chinese consumers. Denza in late 2019 began selling the X, a seven-seater SUV with a starting price of RMB 289,800, which was discontinued two years later.

• In late 2021, BYD announced plans to restructure Denza as the company reached a deal to buy an additional 40% shares of the JV from its German partner, Reuters reported. Last August, Denza launched the D9 multi-purpose vehicle, its first model after the rebranding, with a starting price of RMB 329,800, and posted deliveries of nearly 80,000 units as of writing.
• China’s biggest EV maker has been aggressively entering the high-end market with a growing portfolio of luxury brands including Denza, Yangwang, and an upcoming sub-brand called Fang Cheng Bao. The first two models under the Yangwang brand were priced from RMB 1 million; Fang Cheng Bao will specialize in professional and personalized identities, according to the company.

Chinese electric vehicle makers Nio, Xpeng Motors, and Zeekr on July 1 reported significant volume gains in June after months-long dips amid intensifying competition. Nio’s aggressive price cuts and Xpeng launching new models have spurred each to improved numbers.

Although BYD remains the dominant player in China, Aion, Li Auto, and Great Wall Motor are emerging as rivals with enhanced technologies and competitive prices, with the sector’s intense competition showing no signs of easing anytime soon.

Why it matters: Jefferies analysts forecast an 8% monthly growth in the wholesale volume of new energy vehicles to around 774,000 units in June and a 20% sequential increase in foot traffic in the industry. 

• Still, the ongoing price war could intensify across the industry during the upcoming summer slow season, as global automakers such as BMW and Mercedes widen their retail discounts and compete on price, Jefferies analysts wrote in a July 1 note.

Major improvements: Li Auto crossed another monthly delivery threshold, reporting delivery of 32,575 plug-in hybrid crossovers to customers in June, up from the 28,277 units a month earlier. The automaker’s year-to-date deliveries of 139,117 units have already surpassed its total unit sales from 2022. Chief executive Li Xiang previously stated he expects that number to get to more than 40,000 units later this year.

• Great Wall Motor also saw strong growth last month, as sales of its new energy passenger vehicles, including pure electrics and PHEVs, surged 110% year-on-year to 26,643 units following the recent launches of its new Haval-branded SUV and six-seater Blue Mountain. Jefferies analysts said sales of the Blue Mountain reached a similar level to Li Auto’s L8 in some areas last month, citing information from dealerships.
• Nio’s delivery figures bounced back to 10,707 units in June, following two consecutive months of lackluster sales of less than 7,000 units. The firm’s June figures were buoyed by its recent price cut across all lineups. 
• Zeekr reported slightly fewer deliveries of 10,620 units last month when it began shipping its third model Zeekr X, a compact crossover with a starting price of RMB 189,800 ($27,590). This figure was up 22.4% from May.
• Xpeng Motors also saw a solid recovery in June with deliveries of 8,620 units, which marked a 14.8% growth from a month earlier. That figure was still 44% lower than a year ago, however, yet the company’s newest model G6 SUV might give it a chance to get further back on track. Jefferies analysts expected the G6, with delivery scheduled for this month, to “surprise on the upside” with monthly sales likely to reach more than 10,000 units.

Other results: BYD sold 253,046 EVs in June (of which 11,058 were Denza-branded multi-purpose vehicles), a new record compared to the 240,220 it achieved in May. The company had projected monthly sales of its D9 premium vans to reach 15,000 units and is set to begin sales of its second model, the N7 crossover, on Monday.

• Aion maintained its growth momentum and delivered 45,013 vehicles last month, slightly more than the 45,003 units it reached a month earlier. The EV arm of state-owned GAC Group is also moving upscale with the launch on Monday of its Hyper GT, a coupe with a price tag of RMB 219,900.
• EV startups Leapmotor and Hozon are still catching up in the sector, with June deliveries of 13,209 and 12,132 representing a mild growth of 9.5% and a 6.9% reduction from a month earlier, respectively. They’re followed by Changan’s EV brand Deepal with deliveries of 8,041 units.
• Huawei-backed EV brand Aito continues to face growth challenges in an increasingly competitive market, reporting deliveries of 5,668 units last month. That figure brings its total delivery numbers for this year to just 27,541 units.

Context: UBS analysts expect Chinese carmakers to continue market share gains as foreign rivals see a shrinking demand for internal combustion engine vehicles. Chinese EV makers “are acting fast in terms of new model launches, with a better understanding of consumer’s needs,” wrote UBS analysts led by Paul Gong on June 19.

Li Auto on June 17 unveiled details of its first purely battery-powered electric vehicle with an expected price tag of over RMB 500,000 ($69,955), claiming its supercharging facilities could give up to 400 kilometers (249 miles) of charge in less than 10 minutes.

The company also announced plans to release an automated driving function that it says will allow commuting drivers to relax their grip in urban traffic later this year, aiming to attract tech-savvy Chinese customers.

Why it matters: Li Auto is catching up with rivals in deploying advanced driver assistance systems (ADAS) at a faster pace than expected, which could be a key differentiator in the driving experience for the company, according to a June 18 note written by Jefferies analysts.

• The analysts added that the price range of Li Auto’s first battery EV would be in a “sweet spot” that could ease margin pressure in the future. The Chinese carmaker for now has three extended-range electric sports utility vehicles on sale.

First BEV: Named Mega, Li Auto’s long-anticipated first all-electric is a multi-purpose vehicle with a price range of RMB 500,000 and above, vice president Liu Jie said at a corporate event on June 17.

• Capable of traveling 400 km after 9.5 minutes of fast charging, the vehicle is scheduled for release later this year.
• Liu also spoke of the company’s goal for the Mega to become the top-selling vehicle in its price segment, regardless of vehicle type.
• Li Auto has set an initial goal of delivering 5,000 Mega vans per month, Chinese media outlet Jiemian reported, citing company insiders. By comparison, Geely’s premium EV brand Zeekr in May delivered 2,106 units of its 009 MPVs, priced between RMB 499,000 and RMB 588,000.

Driver assistance software: Li Auto also revealed plans to begin internal testing of its automated driving function for complex urban scenarios, called city NOA  (standing for Navigate On Autopilot), with a cohort of selected owners in Beijing and Shanghai later this month.

• Vice president Lang Xianpeng said the company’s deep learning model would enable vehicles to perceive their surroundings and make decisions similar to human drivers, as its growing fleet of software users has effectively driven over 600 million kilometers (373 million miles) to date.
• Lang added the cars would be able to navigate on fixed routes for daily commuters in big cities with heavy traffic after the initial two to three weeks of training with its collection of datasets. The function will be rolled out to users from 100 major cities by year-end via over-the-air updates.
• Some rivals have announced respective plans to compete for users with similar offerings. Xpeng Motors’ XNGP function for urban driving is available to owners in four major cities, while Huawei aims to release its Autonomous Driving Systems to Aito owners in 45 cities this year.

Second plant: The accelerated move to BEVs also comes as Beijing-based Li Auto recently received a green light to open its second plant in the nation’s capital, according to a document (in Chinese) released by the Ministry of Industry and Information Technology on June 16.

• The company will build its all-electrics in the RMB 6 billion factory later this year, state-owned media outlet Beijing Daily reported in late 2021. Built on the base of an old plant owned by Korean automaker Hyundai, the facility will have an initial capacity of 100,000 units annually.
• Li Auto currently has one factory in operation at a monthly capacity of 30,000 units in the eastern city of Changzhou. Its year-to-date deliveries exceeded 106,542 units as of May and chief executive Li Xiang expected its monthly delivery to reach a milestone of 30,000 units in June.

Nio announced aggressive price cuts on Monday. The unusual decision from the premium EV maker, which has previously refused to join the ongoing China EV price war, has drawn mixed reactions from experts, with some speculating on a significant sales recovery for the electric vehicle maker while others remain concerned about worsening margin pressures.

The Chinese EV maker on Monday decided to cut prices by RMB 30,000 ($4,199) across all its vehicle lineups, reversing its previous decision to keep pricing stable as part of “the DNA” of the premium brand. For instance, the base version of Nio’s ET5 sedan, once expected to be a high-volume model, now costs RMB 298,000 ($41,630) after the price cut, and RMB 228,000 if a customer chooses the company’s battery leasing plan, with a monthly battery lease fee of RMB 980.

Nio’s share price surged 8.7% on the news on Monday. But at the same time, the company’s gross margin hit a historic low of 1.5% in the last quarter, and the price reduction could further impact this figure. The company’s changing attitude toward price cuts comes at a time when it has faced a persistent delivery decline this year.  

Whether Nio’s lower-priced ES6 and ET5 cars prove to be popular could be the key to its very survival, as pressures mount on the smaller Chinese players in an increasingly competitive EV market. Nio’s deliveries in the first quarter fell by 22.5% to 31,041 vehicles from the fourth quarter last year; it also gave a weaker outlook for the second quarter: up to 25,000 units.

“Nio is playing a double sword game, and the outcome remains unknown,” said Yale Zhang, managing director of Shanghai-based consultancy AutoForesight.

Sales and efficiency boost

Nio’s recent price cuts could drive sales, especially in lower-tier Chinese cities where battery swap facilities remain inaccessible, according to Sun Shaojun, founder of consumer behavior research agency CarFans (our translation).

Sun expects the move, coinciding with the end of free battery swaps, to help Nio control costs and improve recharging network efficiency. Nio’s public chargers often lie idle as owners use the free swap service instead, Sun told TechNode on Monday.

Lei Xing, an auto industry analyst and former chief editor at China Auto Review, saw Nio’s decision as “a long overdue change” to better adapt to the environment, and the first step in a series of potential measures to save costs and improve efficiency. Xing added that Nio should also eliminate under-performing models from its overly large lineup.

Long-term uncertainty

In a market where most major EV makers are offering big price cuts in recent months, some experts are skeptical about the sustainability of Nio’s sale-boosting move.

Nio is anxious to reverse its declining sales trend and prevent further loss of market share from competitors such as Li Auto and some bigger players, AutoForesight’s Zhang said when contacted by TechNode. The price cuts will further damage Nio’s gross margins, as well as its ability to maintain its premium brand reputation long-term, added Zhang.

Xing thinks the price cut will help Nio deliver 180,000 vehicles this year, its current best-case scenario. Even this figure will fall short of an earlier prediction by the company: double last year’s unit sales of 122,486 cars.

“We believe there is an opportunity for us to still achieve deliveries of 20,000 units per month,” Nio chief executive William Li told analysts during an earnings call on June 9. “We need to make sure we can find a better way to meet user needs and expand their demands.”

Chinese EV makers saw a flat month overall in May, with 0% growth in the market from April. However, some EV makers are squeezing out growth more than others. BYD, Aion, and Li Auto managed to report monthly growth of around 10% to 14%, while Nio saw delivery figures sink to its lowest level in 12 months. Xpeng Motors and Zeekr look on track for a modest recovery. 

Why it matters: Total sales in China of new energy vehicles, including all-electrics and plug-in hybrids, were relatively flat in May despite an outstanding performance by major Chinese electric vehicle makers, highlighting the growing advantage of domestic players over foreign counterparts amid rising competition.

• Automakers mostly saw a slowdown in new order intakes and foot traffic at showrooms during the second half of May due to a new surge in Covid cases, weak consumer sentiment, and the phase-out of regional subsidies by some local Chinese governments, analysts at investment bank Jefferies wrote in a note on Thursday, citing Sun Shaojun, founder of auto consumer service platform Carfans.
• Sun expects a strong recovery during June and July, as multiple domestic players begin mass delivery of new models. Sales of passenger EVs were around 483,000 units during May 1-28, up 82% thanks to a low base from a year ago due to Covid lockdowns. However, May deliveries showed no growth from the previous month, according to figures from the China Passenger Car Association.

Strong growth: BYD reported a record high in monthly vehicle sales at 240,220 units, up 108.9% from a year ago and 14.2% from April. This was buoyed by price cuts from dealerships and the launches of multiple cheaper models, including the new Han and Tang models with smaller batteries and the entry-level Seagull. Its premium brand Denza also posted impressive results of 11,005 vehicles delivered.

• GAC’s EV unit Aion and EV startup Li Auto also hit new milestones with deliveries of 45,003 and 28,277 vehicles last month, representing a monthly growth of 9.73% and 10.1%, respectively. The two companies have set goals of selling up to 600,000 and 300,000 vehicles this year, which would more than double their totals from last year.
• Hozon and Leapmotor both reported strong May sales of 13,029 and 12,058 units, respectively, after announcing “price protection” measures in March to counter a months-long price war ignited by Tesla. Historically a budget carmaker, Hozon said it delivered 1,716 Neta GT sports cars, launched last month and priced from RMB 178,800 ($25,276).

Under pressure: Nio on Thursday revealed that its monthly delivery figures have fallen for four months in a row to 6,155 units in May, as fierce competition and an aging product lineup continue to weigh on the Shanghai-based EV maker. On May 24, the company began handing over its all-new ES6 crossovers to customers and said mass delivery of its redesigned ET5 sedans would begin later this month.

• Xpeng’s May delivery was 6% higher from a month earlier, as the EV maker began delivering the P7i, a revamped version of its popular P7 sedans in March. The modest growth was due to supply chain constraints, with chief executive He Xiaopeng recently telling investors the company would “significantly” ramp up production of the key components for P7i with partners in June.
• Geely’s premium brand Zeekr posted deliveries of 8,678 units last month, a 7% increase from April. Its new compact SUV, the X, is scheduled for delivery this month. Rival Deepal began shipping the S7, its second model, on Tuesday, with monthly deliveries of Changan’s EV marque reaching 7,021 units in May, a 9.5% decline from April.
• Aito’s sales rose 22.8% month-on-month to 5,629 units in May. The Huawei-backed EV maker began selling a top-end version of its M5 plug-in hybrid crossover equipped with Huawei components and software for automated driving in April, with delivery scheduled to begin on June 18. Meanwhile, sales of Dongfeng’s EV unit Voyah fell 10.1% to 3,003 units from a month ago.

Chinese electric vehicle battery maker CALB is reportedly withdrawing job offers to fresh college graduates who signed contracts late last year to join the company full-time this summer, Caixin reported. The company attributed the move to “changing market conditions” as it attempts to address customer demand.

Why it matters: The decision by Hong Kong-listed CALB, China’s third-biggest battery maker by volume, reflects growing pressure in the world’s biggest auto market as fierce competition and concerns of a slowdown have seeped into the EV supply chain.

Details: At least five “class of 2023” graduates who signed employment contracts with CALB were told the battery maker had rescinded its offers, according to Caixin. Having signed up in October 2022, the students were due to start work in July, but have now instead received a payment of RMB 3,000 ($424) in compensation. 

• The company said the move was necessary to ensure it could adapt to new circumstances in light of “chances and challenges going forward” in the EV industry.
• All of the company’s seven manufacturing facilities in China have taken back some of their job offers to fresh graduates, according to Caixin. 
• The report did not say how many of the firm’s graduate hires were affected but that hundreds of people had started chats on messaging platform QQ to share information.
• CALB did not immediately respond to TechNode’s request for comment.

Context: CALB’s shares slipped 6.8% to HKD 17.1 on Monday following a 4.28% fall on May 26, taking its market capitalization to HKD 30.3 billion ( $3.9 billion), down more than 50% from last October, when the company went public in a HKD 10.1 billion deal in Hong Kong.

• CALB mainly focuses on the Chinese market, with overseas revenue only accounting for 1.5% of its total last year. 
• CALB generated RMB 20.4 billion in revenue in 2022, triple its revenue from the previous year. A major supplier to Chinese carmakers GAC and Xpeng Motors, CALB is the third-largest battery maker in China. 
• Manufacturers in China collectively sold the equivalent of 25.1 gigawatt hours (GWh) of batteries in April, representing a 9.5% decline month-on-month, according to figures released by China Automotive Battery Innovation Alliance (CIBIA).

Nio on Wednesday launched a new version of the ES6, the brand‘s top-selling SUV. The EV maker has priced the new vehicle from RMB 368,000 ($52,027) and said it offers a driving range of 930 kilometers (578 miles) with its new 150 kWh solid-state battery pack. 

Why it matters: First launched in 2018, the ES6 has long been Nio’s top seller and performed strongly in China’s electric SUV category. The new version of the ES6 has the potential to become a high-volume car for the luxury automaker, which has faced slow growth as more established automakers enter the EV sector.

• Nio first unveiled details of its 150 kWh battery packs in January 2021, when the company claimed the battery would use a solid electrolyte instead of the liquid electrolyte found in existing offerings, providing high energy density and improved safety.
• The EV maker initially planned to deliver its ET7 sedans with the battery pack in the fourth quarter of 2022. However, in September 2022, CEO William Li told investors during an earnings call that production would be delayed “for several months.”

Details: The new ES6 with a 75 kWh battery pack is on sale for RMB 368,000 ($52,027) and offers a 490 kilometer driving range. The 100 kWh battery pack version is priced at RMB 426,000, offering a 625 kilometer driving range. Delivery began immediately after the launch on Wednesday night.

• The price of the ES6 can be reduced to RMB 298,000 if buyers choose Nio’s “Battery-as-a-Service” program, but they will have to budget in a monthly RMB 980 battery leasing fee. 
• The company did not reveal the pricing for the 150 kWh version of the new ES6, but CEO Li promised that delivery would begin in July during an online press conference on Wednesday, without providing any further details.
• The compact SUV can accelerate from 0 to 100 km/h (62 mph) in 4.5 seconds and has a dedicated computer to control chassis components, which the company said would improve the car’s balance and control.

Context: The five-seater ES6 has been Nio’s most popular vehicle model since it was first introduced in December 2018 and was the top-selling electric SUV in 2020, according to figures from the China Passenger Car Association. Nio has delivered more than 120,000 units of the original ES6 as of writing.

• The company currently has seven models on sale and covers a price range between RMB 300,000 and RMB 650,000. Li said it had set a target to double the company’s delivery volume from the 122,486 units it achieved last year.
• However, it delivered just 31,041 vehicles for the first three months of this year amid fierce competition, a 20.5% increase from a year earlier but a 22.5% decline from the previous quarter. By comparison, peer Li Auto delivered 52,584 units over the same period.

With its peak daily order volume for food deliveries surpassing 60 million last year, Meituan continues to sit pretty at the top of the tree when it comes to China’s local life services sector. The app spans everything from movie tickets and restaurant bookings to medical appointments, and recorded a total of 677.9 million users making transactions in 2022.

Yet Meituan’s dominance is increasingly facing challenges. Major Chinese companies including social media platform Xiaohongshu and ByteDance-owned TikTok sibling Douyin have been making inroads into the local life services market as Covid restrictions have eased. By linking consumers with nearby service providers or merchants and encouraging them to make purchases digitally before going to have the experience offline, these newcomers are looking to such transactions as a way to monetize their huge user bases.

For the moment, Meituan claims to be unperturbed. Meituan CEO Wang Xing described Douyin’s expansion into food delivery as having “a limited impact” on the company during its Q1 earnings call. However, the delivery platform recently made takeout livestreaming a monthly event and has launched group-buy delivery services in what many see as a bid to stay competitive in the face of these new entrants.

The total size of the local life services market is expected to reach RMB 35 trillion in China by 2025, though its online penetration rate was only 12.7% in 2021, according to data from Chinese research firm iResearch and cited by Chinese media outlet 21jingji, meaning there’s still plenty to play for.

Here’s a short introduction to new players in this vibrant market.

Xiaohongshu

Experience-sharing lifestyle platform Xiaohongshu, the latest major entrant to this competitive sector, has over 260 million monthly active users. The platform has maintained a thriving user base and sense of community for years and serves as a lifestyle search engine for many of its users. Now, it is making one of the biggest moves in the local life sector.

Xiaohongshu is currently inviting caterers and service providers to test the sale of group-buying packages on its platform. Participating merchants can sign up without paying a deposit or commission to Xiaohongshu for revenue earned through the service, according to tech media outlet GeekPark. Meanwhile, the platform’s influencers are able to earn commission by posting information about retailers that offer group buy options.

If the Shanghai-based company can leverage its feed algorithms while encouraging users to complete transactions within the app, it may see Xiaohongshu emerge as a serious challenger to Meituan, while also accelerating the company’s monetization quest. In 2020, 80% of Xiaohongshu’s revenue was generated by ads, the Financial Times previously reported, citing research firm LeadLeo, but the company is increasingly looking to diversify its revenue streams.

READ MORE: Xiaohongshu bets on e-commerce livestreaming to accelerate monetization: report

Douyin

Douyin has made significant strides in expanding its presence in the local life market, with its services sector reportedly generating over RMB 77 billion ($11.1 billion) in total sales last year, while advertising revenue amounted to just RMB 8.3 billion.

Growth in the platform’s brightest business continues to be strong. Local media outlet 36Kr reported that the unit generated more than RMB 10 billion in GMV in every single month in the first quarter of this year.

The TikTok sibling app has expanded its offerings to include group-buy delivery, sightseeing tickets, hotel reservations, and manicures in recent months. In mid-2022, Douyin allowed short video viewers to order meals directly on the app through a mini-program operated by Alibaba’s food delivery service Ele.me. In March, the service was introduced to 15 new cities, expanding the service to a total of 18 locations in China.

These efforts reflect the fact that ByteDance, Douyin’s owner, is stepping up its push to monetize users on the widely popular platform.

The head of Douyin’s local life business, Zhu Shiyu, recently stated that life services was a vast market worth more than ten trillion yuan, and that only a small proportion of transactions were currently being conducted online.

Kuaishou

Kuaishou, another leading short video-sharing platform in China with 366 million daily active users, has been expanding its presence in the local life services space in an effort to also capture market share, although it currently has less of a presence than rivals Douyin and Meituan.

Kuaishou had been active in offering lifestyle services in Shanghai, Qingdao, and Harbin, with Hangzhou the next major city to see local services rolled out. Kuaishou aims to provide local life services for different cities through a replicable model developed through experimentation. The short video operator incentivizes local merchants to sign up for the service while supporting local influencers who are willing to promote shops on the app.

Xiaogu, head of Kuaishou’s local life business unit, noted that since it entered the Qingdao market on Feb. 10, it has added over 300 local businesses. Kuaishou reportedly recorded around RMB 5 million in local sales in the seaside city in its first month, and already saw some influencers generate around 200,000 yuan in a single month.

Traditional Chinese automakers GAC and Geely, along with market leader BYD, have reported impressive electric vehicle delivery figures in April, taking market share away from young competitors such as Nio and Xpeng. 

Why it matters: April deliveries show the growing importance of traditional auto manufacturers in the Chinese EV market, putting additional pressure on EV upstarts, especially Nio and Xpeng.

Details: BYD has maintained its dominant position as sales nearly doubled to 210,295 vehicles in April from a year earlier. In particular, it sold 10,526 units of the Denza D9, a multi-purpose vehicle under its premium brand Denza, surpassing the threshold of 10,000 units for a second month.

• GAC’s EV unit Aion has also enjoyed strong growth momentum with sales of 41,012 units, representing a year-on-year increase of 302%. Li Auto also saw impressive growth, becoming the top-performing brand among EV startups with reported deliveries of more than 20,000 vehicles for a second consecutive month in April.
• More traditional Chinese manufacturers, namely Geely and Dongfeng, showed small but gradual rises. Geely reported deliveries of 8,101 of its Zeekr-branded vehicles, up 22% from the previous month. Dongfeng’s Voyah family cars reported 3,339 deliveries, a 10% growth from the previous month.  
• Meanwhile, deliveries of Changan’s EV arm Deepal declined by 9.5% to 7,756 units from a month ago. Yet, that number surpassed those of Nio and Xpeng for the first time following the launch of the brand by Ford’s manufacturing partner last April.
• Nio and Xpeng now face serious pressure. Xpeng saw relatively flat deliveries of 7,079 units for the month, although the automaker has managed to stall the delivery declines that began late last year, thanks to the launch of its revamped P7 sedan in late March, which began to offset the slump in sales of its G9 crossovers.
• Nio’s April deliveries plunged by 36% month-on-month to 6,685 units. Speaking on the sidelines at the Auto Shanghai show last month, president Qin Lihong said the company is in a period of model transition, clearing out most of its older models and still racing to introduce redesigned and new models.
• Seres did not reveal the numbers for its Aito brand. However, a total of 4,585 units were handed over to customers last month, according to data obtained by Chinese financial media outlet Caijing. The Huawei-backed car brand delivered 16,244 units from January to April.  
• Hozon and Leapmotor have settled into a period of steady growth, with deliveries of 11,080 and 8,726 vehicles, respectively. Both companies are increasingly focusing on higher-price segments rather than the budget offerings they are known for. Leapmotor said its pricier C series accounted for 83% of April’s sales.

Context: Established Chinese automakers commanded 67% of the country’s passenger EV market in March, a 6% increase from a year ago, according to figures published by the China Passenger Car Association. For “new forces,” which refers to younger EV startups, market share declined by 6.7% annually to 10.4%. In addition, Tesla took a 14.1% market share in China.

• The CPCA has yet to reveal detailed April figures but estimated on April 25 that passenger EV sales would decline by 8.4% month-on-month to roughly 500,000 units, as the market faced disruption from the recent price war and continued to slowly recover from the Covid-19 pandemic.

BYD on Thursday reported strong revenue growth in its first quarter, with net profit up 410% from last year despite concerns about slowing demand following a Covid-hit 2022. The EV giant’s profit growth is slowing, however, and was down 43.5% from the previous quarter due to an ongoing national price war and a rush of purchases before subsidies were ended late last year. 

Why it matters: BYD’s figures reflected a broader trend of growing competition and shrinking profits for automakers in China, as car brands were hit by the phasing-out of electric vehicle subsidies and a price war started by Tesla’s price cuts. BYD continues to lead the sector however, with a 35% share of the country’s electric vehicle market. 

Details: China’s biggest electric car maker said on Thursday it made RMB 4.1 billion ($597 million) from January through March, representing an impressive surge of 410.9% year-on-year, but a 43.5% drop from the previous quarter.

• The firm’s profit margin also fell slightly from 19% in the fourth quarter of 2022 to 17.8%, as it was hurt by Beijing’s subsidies cuts and its reduced sales volume, Jefferies analysts wrote in a Friday report.
• Sales nearly doubled from a year ago to 552,100 vehicles during the period, although that number represented a decline of 19% from the previous quarter. January and February are traditionally low seasons due to the Lunar New Year holidays.
• The Chinese auto giant is significantly ramping up its spending on research and development, with R&D expenses jumping 164.2% annually to RMB 6.2 billion during the first quarter, close to rival automaker Geely’s spend of RMB 6.8 billion for the entirety of last year.
•  Analysts expected the automaker’s profitability to recover as lithium prices began falling after a strong two-year run, and its dominance in the mainstream car segment could continue on better cost control.

Context: China’s auto industry has faced downward pressure as general passenger car sales declined 4.5% from last year to 4.9 million units in the first quarter of this year. 

• Industrial profit from the automobile manufacturing sector dropped 24.2% over the same period from a year ago, according to data from the National Bureau of Statistics.
• Sales of Volksagen’s partner SAIC fell 27% annually to around 891,200 units in the first quarter. At the same time, Chinese automaker Great Wall Motor reported RMB 217 million in net loss.
• BYD is among the Chinese automakers forced to match Tesla’s repeated aggressive price cuts to maintain their sales volumes. On March 16, BYD launched a new version of its popular Han sedan priced from RMB 209,800. Previously, the cheapest version cost RMB 269,800.
• The company on Wednesday began selling the Seagull budget car with a price range of between RMB 73,800 and RMB 89,800. At the same time, BYD is also venturing into the ultra-luxurious sector, recently announcing pre-sales of the U8, an off-roader from its Yangwang brand, for a little over one million yuan. 

As China’s car industry quickly embraces new energy vehicles, the country’s tech giants and startups are competing head-on with established global auto parts manufacturers to help automakers develop unique in-car software experiences and assistant driving features.  

Tech majors like Huawei and Baidu are positioning themselves as automotive suppliers by providing comprehensive software systems along with a full range of electronic components for the smart, connected, and electric vehicles of the future. Meanwhile, global tier-1 suppliers Bosch and Continental are localizing more of their tech capabilities to adapt to the fast-changing Chinese market.

Here’s a roundup of some of the upcoming automotive tech that debuted at this year’s auto show in Shanghai.

Baidu: Seeking long-term ties with carmakers

Two years after setting up a dedicated unit to develop self-driving tech for consumer cars, Baidu made a strong commitment to automakers by declaring itself their “best partner” in smart, electric vehicles in China in a statement made on April 16 ahead of this year’s show.

Low-cost deployment is one of its major selling points. The search engine giant launched the Apollo City Driving Max on April 16, claiming it is by far its most powerful advanced driver-assistance system (ADAS). The AI giant also claims that the new system is the only pure vision-based approach for automated driving on Chinese urban roads, meaning it operates without the use of pricier lidar sensors.

Baidu also introduced its new high-definition mapping technology at a relatively lower cost than rivals, adopting a crowdsourced approach to compile map data to help EVs get around by themselves. “This is unique to Baidu,” said corporate vice president Rob Chu. The company expects such efforts to pay off in the long run, allowing it to form consistent and reliable partnerships with auto manufacturers.

Huawei: Competing against Tesla’s software offerings 

Huawei has had a bumpy ride after making a splash at Auto Shanghai 2021 with the public debut of its assisted driving technology, as two of its major manufacturing partners – BAIC’s Arcfox and lesser-known Seres – have both found themselves facing lackluster sales.

On April 16, the technology giant unveiled the second generation of its Advanced Driving System, which was designed to let vehicles navigate not only on highways but also around complex city streets like Tesla’s full self-driving beta software. Huawei’s consumer business head Richard Yu made the announcement in Shanghai, claiming that the Chinese telecom firm has surpassed Tesla in handling on- and off-ramps among other traffic scenarios, according to its testing results.

The system will be released to users in at least 45 Chinese cities by the end of this year, where high-definition mapping services are currently unavailable to them.The system was built upon multiple sensors and cameras to reduce the reliance on mapping. A high-end version of the Aito M5 electric crossover is the first model to adopt the technology, while the Avatr 11, co-developed by Huawei and its partners Changan and CATL, and the Arcfox Alpha S will also adopt the system. 

Bosch: Chinese OEMs a major growth driver

German auto supplier Bosch debuted its fourth-generation computing platform for in-car entertainment at the Shanghai auto show, highlighting the ongoing trend of cars relying on software to differentiate themselves in a crowded marketplace.

Entirely developed by its Chinese team, the information domain computer has undergone four upgrades over the past two years, facilitating automakers’ fast and customized development of in-car applications, according to Dr. Markus Heyn, chairman of Bosch’s mobility solutions business sector. This also enables vehicle owners a seamless and smart cockpit experience both in the vehicle and on the cloud.

Heyn said he was personally impressed by the wide range of new brands and electric vehicles that are on display at this year’s Auto Shanghai. “I am extremely proud that Bosch is a part of this rapidly growing and evolving industry and serves as a global partner for our customers in China,” added Heyn. Chinese original equipment manufacturers (OEM) accounted for nearly 60% of the mobility solutions business sector of the engineering group’s total sales in China last year.

Continental: Keeping up with China’s fast transition to EVs

Continental on Wednesday showcased for the first time a high-performance computer that is capable of assisted driving and body control, giving carmakers a more agile process of software development. More than 30 new vehicle models will be using Continental’s supercomputing solution by 2024, the company said, with GAC’s EV unit Aion becoming one of its early adopters.

The German auto parts maker sees standardization as a strength in keeping up with China’s fast transition towards smart EVs. The company set up a joint venture with local startup Horizon Robotics back in late 2021.

“A lot of the cost in ADAS is coming from developing specific software. We figure out what is a common part and roll out standard components in a fast and cost-competitive way, and then we add some specific functions to make a difference,” said Frank Petznick, head of the autonomous mobility business area at Continental. “I think this is the key [to success] in China and many Western companies have not understood that yet.”

Horizon Robotics: Landing BYD as a major client

This year’s Auto Shanghai also reflected the rise of domestic suppliers. Horizon Robotics is one of the Chinese suppliers helping auto companies to secure their supply chain and reduce costs. Horizon said on Tuesday that it will team up with Chinese EV leader BYD to develop software and hardware systems for automated driving to use in the latter’s cars.

Multiple BYD cars will be manufactured later this year based on Horizon’s Journey 5, which is made specifically for computing in connected and intelligent vehicles. The move marks “a significant achievement” in the two companies’ strategic collaboration since 2021, according to Dr. Yu Kai, founder and CEO of Horizon Robotics.

Backed by a list of auto majors including Volkswagen, Horizon already supplies tech to automakers including Geely and Li Auto. The company also announced a partnership with EV maker Hozon Auto on Tuesday to build assisted driving platforms set to hit the market as early as 2024.

Chinese automaker Geely on Wednesday launched the Zeekr X, a compact luxury SUV under the electric vehicle brand Zeekr. The model is Zeekr’s third model and highlights the brand’s ambition to compete in the luxury car segment.

Why it matters: The sales of the new model could influence Zeekr’s goal to go public in the US and establish itself in Europe.

•  The Zhejiang-based automaker will begin entering the European market with the new model and 001 hatchback sedan, Andy An, Geely’s president, and Zeekr’s chief executive told reporters during a press event on Wednesday.

Details: With a starting price of RMB 189,800 ($27,590), the Zeekr X is positioned as a compact luxury crossover touting high-performance features such as fast acceleration and flexible interior space that can offer customized configuration.

• The high-end Zeekr X features twin electric motors with a power output of up to 315 kW, allowing the vehicle to accelerate from 0 to 100 kilometers per hour (62 mph) in 3.7 seconds.
• That is quicker than German offerings such as the Audi Q4 e-tron (6.8 seconds) and BMW’s M240i (5.3 seconds) and comparable to the dual-motor version of Tesla’s Model X (3.8 seconds).
• The automaker also introduced a novel, flexible interior design, such as allowing users to change the car’s central armrest into a slideable console box, helping the driver to move across the front passenger seat to get off in tight parking spaces. 
• Users can also fold up the back seat to transform the rear seating area into a new storage space. The car offers multiple seat adjustments and other luxury amenities, including a 14.6-inch infotainment screen.
•  The exterior design of the new car is also a stand-out, using designs usually seen in concept cars, such as integrated door handles, borderless rear-view mirrors, and a hidden charging cover. 
• The Zeekr X crossover will have a driving range of up to 560 kilometers (348 miles), similar to that of the Smart #1, a small electric car jointly made by Geely and Mercedes-Benz. Delivery is scheduled to begin in June.

Context: The compact SUV could be a key test of Geely’s ambition to evolve from a budget-friendly mainstream carmaker to a global luxury EV maker.

• Geely’s internal plans call for sales of 40,000 Zeekr X SUVs this year, as part of its 140,000 annual delivery target for the premium EV brand, which was launched in early 2021. The Volvo’s parent also operates several other luxury brands such as Lotus and Polestar.
• However, Zeekr is still far from reaching its goal, delivering a total of 15,234 units during the first three months of this year, including its 001 sedans and the 009, a multi-purpose vehicle with an average selling price of RMB 527,000 amid growing pressure from rivals from Tesla to peer BYD.

Chinese electric vehicle makers posted a slight increase in monthly deliveries in March, boosted by industry-wide price cuts since early this year. However, the gains were minimal and uneven, bolstering the market’s view that competition will remain fierce, with dwindling margins amid weakened demand.

Why it matters: Retail sales of Chinese passenger EVs during March 1-26 rose slightly by 10% from last year and just 1% from a month earlier, according to figures from the China Passenger Car Association. Meanwhile, overall sales of Chinese passenger cars declined 1% year-on-year and 17% month-on-month. BYD and GAC’s Aion still lead in deliveries, while Li Auto continues to outperform EV startup rivals Nio and Xpeng. 

• China’s auto industry is in a period of transition. New energy vehicles are fast growing but many brands have yet to achieve profitability, while gas cars are still profitable despite declining sales, Ouyang Minggao, a member of the Chinese Academy of Sciences, said at an industry forum on April 2.

Details: BYD said on April 2 that sales almost doubled from March last year to 207,080 units, reflecting its growing dominance in the country’s EV market. Notably, the giant manufacturer saw strong gains for its premium marque Denza, sales of which increased 42% month-on-month to 10,398 units.

• GAC’s EV arm Aion reported sales of over 40,000 units last month, marking the first month in which deliveries exceeded the critical threshold. On March 7, the company began selling a more affordable version of its compact crossover Aion Y, lowering the starting price of the model by 17% to RMB 119,800 ($17,380).
• Li Auto has maintained strong growth momentum due to the popularity of its L series family sports utility vehicles, delivering 20,823 units in March. The automaker aims to deliver as many as 30,000 vehicles per month in the second quarter of the year, as delivery of its entry-level L8 and L7 crossovers begin in April, chief executive Li Xiang told investors on Feb. 27.
• Other US-listed EV makers posted a relatively weak performance. Having stuck to its pricing strategy despite demand concerns, Nio said March deliveries fell by 15% from a month earlier to just over 10,000 units. Xpeng’s March deliveries grew by 16.5% sequentially to 7,002 units, boosted by sales of a revamped version of its popular P7 sedans.
• Hozon reported flat March deliveries of 10,087 units, while rival Leapmotor said that number increased 93% to 6,172 units. Both companies are among a group of automakers that recently assured customers no price cuts were on the horizon.
• Changan’s EV marque Deepal said sales more than doubled to 8,568 vehicles last month after offering customers cash incentives of RMB 22,000 from March 10. That number of Geely’s premium EV brand Zeekr rose 22.1%, boosted by an incentive package worth RMB 80,000 launched on March 16.
• Huawei is under bigger competitive pressure, as manufacturing partner Seres reported lackluster sales of 3,679 vehicles in March. Its accumulative sales surpassed just over 11,000 units during the first quarter of this year. The Chinese tech giant on March 31 reassured carmakers once again by saying it would not manufacture cars on its own.

Context: Ouyang from the Chinese Academy of Sciences suggested Chinese carmakers develop both all-electrics and plug-in hybrid EVs in the next ten years, as the latter is normally equipped with smaller battery packs and therefore less affected by the volatility of raw material prices.

• Speaking at this year’s China EV 100 forum in Beijing, he estimated that plug-in hybrids could take nearly half of the Chinese EV market in 10 years from last year’s 22%.

Nio announced on Tuesday that it has begun deploying its latest generation battery swap facilities as part of an aggressive expansion plan to double its recharging network to more than 2,300 swap stations and 24,000 chargers across China this year.

The electric vehicle maker expects its expensive bet on power infrastructure to put it ahead of competitors amid a fierce price war, as most owners are turning to battery swapping as the main solution to refuel their EVs, senior Nio executives told TechNode.

“Many users can never have home chargers in China so they choose our vehicles for the battery swap technology,” senior vice president Shen Fei said on March 23 in Shanghai. “Rather than lowering vehicle prices, we prefer offering users an excellent recharging service and driving experience.”

Grappling with flat sales amid growing pressure from larger rivals, Nio is hoping the battery swapping stations can help achieve its annual delivery goal with greater service capacity. The move could also pave the way for the release of its mainstream sub-brand scheduled for 2024, according to executives.

Third generation swap station

Unlike many of its rivals, Nio has long preferred swapping over charging. Swapping stations give drivers a fully-charged battery pack in a few minutes compared to varying charging wait times, which can range anywhere from 30 minutes to several hours. But the former tends to come with a higher price tag to the provider, given the more complex infrastructure and equipment. 

On Tuesday, Nio announced that its third generation power swap station could offer up to 408 swaps per day, an increase of 30% compared with the previous generation. Each swap takes less than five minutes, meaning 20% less time spent for users.

Shen said that 90% of the 1,000 swap stations in the pipeline this year would comprise the latest version, creating the possibility of serving different brands – both those under the Nio umbrella, including the forthcoming Alps sub-brand, and those of other carmakers if compatible. The latest swap facility features the potential to accommodate more vehicle models with wheelbases between 2.8 meters and 3.3 meters, an increase from the upper limit of 3.1 meters of the previous generation.

Meanwhile, Nio is pushing for more hybrid locations that will include a swap facility and a number of charging piles. Such an approach could almost double the service capacity of existing charging stations offered by competitors with a field of the same size and for the same grid capacity, allowing the station to offer both swapping and charging during peak hours and charge batteries for future swaps during off-peak hours, Shen added.

The company did not reveal how much it would cost to manufacture and operate the latest version of its swap station. “The value is more important than its cost,” said Shen.

‘Power swap district’

For some Nio buyers, battery swapping (although a capital-intensive approach) is the reason they choose Nio over other EV brands since many have difficulties installing private chargers.

A Shanghai owner surnamed Dai picked Nio’s ET5 over Xpeng’s G9 late last year after finding he couldn’t set up a home charger in his residential area due to load safety considerations. Citing other reasons, such as vehicle design and customer service, Dai told TechNode he was also impressed by the fact that there are at least two Nio swap stations near his office.

Dai is among the Nio owners living in a so-called “power swap district,” a term coined by the company to describe areas where drivers have a swap facility within three kilometers of their residential or office buildings.

The EV maker said that at least 68% of Nio owners live in a “power swap district,” and the final goal is to push the proportion to 90% across the country. “Some of our users still have places 10 kilometers (6.2 miles) away from a swap station, and I believe we owe them one,” said Shen.

Nine-year-old Nio expects battery swaps to create a model for its luxury car business and underpin its goal of delivering 250,000 vehicles this year. One of the key focuses in 2023 for Nio will be the expansion of its infrastructure to Chinese lower-tier cities, as long as each city has a base of around 100-200 users, according to Shen.

READ MORE: Nio ramps up charging and battery swap network as execs remain bullish on 2023 growth

BYD is setting up separate divisions with corresponding executive appointments and dedicated operation teams for each brand under its diverse portfolio in a move to improve efficiency and boost internal competition, local media outlet 36Kr reported.

Why it matters: The move comes as BYD pursues a wider customer base, especially in the luxury car segment, rolling out several new brands and offerings. The firm is also seeking to maintain its leadership of the Chinese electric vehicle space amid rising competition.

• The automaker originally set an ambitious sales target of 4 million units this year, which will more than double 2022’s number, financial media outlet Caixin quoted chairman Wang Chuanfu as saying. The company later declined to provide a guide figure for 2023, citing multiple challenges.

Details: Early this year, BYD carried out a reorganization under which its Dynasty, Ocean, and Denza series would be run as separate units in terms of vehicle development and project management, 36Kr reported on Friday, citing people familiar with the matter.

• The Chinese manufacturer has named executives, mostly existing automotive program directors or heads of the respective businesses, to lead each unit, calling them “brand research and development institutes” (our translation).
• Each team should be able to better allocate resources with its own leadership structures and profit-and-loss statements while maintaining access to company-wide vehicle technologies, the report said, adding that the new structure has also been adopted by rival carmakers such as Geely.
• BYD has implemented various measures to streamline operations and boost internal competition since last year, such as revamping its evaluation scheme for employee performance and letting go of those with the lowest grades, according to the report.
• BYD did not respond to TechNode’s request for comment.

Context: China’s top EV maker by sales volume has been quickly expanding its product offerings to a broader range of vehicle types than the affordable, down-to-earth offerings it has traditionally marketed.

• BYD debuted the first two models under its high-end Yangwang brand at the beginning of 2023 and is on track to set up another premium, more personalized brand (codenamed F) later this year. Both new brands will have showrooms independent of BYD’s existing sales networks.
• The company also operates Denza, a mainstream luxury brand initially co-developed by the Chinese carmaker and Daimler in 2010 and which posted sales of 9,803 D9 multi-purpose vehicles as of December, five months after its launch. Denza is expected to introduce two new electric crossovers this year.

Nio and Li Auto this week reaffirmed plans to stick to their pricing strategy, bucking an industry-wide trend of significant price cuts in China initiated by Tesla and followed by dozens of auto majors from Toyota to Volkswagen. The young electric vehicle makers are looking to protect their superior brand images and achieve profitable growth despite concerns of a slowdown in sales in the short run, according to industry observers.

Why it matters: The ongoing price war in the Chinese auto market has created an unhealthy situation, as it might cause a growing number of consumers to wait on the sidelines in anticipation of further price reductions, UBS analysts told investors in a Wednesday note.

• Sales in provinces with local subsidies such as Hubei could see a temporary boost, wrote analysts led by Paul Gong. However, they also cautioned that for many companies, their brand premiums could be negatively affected, making it more difficult to sell their cars at normal prices in the future.
• China’s passenger EV sales increased 9% year-on-year to around 131,000 units during March 1-12, while total retail sales of passenger cars declined 17% against the same period last year to around 414,000 units, according to figures published Wednesday by the China Passenger Car Association.

No price cuts planned: Nio has no plans to cut prices for, or release affordable versions of, its flagship models to counter recent price cuts by competitors, Pu Yang, assistant vice president of sales operations, told Chinese reporters on Tuesday. A Nio spokesperson confirmed the report.

• In-store visits to Nio showrooms over the past weekend rose to a new three-month high, according to Pu, who added that some potential customers are holding off on purchases and waiting for prices to stabilize, which has affected order intake.
• Nio will compete for a larger market share by offering competitive prices in the premium car segment and shoring up services with the expansion of its battery swap facilities, Pu said, citing the strength of its products and brands.
• Nio’s domestic sales declined to 2,170 units during the week of March 6-12 from 3,345 units a week earlier, according to figures compiled by Chinese auto trade media outlet EV Observer. In comparison, Li Auto’s sales grew by 32% to 4,243 units during the same week.

Protection against price cuts: Li Auto also made a related move on March 11 by offering a price guarantee on its EVs until the end of the month to reassure customers that no price cuts are on the horizon. CEO Li Xiang said on March 2 that the company would stand by its pricing strategy.

• Four car brands are following suit. On Monday, Denza, BYD’s premium EV brand, announced an upfront price protection program through which it will give customers a rebate if there is a price reduction for its D9 multi-purpose vehicles within 90 days of purchase. This comes soon after the company slightly raised the price of its electric minivan to RMB 395,800 ($57,302) on March 1.
• Lynk & Co, owned by China’s Geely Auto Group, as well as younger makers Hozon and Leapmotor, had made similar moves as of Thursday. However, on Feb. 27, Lynk & Co began selling a cheaper version of its 01 models, which will be available until the end of April at a price of RMB 159,900, an 11% reduction compared to the 2023 version of the hybrid crossover.

An all-out price war: China’s car price war was in full swing last week when state-owned manufacturer Dongfeng Motor slashed the prices of some models, such as the Citroen C6, by up to RMB 90,000, with the help of incentives from the government of the central Hubei province.

• At least 30 domestic and international carmakers have joined the fight, Bloomberg reported. SAIC-Volkswagen on Monday announced a massive cut of up to 20%, or RMB 40,000, for EVs under the German automaker’s ID family, SCMP reported. Meanwhile, some local BMW dealers reportedly offered a discount of as much as RMB 100,000 on its i3 sedans.
• Experts cited excess inventory of gas-powered vehicles, waning competitiveness of joint brands by Chinese makers and their overseas partners, and Beijing’s full implementation of new emission rules this July as reasons for the price reductions. Analysts from China’s Huatai Securities expected most price campaigns to last until the end of March.
• Multiple EV makers have been tempted to follow Tesla’s lead and reduce the prices of their vehicles since late last year when the US carmaker launched price promotions to boost sales. This was followed by a reduction of up to RMB 48,000 on select models early this year, forcing rivals from BYD to Xpeng Motors to lower their prices to stay competitive.

READ MORE: Chinese EV makers rush to offer big incentives as sales slide

Hozon, a Chinese electric vehicle maker backed by CATL, broke ground at its first overseas car plant in Thailand on Friday, as the company eyes growing demand for green vehicles in Southeast Asia.

Why it matters: The move is the latest example of Chinese automakers looking to crack global markets and find new revenue sources while dealing with increased competition and weakening demand at home.

Details: Hozon announced on Friday that construction of the company’s first overseas factory, located on the northeast side of Bangkok and due to have an annual capacity of 20,000 vehicles, has started, with mass production set to begin in January 2024.

• The Thailand plant will be built with local partner Bangchan General Assembly Co., Ltd. and become a major base to produce and export right-hand-drive EVs to ASEAN countries, according to chief executive Zhang Yong.
• Also known as Neta Auto in China, Hozon aims to sell 10,000 vehicles in Thailand as part of its goal of selling 300,000 vehicles this year. The company also has plans to enter the Middle East and Europe, though it has not revealed further details.

Context: Hozon began selling its third production model, the Neta V, in Thailand last August, marking its entry into the country’s growing EV market.

• Sales of the entry-level crossover reached 1,809 units in Thailand in the first two months of this year, making it the second best-selling EV model in the country following BYD’s Atto 3, according to figures compiled by Autolifethailand.
• Thailand reported total sales of 8,515 EVs over the same period, of which 3,108 were BYD compact sports utility vehicles. Fitch said it expected EVs to account for 4% of the country’s total car sales in 2023, and in the medium term, the Thai government is aiming for 30% of all new cars made in the country to be EVs by 2030.
• Multiple Chinese carmakers have been piling into the regional Southeast Asian market. BYD began establishing a $491-million Thai car plant, with a proposed maximum output of 150,000 vehicles, last year. The plant is scheduled to start operating in 2024.
• Great Wall Motor opened a factory in the country in mid-2021, which it acquired from General Motors a year earlier, and can churn out up to 80,000 hybrid and electric cars annually. SAIC has been manufacturing MG-branded cars with local conglomerate CP Groups since 2014.

READ MORE: Meet the Chinese carmakers racing to get a larger share of the global market

Two of Xpeng Motors’ vice presidents are stepping down after more than five years in their respective roles as the EV maker carries out a wider leadership restructuring, according to two people familiar with the matter.

Why it matters: The departures are Xpeng’s latest leadership reshuffle after it appointed Wang Fengying, a former executive at Great Wall Motor, as the company president on Jan. 30. Xpeng is undertaking a drastic reorganization in the hopes of turning its prospects around as falling sales add to its stresses in an increasingly competitive EV market. 

• The reshuffle is also meant to help chief executive He Xiaopeng reinforce his control over the company and give more weight to Wang, the sources said. Industry observers expect Wang to guide Xpeng through these difficult times.

Details: Liu Minghui, a long-standing vice president of powertrain engineering at Xpeng, stepped down last month after more than five years in the role and was replaced by Gu Jie, who recently joined the company from US auto supplier Delphi.

• Gu will report directly to CEO He Xiaopeng. Xpeng is looking to improve its development and manufacturing competitiveness, especially regarding electric powertrain and battery-related technologies, one of the sources told TechNode.
• As part of the overhaul, Liao Qinghong, a vice president of sales and chief of talent at Xpeng, handed over some of his responsibilities to Yi Han, a former executive at Geely, in preparation for leaving the company.
• Before joining Xpeng earlier this year, Yi led marketing efforts and brand execution for Volvo, Lynk & Co, and Smart within the Geely Group for more than a decade, public records show.
• The ongoing reorganization will dilute the authority of some founding members, a potential hindrance to the company’s refocus on efficiency and profitability, according to one of the sources and a third person with knowledge of the situation.
• This significant change follows the late January appointment of president Wang to a role that includes responsibility for major operations from vehicle planning to sales management, roles that used to be overseen by co-founder Henry Xia and Liao, respectively.
• An Xpeng spokesperson declined to comment when contacted by TechNode on Thursday. Chinese tech media 36Kr first reported the news.

Context: Xpeng has made a series of moves over the past months as it hopes to drive sales back up amid growing competition from larger players. Soaring battery material prices have also weighed on the company’s profitability in the past year.

• The Guangzhou-based automaker set up multiple cross-functional teams to encourage collaboration and boost efficiency last October, followed by new measures aimed at lowering costs and streamlining the company’s workflow weeks later.
• The company is rushing to launch two all-new vehicles and three redesigned models in the hope of reaching a modest delivery target of around 200,000 vehicles this year. P7i, a revamped version of the company’s best-selling model P7, launched sales on Friday with a starting price of RMB 249,900 ($35,904).
• Meanwhile, sales of the G9 crossover, initially supposed to be a flagship, high-volume model, flagged to 2,249 units in January from 4,020 units a month earlier, following heated criticism of pricing and specs from customers when it was launched in September. The company delivered a total of 6,010 vehicles last month without specifying the breakdown of models.
• Xpeng’s total deliveries were 11,228 units during the first two months of this year, falling further behind rivals Li Auto and Nio, who delivered 31,761 and 20,663 vehicles respectively. Li Auto reported a gross margin of 20.2% as of the fourth quarter of 2022, while Nio’s margin plunged to 3.9%. Xpeng generated a 13.5% gross margin as of the third quarter of last year.

READ MORE: Despite recovery in February, Chinese EV makers still face challenges as costs and competition increase

TechNode Chinese reporter Zheng Huimin contributed to the reporting of this story.

OnePlus, a Chinese phone brand owned by Oppo, revealed its new Ace 2V at a product launch on Tuesday, highlighting its high performance stats and low price tag as it looks to accrue market share in a segment long dominated by Xiaomi.

Why it matters: The Ace 2V provides a new threat to Xiaomi’s Redmi series when it comes to price sensitive consumers, a field where the latter has traditionally excelled. The basic Redmi K60 model is priced at RMB 2,999; the standard Ace 2V undercuts it by RMB 700. 

• Lu Weibing, Xiaomi’s president, announced a price cut for the Redmi K60 series on his Weibo account on Feb. 7, the same day that the OnePlus Ace 2V was revealed. A week later, president of OnePlus China Li Jie posted on his Weibo account, “Don’t give in to mediocrity, this is a victory for effort,” and “We won’t sacrifice specs and user experience to profit” (our translations).

Details: The Ace 2V phone began pre-sales on Mar. 7, though is currently only available in China. According to OnePlus, it will be renamed OnePlus Nord 3 in overseas markets, but its global release date is as yet unknown.

• OnePlus has priced its three Ace 2V models (12GB RAM + 256GB, 16GB RAM + 256GB and 16GB RAM + 512GB) at RMB 2,299, RMB 2,499 and RMB 2,799 respectively.
• The OnePlus Ace 2V offers a Dimensity 9000 chip, 12/16 GB of RAM and 256/512 GB of UFS 3.1 storage. At a press conference demonstration, the OnePlus Ace 2V achieved a score of 1.05 million on the AnTuTu software benchmarking system, the highest of any Dimensity 9000 phone to date. The company says that such specs will ensure a smooth gaming experience.
• The phone features support for 5G, Wi-Fi 6, Bluetooth 5.3, NFC, and several navigation systems. It includes an infrared port and 80W fast charging port, with a battery capacity of 5,000 mAh. It also offers a 6.74-inch OLED display with 2,772 x 1,240 resolution and a 120Hz refresh rate and comes with a three camera system featuring a 64 megapixel main camera, 8 megapixel ultra-wide angle lens, and 2 megapixel macro lens.

Context: In December last year, major Chinese phone maker Oppo announced that it would be investing RMB 10 billion ($1.43 billion) over three years as part of a “dual primary” strategy aimed at enhancing and clarifying OnePlus’ status. The two firms merged in 2021. 

• According to data from technology market research firm Counterpoint, Oppo was the third highest selling smartphone brand in China in the fourth quarter of 2022, taking 16% of the market and ranking behind Apple and Vivo. Oppo’s sales figures include those for OnePlus. Xiaomi’s market share was 12% for the same period. 
• In December, it was reported that Xiaomi was undertaking large-scale layoffs after a persistent decline in its phone sales over the course of 2022.

Meituan will stop operating its own ride-hailing fleet and shift towards aggregated rideshare services in a strategy update that will cut costs and, it hopes, develop other growth avenues, local publication LatePost reported on Monday.

Why it matters: The decision marks a significant retreat for the Chinese food delivery titan, which has been competing against dominant ride-hailing company Didi for more than six years and could be a turning point for transport in the country’s evolving services sector.

Details: According to an internal letter obtained by LatePost on Monday, Meituan has decided to cull its proprietary ride-hailing operations in several major cities and will look to expand its aggregated services with third-party providers nationwide.

• The life services platform said in the letter that it would scale back efforts in ride-hailing, with some employees to be consolidated into other business lines.
• The remaining ride-hailing team will be combined into a larger unit, with team lead Rocky Zhang to report to Li Shubin, head of Meituan’s platform operations.
• The backdrop of Meituan’s cost-cutting move is slowing revenue growth due to the macro economic environment, the report said, citing a person close to the company.
• A Meituan spokesperson declined to comment when contacted by TechNode on Tuesday.

Context: Meituan announced its entry into the Chinese ride-hailing market back in early 2017 and operates a proprietary fleet of around 120,000 drivers in cities including Shanghai, Nanjing, and Chengdu as of last December.

• The company has also been offering aggregated rideshare services that connect its users with other service providers since mid-2019 and prioritized the business in a stand-alone unit two years later, when unit leader Zhang began reporting directly to chief executive Wang Xing.
• The tech giant briefly ramped up efforts to subsidize users and drivers in exchange for market share in mid-2021. This came immediately after long-time rival Didi was banned from signing up new users by regulators in connection with its US public listing.
• The platform has a daily order volume of around 1 million rides, of which 40% are fulfilled by Meituan’s own fleet, said the report. Didi remained the dominant ride-hailing player with a market share of more than 60%, providing nearly 17 million rides per day as of February. In comparison, Alibaba’s mobility platform Amap provided 8 million rides.

Chinese automakers mostly saw a return to their growth trajectory in electric vehicle sales in February after taking measures to ride out a seasonal lull worsened by Beijing’s phase-out of EV purchase subsidies. 

BYD, GAC’s Aion, and Nio saw strong recoveries, while Xpeng and Huawei-backed Aito continue to fall behind in the competition. However, sales are still down from the historic highs of the past year, and a tougher competitive environment could create more headwinds in the near term, according to executives.

Why it matters: The figures come as many automakers have said they face increasing pressure from competitors just as operation costs mount. 

• Li Auto chief executive Li Xiang told Chinese reporters on Thursday that the lingering impact of the end of EV subsidies and recent price cuts by bigger rivals will continue to weigh on sales in the first quarter.
• Nio also anticipates more pressure on its margins as the company currently undergoes “a transitional period,” CEO William Li told investors on Wednesday, adding that it was clearing out inventory of its older vehicles in preparation for the release of new models in the second quarter.

Strong recovery: BYD has continued its growth momentum in customer demand despite a slowdown in the overall Chinese EV market, reporting delivery of 193,655 vehicles in February, a jump of 119.4% from a year earlier and an increase of 28% from the previous month.

• BYD has retained its dominant position, especially in the price segment of RMB 100,000 to RMB 250,000 ($14,478 to $36,196), according to Sun Shaojun, founder of auto consumer service platform Che Fans.
• GAC’s EV unit Aion also saw a big revival, with sales almost tripling to 30,086 units from a month ago. Sun said Aion was among the few rivals to BYD that “can catch up a little bit in certain regions and car segments.” (our translation)

Back to normalcy: Li Auto’s February sales grew 97.5% year-on-year to 16,620 units, representing a mild increase of 9.8% from a month earlier. Nio and Hozon posted double-digit growth from a month ago with 12,157 and 10,073 vehicle deliveries, respectively.

• Hozon  began offering a de-facto price cut on Feb. 3, as customers who placed an order for its Nezha S electric sedan with a deposit of RMB 5,000 by the end of the month could secure a rebate of RMB 20,000.
• Li Auto and Nio are expected to deliver around 23,200 and 12,300 vehicles respectively in their best-case scenarios for March, as delivery guidance for the first quarter reached 55,000 and 33,000 units.

Lackluster sales: Xpeng Motors is still struggling to get back on track after facing poor sales and criticism over its pricing strategy in 2022. Its vehicle deliveries totaled 6,010 in February, despite a recent price reduction. This is just 15.2% higher than January’s sales and 3.5% lower than a year ago.

• Huawei-backed EV maker Seres also saw little improvement following major promotions on their Aito-branded EVs, as February deliveries fell 21.7% to 3,505 units on a sequential basis.
• Sales of Changan’s EV marque Deepal declined 33.1% sequentially to 4,103 units. On Monday, the automaker kicked off a spat with rival Geely about the design of the latter’s newest EV.
• Geely’s premium brand Zeekr posted deliveries of 5,455 vehicles last month, and sales at Hong Kong-listed Leapmotor were up 180.8% from a 12-month low to 3,198 units.

Context: Sales of new energy passenger vehicles, which include all-electrics and plug-in hybrids, rose 9% year-on-year to around 546,000 units from Jan. 1 to Feb. 19, according to figures published by the China Passenger Car Association (CPCA) on Wednesday.

• Gas-powered cars were worse off, as sales slumped more than 30% annually over the same period. The CPCA has estimated 31% annual growth for passenger EV sales to 8.5 million units this year.

Chinese automaker Changan has issued a formal complaint against Geely for allegedly copying its latest EV car design, sending the Hangzhou-based car company a cease-and-desist letter which surfaced online on Monday, amid fierce competition in the country’s dense electric vehicle market.

Why it matters: The dispute highlights an intensification of the battle for market share among automakers in China, where the country’s EV growth momentum has slowed amid post-Covid zero economic swings.

• The move could have a negative impact on the image of Geely’s new Galaxy lineup, which Volvo’s parent company has positioned as a high-volume brand for the mainstream to premium segment.

Details: In a letter issued on Feb. 27 by Baijus Law Firm, Changan accuses Geely of taking multiple design features from its vehicles for the latter’s prototype Galaxy Light EV.

• Changan requested that its competitor stop violating its intellectual property rights and said it would consider legal options. On Wednesday, a company representative confirmed to TechNode that it had sent the letter.
• The legal effort prompted an angry response from Geely. In a statement published Tuesday on Chinese Twitter-like microblogging site Weibo, the company said it would fight “misleading” information and pursue legal action against “false” accusations.
• “Geely Auto Group takes intellectual property rights seriously and adheres to all relevant laws and regulations. We are confident that […] our team has not infringed on the intellectual property rights of any other company,” the automaker said in the statement.

Context: The legal spat came shortly after Geely unveiled the Galaxy Light sedan, a futuristic car with traditional Chinese aesthetic elements inspired by Hangzhou’s scenic West Lake area.

• The Zhejiang-based automaker also showcased the L7, a plug-in hybrid crossover and the first production car in the Galaxy family, while announcing plans to expand its product portfolio to seven models in the next two years.
• A manufacturing partner to Ford, Chongqing-headquartered Changan sold 271,240 electric cars under its stand-alone brands last year, marking a 150% growth from a year previously. To compare, sales of Geely’s electrified vehicles tripled to 328,727 units in 2022.

READ MORE: Local Chinese authorities unveil stimulus measures to spur EV sales

Li Auto aims to double its China market share in high-end sports utility vehicles to 20% in 2023, encouraged by buoyant demand from the country’s emerging middle class, chief executive Li Xiang said on Monday.

The electric vehicle maker also reported a solid rise in fourth quarter revenue and an upbeat outlook for the current quarter. Despite intensifying competition and slowing demand in China’s EV market, Li Auto is on track to launch its first all-electric model later this year.

Why it matters: Li Auto has set an annual sales goal higher than analysts had anticipated and much more positive than those from the likes of Nio and Xpeng Motors. If achieved, it would make Li Auto the first Chinese automaker to capture a significant share of the country’s premium car segment, according to Sun Shaojun, founder of auto consumer service platform Che Fans.

Rosy 2023 outlook: If met, the market share goal would more than double last year’s share of 9.5% and equates to an annual sales volume of around  300,000 vehicles in the Chinese premium SUV segment, Li said during an earnings call. This is higher than the 270,000 units forecasted by Bernstein analysts.

• The key to success on this front is a strong product portfolio that covers a broader customer base, according to Li. The carmaker estimates sales in the segment of between 1.4 million and 1.5 million units this year, including gas-powered and electrified crossovers, with a price range of RMB 300,000 to RMB 500,000 ($43,205 to $72,009).
• Li said that vehicle delivery would likely reach 30,000 units per month during the second quarter as shipments of the newly-launched L7 begin in April. Li sees little chance of cannibalization between the five-seat L7 and its larger sibling, the L8. The former is intended to attract small nuclear families comprising two or three members, while the latter targets two-children or three-generation households.

All-electric lineup: Li Auto is on track to launch its first pure electric vehicle model, which will be equipped with Qualcomm’s latest five-nanometer cockpit chip 8295, Li told investors. He added that the company’s battery EV series will cost between RMB 200,000 and RMB 500,000.

• The company sees high battery costs and inconvenient charging as some of the biggest issues for EV penetration and aims to promise future buyers the ability to add 400 kilometers (249 miles)-worth of charge in 10 minutes. Rival Xpeng pledged a similar experience with its premium SUV G9 late last year.
• Meanwhile, Li Auto acknowledged that it has been negotiating new price terms with suppliers, responding to an analyst question about reports that CATL has been offering big discounts on EV batteries, but declined to provide further details. President Ma Donghui said the company would commit to a multi-supplier strategy to ensure stable supply.

Solid Q4 results: Li Auto’s revenue increased 66.2% year-on-year to more than RMB 17.7 billion in the fourth quarter of 2022, compared with estimates of RMB 17.6 billion, according to Bloomberg. Net income declined 10.5% annually to RMB 265 million but improved from a net loss of RMB 1.65 billion in the previous quarter.

• The Beijing-based automaker’s gross margin came out as 20.2% in the quarter, from 12.7% in the third quarter and fairly close to Tesla’s 25.6% over the same period. Peers Nio and Xpeng posted gross margins of 13.3% and 13.5% in the third quarter of 2022, respectively.
• Li Auto expects to deliver up to 55,000 vehicles in the first quarter of this year, which would represent an increase of 73.4% from a year ago. Overall sales of passenger electric cars declined 6.3% year-on-year in January, according to figures from the China Passenger Car Association.

Context: Nio and Xpeng have both set a delivery target of around 200,000 vehicles this year as China’s EV market shifts into a lower gear, partly due to the phasing-out of EV purchase subsidies by the central government last December.

• Nio CEO William Li has said he expects deliveries this year to surpass the nearly 190,000 units Lexus sold in China last year. Xpeng is aiming for accumulated overall sales of 450,000 EVs this year, of which around 250,000 were delivered as of last year, according to an internal letter obtained by local media outlets.
• Li Auto’s first plug-in hybrid vehicle, the Li One, ranked fifth in terms of sales in the Chinese premium SUV segment with the shipment of 78,791 units last year, the CPCA figures showed. Tesla’s Model Y topped the chart with deliveries of 315,314 units, while Mercedes-Benz’s GLC, Audi’s Q5, and BMW’s X3 each booked sales of more than 140,000 units.

Geely on Thursday revealed the L7, its first model in the new Galaxy electric vehicle lineup. The compact SUV enters the market as a direct competitor to BYD’s popular Song Plus model, with a similar size, driving range, and price tag.

Delivery of the L7 is scheduled to begin in the second quarter. Geely will release anywhere from one to seven models of the electrified, software-defined Galaxy lineup by 2025, targeting medium- to high-end buyers with a range including four plug-in hybrid electric vehicles (PHEVs) and three all-electrics, Gan Jiayue, chief executive of Geely Automobile Group, said during a press event.

Why it matters: Geely aims to make the long-anticipated Galaxy L7 a high-volume, landmark model and wants to become China’s next answer to BYD and Tesla in the country’s crowded electric vehicle race.

Details: The L7 is a similar size to BYD’s Song Plus SUV, at 4.7 meters in length with a 2,785-millimeter-long wheelbase. The plug-in hybrid will have a driving range of about 1,370 kilometers (851 miles) on a full tank of fuel and a full charge, compared with BYD Song Plus’ 1,200 km range.

• The vehicle will be equipped with an operating system designed by Ecarx, an auto chip software firm backed by Geely founder Li Shufu, and uses Qualcomm’s 7nm cockpit chip 8155. The setup allows passengers to play high-demand triple-A games while the car is in motion. 
• Pre-bookings for the SUV are now open, for a deposit of RMB 599. The car is estimated to fall in the price range of RMB 150,000 to RMB 300,000 ($21,647 to $43,294). By comparison, BYD’s Song Plus DM-I is priced in the range of RMB 154,800 to RMB 218,800. 
• Geometry, another of Geely’s affordable premium EV brands, is to pivot to the budget segment of the market with a price range of under RMB 150,000. Vice president Lin Jie told Chinese reporters he expects the two lineups to strengthen the company’s presence in segments that could account for more than 65% of the future new energy vehicle market (including EVs and PHEVs).

Context: Geely expects more than a third of its car sales to be either all-electric or hybrid vehicles this year, vowing to sell at least 600,000 electrified cars as part of a 1.65 million volume goal in 2023. The Zhejiang-based automaker posted total sales of roughly 1.4 million units last year, of which around 328,700 were electrified.

• Geely operates several EV brands, including Lotus, Polestar, and Zeekr, while Geometry contributed nearly half the company’s 2022 NEV sales. Zeekr has announced a goal to double sales of its premium EVs with an average price above RMB 330,00 to 140,000 units this year.
• BYD’s Song model was China’s most popular SUV of any kind last year, recording sales of 478,811 units with an annual growth rate of 137.4%, according to figures compiled by the China Passenger Car Association. Tesla followed with delivery of 315,314 Model Y vehicles, while Great Wall Motor booked sales of 250,120 units of the Haval H6.

CATL is in talks with a number of Chinese automakers to offer big discounts on batteries using materials sourced from its proprietary mines. In return, the electric vehicle battery giant is requesting its clients place around 80% of their future orders with it in the next three years, several Chinese media outlets reported.

Why it matters: The move could intensify already fierce competition in the upstream value chain of the electric car industry and force smaller battery makers to follow suit in what could become a price war, experts said.

• Even without this program, preferential pricing will come to major battery companies in one way or another this year and beyond, as industry oversupply kicks in from the second half of 2023, Jefferies analysts wrote in a Monday report.
• The price war could pressure the margins of second-tier battery makers with smaller scale economies and lower supply chain competitiveness, they added. The ongoing EV pricing battle spurred by Tesla could result in further price cuts from Chinese carmakers, “leading them to ask battery companies for price cuts,” Jefferies analysts added.

Details: CATL is in negotiation with several strategic clients, including Nio and Li Auto, to sign three-year contracts that would guarantee them a certain amount of EV batteries priced at RMB 200,000 per ton ($29,152) of lithium carbonate, the compound from which lithium is extracted. Chinese media outlet 36Kr was the first to report on the talks.

• These lithium-ion batteries will be made from ingredients sourced from several domestic and overseas mines in which CATL has an ownership stake, Caixin reported on Monday, citing a person familiar with the matter. Sources said the offer is expected to run from the third quarter of 2023.
• The move could significantly reduce purchase costs for the automakers, including Huawei-backed Seres and Geely’s premium EV brand Zeekr. In return, the EV makers will be required to commit 80% of their battery purchases to CATL in the next three years.
• Some EV makers have expressed willingness to accept the deal, while others are uncertain about price movements of battery-grade lithium carbonate. CATL also asked buyers to pay a certain amount up front as a deposit, which could therefore increase the EV makers’ expenditure, the Caixin report said.
• Tesla and Xpeng Motors, two of CATL’s biggest clients, are reportedly not among this chosen group. 
• A person with knowledge of the matter confirmed the existence of the deal when contacted by TechNode on Monday, while CATL did not respond to TechNode’s request for comment.

Context: Smaller Chinese battery makers have been feeling the strain in recent months, with CALB, a major supplier to state-owned automaker GAC, and Volkswagen-backed Gotion High-Tech being asked by clients to reduce prices by 10-15% for this year, TechNode has learned.

• Lithium carbonate prices showed a downward trend at the beginning of 2023, which experts described as a ripple effect from China’s slowing sales of electric cars. The price closed at RMB 435,000 on Monday, down 26% from its historic high of nearly RMB 600,000 in mid-November, according to industry consultancy Mysteel Group.
• Multiple Chinese EV makers have been looking to diversify their supply chains for EV batteries to ensure the supply of the critical components at a favorable price. Xpeng Motors has been sourcing batteries from Sunwoda since late 2022, in addition to CATL, while Li Auto is a major client of CATL and Svolt, an EV battery maker backed by Great Wall Motor.
• The world’s biggest EV battery maker is also getting into the mining business. CATL last April bought lithium claims on 6.44 square kilometers (1,591 acres) in Yichun, a city in the central province of Jiangxi, and gained control of a Sichuan-based mining company in January, Caixin Global has reported. It also won a bid in Bolivia to develop the South American country’s lithium resources, Reuters reported.

Despite not being officially available in China, the AI chatbot service ChatGPT has dominated headlines in the country. This week, days after search engine giant Baidu announced it will launch its own ChatGPT-like service in March, at least five other major Chinese tech firms revealed plans to tool up with the powerful AI technology. 

Starting with Alibaba, the e-commerce giant Alibaba said it is developing its own AI chatbot. NetEase’s online learning unit Youdao said it will launch a similar AI service focused on the education industry, and JD, another e-commerce major, boasted that its rich experience in AI means it can soon incorporate these technologies into its services. 

Developed by OpenAI, ChatGPT is an AI chatbot that can answer natural language questions with human-like responses. It is built on GPT-3, the third iteration of a language model trained on a large amount of data. 

The feverish popularity of ChatGPT has sent investors chasing related stocks on China’s stock market. The market is already experiencing a boost in so-called “ChatGPT concept stocks.” 

On Chinese social and search platforms, ChatGPT has also become the top search keyword. On Feb. 4, daily searches for “ChatGPT” on WeChat increased 515.7% to nearly 38 million, and the search volume kept growing rapidly in the following days,  seeing 2.5 times the number or 95 million searches only five days later. 

As advanced AI technology gains momentum to disrupt the status quo, Chinese tech companies are not the only ones racing to prove their ChatGPT-like abilities. Google introduced on Tuesday its AI chatbot Bard,  while ChatGPT’s main investor Microsoft launched a new version of its search engine Bing on Tuesday with ChatGPT built in. 

Baidu: Baidu said on Tuesday that it will launch its own AI chatbot tool called “ERNIE bot” or Wenxin Yiyan in Chinese. The bot will be built based on the company’s large language model ERNIE, which was launched in 2019. Some see Baidu’s service as the most likely one to come close to ChatGPT. 

NetEase: NetEase’s online education team Youdao said it has been working on applying AIGC (AI-generated content) technology to teaching scenarios such as AI oral English teaching and Chinese essay revision. The company expects to launch a relevant demo version of the product soon, which will mark the first landing of AIGC technology and a ChatGPT-like model in China’s online education scene.

iFlytek: Responding to investors’ questions, the company that specializes in speech recognition and natural language processing technologies said it has a solid accumulation of relevant AI technology. For example, in 2022, iFlytek won first place in the authoritative evaluation of several cognitive intelligence fields such as CommonsenseQA 2.0 and OpenBookQA. Meanwhile, iFlytek has developed a series of pre-training language models which include 40 general fields of cognitive intelligence.

Alibaba: The online retail major said on Wednesday that it’s conducting internal testing on a ChatGPT-like service, and the tool is likely to be used in combination with the group’s workplace communication and collaboration tool DingTalk.

JD: Beijing-based e-commerce platform JD said it sees ChatGPT as an “exciting and cutting-edge exploration,” adding it will incorporate the related methods and technology into its products, especially in customer service.

Chinese electric vehicle maker Li Auto released its cheapest ever car on Wednesday, a five-passenger compact sports utility vehicle that the company says has been developed to appeal to women and small families, and that it hopes will take on bigger rivals from BMW to Mercedes-Benz.

The company also launched a new, RMB 20,000 ($2,948)-cheaper version of the L8, its six-seater crossover, offering customers a de facto price cut in response to increased competition from carmakers such as Tesla.

Why it matters: Some industry observers have voiced bullish views on Li Auto as the company keeps expanding its portfolio with new vehicles aimed at meeting the needs of growing Chinese middle-class families.

• Li Auto and Nio should still be able to grow their sales because of their brand new products despite forecasts of a challenging 2023, said Tu T. Le, managing director of Sino Auto Insights.
• “The market has become so competitive that we will likely see many EV makers do whatever they can to protect any share they have been able to carve out in the market,” Le added.

Details: Li Auto on Thursday introduced the L7 extended-range SUV, the company’s first five-seater explicitly designed for Chinese nuclear families. It measures around 5 meters in length and spans a 3,005-millimeter-long wheelbase, bigger than many similar mid-size models.

• For comparison, the BMW X3, Audi Q5L, and Mercedes-Benz GLC crossovers are all less than 4.8 meters in length and have a maximum wheelbase of 2,973 mm. The L7 is also more spacious than its rivals the BYD Tang, Xpeng Motor G9, and Huawei-backed Aito M7.
• The car boasts a luxurious interior and roomy passenger space, with a so-called “Queen’s seat” mode in the back providing leg room of almost 1.2 meters and well-bolstered seatbacks.
• The EV maker is targeting women in China who are increasingly picking the family car. Speaking at a conference on Wednesday, Han Ling, a product manager of Li Auto, specifically used female terms of address a dozen times during a 10-minute speech, according to a TechNode calculation.
• The L7 SUV will be equipped with a supercomputing platform – powered by two of Nvidia’s Orin X chips or by a Horizon Robotics Journey 5 processor depending on the model, and will use cameras and lidar sensors for driver assistance on Chinese highways.
• The Meituan-backed carmaker plans to send selected customers a beta version software update for assisted driving technology on busy urban streets in the fourth quarter of 2023. Rival Xpeng Motors has been implementing a similar update since September.
• The L7 crossover will have a driving range of 210 kilometers (130 miles) on a single charge and can drive for about 1,315 kilometers with a full fuel tank and a full charge, the same as its larger sibling, the L8. The company said its starting price will be RMB 319,800 and delivery is set to begin on Mar. 1. 
• Meanwhile, chief executive Li Xiang on Wednesday revealed a so-called “Air” version of its L8 crossover with a starting price of RMB 339,800, down RMB 20,000 from the Pro model which used to be the lowest-priced option offered by the automaker.

Context: Beijing-headquartered Li Auto currently has three models of different sizes on sale, namely the full-size crossover L9, L8, and the L7, with a price range of around RMB 300,000 to RMB 400,000, in a segment traditionally dominated by global carmakers such as BMW and Mercedes-Benz.

• The L9 was China’s top-selling large-size electric SUV in December with 10,582 units shifted, four months after delivery began in August, while 10,189 units of the L8 crossover were sold in the month, according to figures compiled by the China Passenger Car Association. Both were lower than the 29,387 units of Tesla’s Model Y, but higher than the roughly 4,000 units Nio delivered of its ES7 and Xpeng delivered of its G9.

Major Chinese electric vehicle makers, from Aion to Nio, are joining the likes of Xpeng Motors in an industry-wide price war ignited by Tesla, offering generous sales incentives to boost demand after posting dismal delivery results for January.

Why it matters: Sales growth for new energy vehicles (NEVs) at the start of 2023 has reached a bottleneck after the central government fully scrapped subsidies for purchasing them at the end of December, the China Passenger Car Association (CPCA) wrote in a post on Wednesday, quoting January sales figures. NEVs is a catchall phrase used in China that includes all-electric cars, plug-in hybrids, and hydrogen fuel-cell vehicles.

• A price war kicked off by Tesla has left many consumers on the fence about buying an EV in the immediate future, as some automakers followed suit with price cuts while others raised prices to help offset rising costs, the industry group added.

READ MORE: Local Chinese authorities unveil stimulus measures to spur EV sales

Flagging January sales: Retail sales of Chinese passenger electric vehicles fell by 1% year-on-year and 43% month-on-month to around 304,000 units from Jan. 1 to Jan. 27, according to figures published by the CPCA on Wednesday. The industry group has yet to publish figures for the full month, but reports by many Chinese EV makers are out, and they show a definite sales slump.

• GAC’s Aion on Wednesday reported a 66% month-on-month drop in vehicle deliveries to 10,206 units in January, during which time the company raised its car prices by between RMB 3,000 and RMB 8,000 to make up for rising costs.
• Figures from Xpeng Motors and Huawei-backed EV brand Aito more than halved sequentially to 5,218 and 4,475 units respectively. Both companies followed Tesla’s move with significant price cuts across their vehicle lineups early last month.
• Nio delivered 8,506 vehicles in January, marking a 46.2% decrease from a month earlier, while Li Auto reported a relatively solid performance with deliveries falling 28.7% sequentially to 15,141 vehicles. CATL-backed Hozon sold 6,016 EVs, down 22.8% from a month ago.
• Zeekr’s January sales of 3,116 vehicles were less than a third of the number delivered in December, which the company attributed to a 22-day production suspension for an upgrade at its Ningbo facility. Hong Kong-listed Leapmotor only delivered 1,139 vehicles, an 86.6% drop from a month ago, but didn’t provide any further details.
• BYD handed over 151,341 EVs, including around 10,400 units overseas, which was 35% lower than December’s sales but 62.4% higher than in the same month last year, according to a Wednesday statement.
• Other than diminishing subsidies, most companies blamed the slide on the seven-day public holiday during the Lunar New Year, as well as the spike in coronavirus infections that swept China after the country’s zero-Covid policy ended in early December, among other reasons.

Nio’s big promotion: Nio on Wednesday began offering customers a package of discounts and special offers for its first-generation electric sports utility vehicles, including a more than RMB 10,000 ($1,483) allowance to cover the cost increase caused by the phasing-out of Beijing’s subsidy.

• The EV maker also unexpectedly discounted inventory of the older version of its ES8 and ES6 crossovers by at least RMB 18,000 and offered existing car owners an additional exchange discount of RMB 15,000, local media outlet Powerhouse reported on Thursday, citing two Nio salespeople.
• The company also offered buyers free access to its advanced driver assistance software Nio Pilot which has a sticker price of RMB 39,000, among other promotions. If all these offers are combined, one can purchase a performance version of the 2022 ES6 SUV for RMB 313,700, more than RMB 100,000 cheaper than last month.
• Nio on Thursday responded by saying the company is about to launch its redesigned ES8, ES6, and EC6 models and is therefore offering discounts on the small amount of inventory and showroom cars of the old models it has left.
• Sales of Nio’s ET7, ES7, and ET5 cars, built upon the company’s second-generation technology platform, accounted for 85.6% of its monthly delivery in January, according to a Wednesday statement.

More price campaigns: State-owned automakers SAIC and GAC also announced they would slash prices on their vehicles this week in the hope of grabbing a share of sales during a traditionally slow season.

• Rising Auto, an EV brand launched by Volkswagen’s manufacturing partner SAIC in mid-2020, on Thursday cut the starting price of its base R7 crossover by 7.5% to RMB 279,900. The model is also available at a big discount of RMB 10,000 and can be purchased for RMB 195,900 if customers subscribe to its battery-swap program.
• On Wednesday, GAC’s EV unit Aion also began offering a limited discount of RMB 5,000 on its Aion Y SUVs and Aion S Plus sedans, priced from RMB 137,600 and RMB 149,800 respectively, before the end of this month. 
• A day earlier, Geely’s luxury EV brand Zeekr said that customers who place their orders before the end of March would be able to get certain discounts on car insurance and optional parts.

Multiple regional authorities in China are issuing stimulus measures in a bid to shore up demand for electric vehicles, ranging from cash subsidies to free parking lots, as China’s central government ends its massive decade-long EV support campaign.

Why it matters: The government measures come as sales in the world’s biggest EV market start to show signs of slowing down. The local subsidies underscore China’s continued support of green energy transport, despite the central authorities phasing out EV purchase subsidies altogether a month ago after more than a decade. In September, Beijing extended its 5% purchase tax exemption for EVs to the end of 2023.

• On Jan. 18, Tian Yulong, a spokesperson for the Ministry of Industry and Information Technology, said China would continue to create a supportive and healthy regulatory environment for EVs by ensuring the stable supply of core components and funding the build-up of charging infrastructure. This will include laying down stricter rules for EV production licenses and completing the regulatory framework for battery recycling.

READ MORE: Chinese EV makers rush to boost year-end sales as subsidies expire

Details: The Shanghai municipal government on Sunday announced the extension of its EV subsidy program launched last May in the wake of a months-long city-wide lockdown. Consumers will continue to receive rebates of RMB 10,000 ($1,482) per car for any trade-in of internal combustion vehicles for EVs until June. 30, as part of a stimulus package aimed at propping up the local economy, details of which were released on the government’s official website.

• On the same day, the provincial government of Zhejiang called on municipalities to hand out cash incentives to current gas-fueled car owners who plan to shift to EVs. The eastern Chinese province will permit EVs to park for free at public facilities for the first hour, as it aims for 60% of cars it produces to be EVs by 2025, according to an action plan published by the regional government.
• On Jan. 28, the northern province of Shanxi also rolled out a package of 14 measures to stimulate car demand, including incentives for public EV bus operators, tax breaks for personal EV purchases, and parking discounts. This followed similar initiatives released last month by the provincial governments of Heilongjiang, Henan, and Yunnan to fund EV adoption.

Context: Beijing began granting subsidies to EV buyers across China in 2010, deliberately trimming the purchase incentives starting in 2015 when it found that EVs with a range of over 400 kilometers (249 miles) were qualifying for subsidies of as much as RMB 54,000 per unit. The generous subsidies were cut by more than half to RMB 25,000 in March 2019, leaving China’s sales of new energy vehicles (NEVs), mainly all-electrics and plug-in hybrids, down 4% annually to 1.2 million that year.

• Beijing later introduced a gradual scheme which cut the subsidies by 10%, 20%, and 30% from 2020 to 2022 in the hope of stabilizing the market. EVs with a driving range of over 400 km enjoyed a subsidy of RMB 12,600 in 2022 before subsidies were fully scrapped in December. There were more than 13.1 million NEVs on the road as of 2022, according to figures from the ministry of public security.
• China’s NEV sales nearly doubled to 6.8 million units in 2022, according to figures from the China Association of Automobile Manufacturers (CAAM). Despite this, the market shifted into a lower gear in the second half of last year, as restrictions on free movement related to the Covid-19 pandemic hit consumer demand and disrupted the supply chain.
• Sales of passenger NEVs increased 35% year-on-year to around 640,000 units in December, and the number is expected to rise by just 1.8% year-on-year to 360,000 units in January, according to estimates by the China Passenger Car Association.

Tesla’s margins slid despite selling a record 405,000 electric vehicles in its fourth quarter, as rising battery costs and an ongoing price reduction campaign continue to pressure the US automaker. And yet, chief executive Elon Musk remains bullish on the company’s prospects and is predicting more than 50% full-year growth for 2023.

Why it matters: The results come as Tesla faces major challenges in China from local car manufacturers, and growth in the world’s biggest EV market shows signs of a downward trend amid economic headwinds.

READ MORE: China EV price war: Xpeng, Huawei-backed Aito join Tesla in cutting prices

Details: Tesla posted record fiscal fourth-quarter revenue of $24.3 billion, up 37% over a year ago and beating Wall Street’s forecasts of nearly $24.2 billion. Earnings per share also increased sequentially to $1.19 from $1.05 in the third quarter and beat analysts’ average estimate of $1.13.

• However, Tesla’s automotive margin dropped to 25.9% from 30.6% a year earlier and 27.9% in the previous quarter despite a 16% decline in operating expenses. The company cited price reductions and Covid restrictions in China among the factors resulting in the quarterly decline in margin.
• Musk added the company had seen strong demand recovery in 2023 due to significant price reductions over the past few months, as order volumes increased to the highest level in its history in January. The automaker expects to deliver 2 million EVs this year, a 53% year-on-year growth in a best-case scenario.
• For the calendar year of 2022, Tesla reported $81.5 billion in revenue on delivery of 1.31 million vehicles, marking a year-on-year increase of 51% and 40% respectively. The company fell short of meeting its 2022 delivery target of more than 1.4 million vehicles by around 90,000 units.

Context: On Jan. 6, Tesla launched one of its biggest ever price cut campaigns in China, with some of its Model Y and Model 3 vehicles seeing overnight price cuts of up to RMB 48,000 and RMB 36,000 ($7,088 and $5,316), respectively.

• The big promotion reportedly drove an increase of 300,000 placements in order volume in just three days. The automaker had previously offered various discounts across its vehicle lineups, such as an RMB 4,000 rebate and reduced prices by RMB 20,000 during the last few months of 2022.
• The automaker has scaled back a plan to nearly double the annual capacity of its Shanghai facility to 2 million EVs, due to softening demand and failure to secure approval from the Chinese government, according to a Jan. 13 report by the South China Morning Post.

Skirmishes have surrounded China’s speedy uptake of electric vehicles in the past year, with industry giant BYD reigning supreme but an increasingly large crowd of challengers looking to muscle in on the action. Once-promising startup Xpeng Motors and major automaker Great Wall Motor have been among those to falter in 2022 – and the war is far from over.

Industry observers link BYD’s success to China’s national shift towards electric vehicles, the company’s highly-integrated supply chain across key components, and a rising consumer preference for high-quality, cost-competitive automobiles as recession looms. 

Xpeng’s recent setbacks, however, reflect structural weaknesses at the company, including limited competitiveness and low operational efficiency in a crowded marketplace. Now, the risk of falling behind the competition has become real for the Guangzhou-based company.

Even Tesla faces an eroding market share in a highly competitive field, thanks to an onslaught of new models from various domestic rivals. Meanwhile, foreign auto giants from Volkswagen to Ford have long lagged behind Chinese counterparts in transitioning to green energy.

Here, we look at the annual results of China’s EV leaders and attempt to explain the dynamics behind some of the biggest winners and losers of the past year.

Winners and losers 

Despite being a bright spot in a slowing auto market, China’s two-year run of huge growth in the EV sector hit unexpectedly fierce competition as it shifted into a lower gear in the second half of 2022.

BYD was the biggest winner of the year, with annual sales of 1.86 million electric cars. The company’s output was more than triple 2021’s figure of around 600,000 units, comfortably exceeding its goal of 1.5 million units.

Tesla was left a distant second. The company’s sales started to slow last year as concern grew about an underlying mismatch between supply and demand. In 2022, the US automaker delivered 439,770 China-made vehicles to local customers, a 37% increase from a year ago and significantly lower than its 50% growth target for overall sales volume.

Besides BYD and Tesla, multiple Chinese EV makers including Nio and Xpeng embarked on 2022 with optimism and ambitious sales targets. However, only a handful managed to hit their goals. Aion (the EV arm of state-owned automaker GAC) and Hozon kept their word by selling around 271,000 and 152,000 EVs respectively last year. Geely’s premium EV brand Zeekr also achieved its goal by delivering just over 71,000 vehicles.

China’s US-listed EV makers mostly underperformed. Nio played tough to secure around 80% of its 150,000-vehicle delivery goal, while Xpeng delivered just over 120,000 units of its 250,000 unit target.

Why BYD dominated the market

In December, when most automakers struggled to protect their market shares by offering generous discounts as the Chinese government phased out EV subsidies, BYD went the opposite way by announcing a price rise of up to RMB 6,000 ($870) across its lineup. The move proved BYD’s role as “price maker” in the mass market, analysts at Jefferies wrote in a Dec. 1 report.

Analysts attributed BYD’s dominance partly to its success in ramping up manufacturing capacity and building a secure, integrated supply chain from batteries to chips. In 2022, when the company tripled its annual car capacity to around 3 million units at its eight manufacturing locations, according to public information gathered by investors, it also more than doubled its battery capacity to 285 gigawatt-hours (GWh), according to estimates by Founder Securities. A company spokesperson declined to comment on the capacity figures.

Also, the automaker has adopted a dual strategy of betting on both all-electrics and plug-in hybrid EVs (PHEVs) as range anxiety continues to be a top concern among local buyers. BYD offers nearly 70  models in major configurations and price categories. This helps the company stand out in a crowded market where many competitors pick a type and limit buyers’ options.

Why Xpeng and Great Wall Motor are losing ground

As China’s EV sales reported nearly 100% annual growth in 2022, Xpeng Motors and Great Wall Motor are among the most surprising names for whom sales growth dipped well below the industry average. The two companies sold 120,757 and 131,834 EV units last year, posting a flat increase of 23% and a 4% decline from a year earlier, respectively.

Multiple factors have put pressure on the two companies, including weaker consumer sentiment and interest rate hikes. 

The sales slump at Great Wall Motor indicates a major setback in the company’s slow shift to EVs. In 2022, monthly sales of the company’s Haval H6, once China’s top-selling gas-powered crossover, fell 75% to around 20,000 units from historic highs, as it appeared to be outpaced by popular EV models produced by Tesla (Model Y) and BYD (Song Plus). 

Ora, the company’s dedicated EV sub-brand, saw sales decline by 23% year-on-year to 103,996 units. Nevertheless, Great Wall Motor’s management has big plans for 2023 — promising to launch more than 10 EV models, including five new PHEVs under the Haval brand and two new models under the Ora marque.

Xpeng is facing a more complicated external environment, as well as the threat of increased pressure from rivals, said David Zhang, a school dean at Jiangxi New Energy Technology Institute. Not only are sales of big name rivals such as BYD and GAC’s Aion gaining momentum, but younger makers such as Hozon and Leapmotor are increasingly catching up. That’s the broader context behind Xpeng currently restructuring its business, according to Zhang.

Meanwhile, Xpeng is exposed to a potential demand mismatch risk in the short-term, as consumer confidence in vehicle intelligence technologies lags behind ambitious plans to bring self-driving cars to the market, analysts from Zheshang Securities told local media outlet Jiemian.

The Alibaba-backed EV maker has pledged to put more effort into overall car-making after reporting three consecutive months of dropping sales as of October and losses of RMB 6.78 billion ($1 million) for the first three quarters of 2022. It is also dealing with an aging product portfolio and implementing cost control measures to boost efficiency and drive sales, with chief executive He Xiaopeng promising to refocus on the core company after spending some time and energy on emerging businesses such as flying cars.

“We have high expectations for 2023. It’s a game of both competence and persistence. We have winning cards to play the game, and the evolution is making good progress,” a company spokeswoman said when contacted by TechNode.

Trend 1: Bring everything in-house

In-house manufacturing of key components has become one of the biggest trends in China’s EV industry over the past year, as many automakers look for ways to reduce supply chain vulnerability amid persistent chip shortages and the surging cost of battery materials. Among them, BYD is widely seen as a role model for this vertical integration strategy: the automaker builds its own supply chain and performs most of the activities required to bring its vehicles to market.

Already the world’s second-biggest battery maker and a major domestic supplier of power semiconductors for automobiles, BYD is now looking to expand production capacity significantly and accelerate the development of new products. Founder Securities expects BYD’s capacity to increase to 445 GWh-worth of batteries to close the gap with dominant player CATL by the end of 2023. In November, the company abandoned an initial public offering plan for its semiconductor unit as it decided to focus instead on expanding the capacity of a local plant by 80% to reach 360,000 wafers in 2023.

Other major industry players, from state-owned GAC to US-listed Nio, have also been racing to develop battery and semiconductor technologies in-house to ensure a secure supply of the key components. Here are some recent moves and potential developments for the companies heading into 2023:

• On Nov. 18, Svolt, an EV battery startup backed by Chinese automaker Great Wall Motor, filed initial paperwork for a public share sale on Shanghai’s Nasdaq-style Star market. The company is looking to raise RMB 15 billion to build three manufacturing plants with a combined annual capacity of around 106 GWh.
• On Dec. 29, GAC began building an RMB 2.2 billion drivetrain plant in Panyu, a city in the southern province of Guangdong, with mass production to kick off at the beginning of 2024. Initial capacity will enable it to assemble drivetrain systems for 400,000 battery EVs and 100,000 plug-in hybrid vehicles annually by 2025.
• On Dec. 21, Xpeng confirmed that it has set up an RMB 5 billion subsidiary to produce battery packs on its own but will still source battery cells from partners. On Oct. 25, peer Nio made a similar move by forming an RMB 2 billion subsidiary for battery manufacturing, in addition to a $32.8-million research facility for battery development.
• On Oct. 10, Chinese media outlet LatePost reported that both Nio and Xpeng had formed hundred-strong teams to work on chips for autonomous driving, while Li Auto had been hiring chip designers for more fundamental semiconductor components.

Trend 2: Short-term bumps

Analysts have warned about the prospects of a bumpier year for EV makers in 2023, and sure enough, the industry is already seeing some sharp movements. On Jan. 6, Tesla made a big splash by cutting the prices of its China-made vehicles by between 6% and 13.5%, a move that Sun Shaojun, a popular Chinese car blogger, described as kicking off an industry-wide battle for survival in the year ahead.

Sun added that many rivals would probably have to follow suit in the face of such a big promotion by an industry leader. Meanwhile, analysts at Bernstein expect competition to heat up with as many as 126 new battery EV models and 55 new plug-in hybrid models coming to market in 2023, a 40-50% increase on last year.

In anticipation of a post-Covid recession and in light of EV subsidies being scrapped, sales are expected to slow this year. Credit Suisse’s sales forecast of 9.4 million EV sales in China is one of the more bullish on Wall Street, while Bernstein more cautiously holds that 8 million units will be sold in the country this year.

An ongoing growth story 

And yet, long-term growth prospects remain buoyant, as demand shifts from policy-led to consumer-driven, Bernstein analysts wrote in a Jan. 5 report. UBS shared the sentiment, expecting the new energy vehicle (NEV) penetration rate, mainly for all-electrics and PHEVs, to grow by 10% this year to reach 37% of all new car sales.

2022 proved to be a big year for Chinese EVs. The central government achieved its goal of EV adoption approaching 25% of total car sales three years ahead of schedule, as industry sales nearly doubled to 6.8 million units. Still, pressure on margins is likely to persist in the near term for smaller companies, which have already been exposed to high battery material costs.

Looking ahead, China has cemented its growth momentum in the global EV race, but industry players should expect short-term sacrifices to hit their profits as they glimpse a bigger and brighter future.

Xpeng Motors is aiming for profitability on an operating level by 2025, according to an internal speech from chief executive He Xiaopeng to employees. The electric vehicle maker will also focus on redeveloping business strategies, dealing with corporate restructuring issues, and bolstering corporate value in 2023. 

Why it matters: He’s comments come on the heels of a turbulent year for Xpeng during which the company faced major setbacks, including a 23% sales drop in the second half of 2022 and an 80% plunge in market capitalization from a year ago.

Details: Xpeng expects to break even in 2025 with its earnings margin before interest, taxes, depreciation, and amortization reaching 17%, according to a report from 36Kr that cites comments made by He at an internal meeting on Wednesday.

• The management is more optimistic than some analysts’ predictions. Bernstein estimates that Xpeng will turn its adjusted operating margin from -5.1% in 2024 to 0.3% in 2025. That number was estimated to be -33.1% last year, according to Bernstein.
• He also pointed out that employee morale at the electric car company is low due to falling sales and share prices and that Xpeng’s productivity as a company is not where it should be, vowing greater restructuring efforts to simplify operations this year.
• Meanwhile, He highlighted the company’s push to forge ahead with vehicle development from the perspective of customers, adding that all future Xpeng vehicles will be equipped with safety-based driver assistance technologies.
• Xpeng will also accelerate its overseas expansion in the next few years, with plans to launch two new vehicle models for the global market in 2023, followed by a third in 2024, according to He.

Context: Xpeng reported an annual growth rate of 23% in vehicle sales in 2022, significantly lower than the industry average of around 90% and falling behind US-listed peers Li Auto and Nio, who posted year-on-year growth of 47% and 34%, respectively.

• The Alibaba-backed EV maker has been undergoing a major restructuring since late last year with the establishment of several committees and financial teams to enhance efficiency and control costs. It also announced price cuts of up to 15% for its vehicle lineups earlier this week amid rising competition with Tesla.
• Xpeng is not the only Chinese EV maker taking steps to streamline operations. On Jan. 1, Nio chief executive William Li told employees that low-productivity teams and insignificant projects would be “streamlined and optimized” this year in light of a slight increase in budget, according to an email seen by 36Kr.

China’s electric vehicle price war has edged up a notch, with Xpeng Motors and Huawei-backed Aito now following Tesla in slashing prices on their lineups, responding to intensifying competition as Tesla’s China-made vehicles gain market share.

Why it matters: These latest price cuts could force more EV makers to follow suit, hitting profit margins that have already been squeezed by the recent sharp rise of battery raw material costs.

• The next two months may see more price drop campaigns thanks to new product offerings and a decline in lithium carbonate prices, said Cui Dongshu, secretary general of the China Passenger Car Association (CPCA), on Jan. 10.

Details: According to a “new pricing scheme for the Chinese New Year” released by Xpeng on Tuesday, the starting price of its P7 sedan dropped RMB 30,000 or around 15% to RMB 209,900 from RMB 239,900 ($30,942 to $35,365). Xpeng’s newly-launched G9 crossovers were excluded from the cuts.

• The EV maker also cut the price of the top-spec long-range model of its G3i crossover by RMB 25,000 to RMB 176,900, while the starting price of its mainstream P5 sedan dropped by 12.8% to RMB 156,900.
• The actual transaction prices of the G3i and P5 remain largely unchanged as the respective cuts on the sticker prices are in line with an RMB 20,000 discount that the company offered from October to December, Morgan Stanley told investors in a report.
• However, the price reduction for the P7 comes as sales costs increase by between RMB 10,000 and RMB 16,000. Xpeng’s gross margin in the current quarter will “likely hit a trough” due to the price adjustments, wrote the analysts.
• On Jan. 13, Aito, a Chinese EV brand backed by technology giant Huawei, also cut prices for its M7 and M5 sports utility vehicles by nearly 10%, bringing the two vehicles’ prices to RMB 289,800 and RMB 259,800.
• The price cuts will likely squeeze vehicle margins per unit. Still, selling at volume may help Aito increase gross margins and grow its business, according to an investor relations representative at Seres, which makes Aito-branded vehicles with Huawei.

Context: Despite a backlash from many existing car owners, Tesla has achieved instant results on sales and regained growth momentum after it drastically cut prices on its China-made vehicles earlier this month.

• Order volumes at some of Tesla’s showrooms in lower-tier Chinese cities have surged by as much as 500% from a month earlier, according to a Monday report by Chinese media outlet Yicai. The Beijing News also reported that the company saw an increase of 300,000 new orders in three days following the cuts.
• Some competitors have so far refused to join the fray. On Monday, an executive at Zeekr said that Geely’s premium EV brand would stick to its current price for its 001 crossovers. Meanwhile, BYD and GAC’s EV unit Aion raised prices across their vehicle lineups at the beginning of this year, citing Beijing’s phasing out of EV incentives among other reasons.
• Tesla handed over nearly 440,000 China-made vehicles to local customers in 2022, representing a below average increase of 37% from a year ago. The company’s share in the Chinese EV market fell by 8.3% year-on-year to 6.6% in December, according to figures from the CPCA.

READ MORE: Chinese EV makers rush to boost year-end sales as subsidies expire

The latest member of BYD’s Ocean family of EVs has been inadvertently revealed in China by the country’s Ministry of Industry and Information Technology (MIIT), as the electric vehicle maker looks to extend its leadership in a competitive entry-level market segment.

Why it matters: The compact EV, called Seagull, will likely be the cheapest model in BYD’s lineup, and the Warren Buffett-backed automaker will face stiff competition in a segment dominated by standouts such as Wuling’s popular and inexpensive Hongguang Mini EV.

Details: The Seagull compact SUV will measure around 3.8 meters in length with a wheelbase of 2.5 meters, according to information released by MIIT on Jan. 11. This is shorter than the length of 4.1 meters and the wheelbase of 2.7 meters of BYD’s Dolphin hatchback, both under the company’s ocean-themed EV family.

• Outed in several images from MIIT, the Seagull’s rounded silhouette and sharp shoulder line follow the same sporty design language as the rest of the automaker’s Ocean models, which cater to a younger consumer segment compared with its Dynasty Series.
• Industry observers estimated the Seagull would be priced below RMB 100,000 ($14,916), compared with the Dolphin, which is priced between RMB 116,800 and RMB 136,800. The Seagull will be powered by an electric motor with an output of 55 kW, also lower than the 70 kW delivered to the Dolphin.
• The Chinese government requires automakers to submit documents regarding new product information before launch to gain approval for models sold in the country. A BYD spokesperson declined to comment on launch details when contacted by TechNode on Monday.

Context: Budget-friendly, entry-level micro-EVs accounted for around one-third of passenger electric vehicle sales in China last year, according to figures from the China Passenger Car Association (CPCA). Competition in the sector has been heating up in recent years, and buyers are more price-conscious than those of luxury cars.

• Wuling’s Mini EV maintained its title as China’s best-selling EV model in 2022 with sales of 404,823 units, representing a slight 2.4% increase from a year earlier. Other popular micro-EVs include Chery’s QQ Ice Cream and Changan’s Benben, with deliveries of each exceeding 90,000 units last year. Meanwhile, Hong Kong-listed Leapmotor also sold 61,919 T03 compact hatchbacks, CPCA figures showed.
• Earlier this month, BYD said it had delivered more than 230,000 Dolphin vehicles since the launch of the first model under the Ocean Series in August 2021. The company also sold more than 50,000 Seal crossovers last year after delivery began in August. The Seal, the second member of the Ocean marque, is a direct rival to Tesla’s Model 3 with a starting price of RMB 212,800.

WM Motor, a Chinese electric vehicle maker backed by search engine giant Baidu, is set to be acquired by Apollo Future Mobility, a Hong Kong-listed firm backed by Hong Kong tycoon Li Ka-shing, for about $2 billion. The acquisition means the EV maker will go public in Hong Kong via a backdoor listing. 

Why it matters: The $2 billion takeover is seen as a survival move for the Chinese EV maker, once a rival of Nio, Xpeng, and Li Auto but now desperate for cash. The company has experienced significant setbacks, including sluggish sales, massive recalls, and lawsuits with Geely in the past few years.

Details: Apollo Future Mobility Group’s subsidiary Castle Riches Investments Limited will spend around $2 billion to buy 100% of WM Motor Global Investment Limited’s shares, according to a security filing (in Chinese) made on Thursday.

• Apollo also said it would sell more than HK$ 3.5 billion ($450 million) of its shares, with 20% of the proceeds to be used to repay interim financing to WM Motor and 70% to be used to fund its further development.
• WM Motor became a major shareholder in Apollo in late 2021 and held a stake of nearly 23.7% before the share sale. WM Motor founder and chief executive Freeman Shen is a non-executive director at Apollo.
• The two companies are set to complete the deal within the next three months, which could allow WM Motor to be listed on the Hong Kong Stock Exchange in the second quarter, local media outlet CLS reported.
• WM Motor Global Investment Limited owns more than 80% of the shares in WM Smart Mobility Technology (Shanghai) Co., Ltd., a major business entity of the namesake EV maker in China, the filing said.

Context: Positioning itself as a luxury EV maker with plans to launch its first model in 2024, Apollo has been chaired by Ho King-fung, previously a JP Morgan analyst and a nephew of former Macau chief executive Edmund Ho Hau-wah, since 2016.

• The company is heavily backed by political and business elites in Hong Kong and Macau, with Ho’s family holding an 11.35% stake as of March 2022, according to a Thursday report by Chinese media outlet Yicai. Hong Kong tycoon Li Ka-shing and Solina Chau Hoi Shuen, a businesswoman and close friend of Li, also own a combined 9.9% stake in the company, the report said.
• In October 2021, WM Motor said it would raise $500 million in two financing rounds, including a $300 million Series D1 led by PCCW, a telecommunication firm headed by Li’s younger son Richard. The Shanghai-based EV maker has also secured support from investors, including the city’s government funds, state-owned automaker SAIC, and Baidu.
• In June, WM Motor filed paperwork for an initial public offering in Hong Kong and was rumored to be looking to raise as much as $1 billion, according to a Bloomberg report. The company did not proceed with the initial share sale, however. The firm also had plans to list on the mainland’s Nasdaq-style Star Market back in late 2020, the South China Morning Post reported.
• Once hailed as one of the “Fab Four” in China’s EV market by Deutsche Bank analysts, WM Motor has underperformed in the past two years, reporting sales of 44,152 units in 2021, less than half those of peers Nio, Xpeng Motors, and Li Auto. That number further declined to 29,358 units from January to November 2022, according to figures from the China Passenger Car Association (CPCA).

READ MORE: Struggling EV maker WM Motor reportedly seeks back-door listing

BYD became the world’s best-selling electric vehicle brand in 2022, managing to sell a record 1.8 million units, more than triple its numbers from a year earlier. Other major automakers also reported improvement in December, according to the latest sales figures. 

Why it matters: The figures show that BYD has had an iron grip on the market in the last year while smaller EV makers faced ups and downs. China’s EV sales in 2022 are set to finish lower than expected as the industry enters a slower period after authorities phased out EV purchase subsidies at the end of 2022.

• China’s wholesale sales of electric passenger vehicles in December will increase by 17% from a month earlier to around 700,000 units, according to estimates by the China Passenger Car Association (CPCA).
• This means China’s new energy vehicle sales for last year could be below the previous estimate of 6.5 million units by CPCA. Passenger EV sales from January to November grew 100% year-on-year to 5.7 million units.

Details: BYD said on Monday that it delivered around 235,200 vehicles in December, an increase of 150.5% from the same period a year earlier. That figure also brings BYD’s total sales for 2022 to more than 1.86 million units, up 208.6% compared to 2021 figures.

• Aion, the electric vehicle unit of Chinese automaker GAC, maintained strong growth momentum with sales of 30,007 units last month. Overall sales surged 126% year-on-year to around 271,000 units in 2022. The company has set a target of selling 600,000 EVs in 2023, according to general manager Gu Huinan.  
• Hozon, a budget carmaker backed by CATL, was another bright spot with deliveries of 152,073 vehicles, an 118% jump compared with 2021. The company exported a significant number of 3,456 EVs and is looking to accelerate overseas expansion in regions such as Southeast Asia and the Middle East in 2023.
• Li Auto also ended the year with a record delivery count, handing over 21,333 crossovers to customers in December and becoming the first Chinese EV startup to reach the 20,000-unit milestone in monthly delivery. The total delivery count in 2022 for the brand was 133,246 vehicles, up 47.2% from a year ago.
• After a difficult third quarter, Xpeng Motors’ deliveries bounced back in December to a normalized level but still fell short of its US-listed peers Nio and Li Auto. The company delivered 11,292 units last month, including 4,020 units of the G9, its first premium crossover, which it launched in September. The final tally was 120,757 EVs, a mild 23% annual increase.
• Huawei-backed EV maker Aito also reported strong deliveries of 10,143 units in December, with total 2022 deliveries topping 75,000 units. 
• Monthly deliveries of Geely-backed EV brand Zeekr also surged 199% year-on-year to 11,337 units, bringing the maker’s total delivery count to 71,941 units.
• Nio delivered 15,815 cars last month, a monthly record high following November’s 14,178 units. Annual deliveries totaled 122,486 vehicles, representing a 34% growth from the previous year.
• Tesla’s deliveries increased 40% to 1.3 million EVs in 2022 from the prior year. The CPCA, which has tracked monthly sales for the company’s China operations since 2020, has not revealed its December sales figure for the Chinese market.

Context: Analysts expect industry sales to hit a plateau in 2023 after several years of strong growth as the Chinese government scraps subsidies for EV purchases.

• Citic Securities forecast sales of new energy vehicles, which mainly include battery-powered EVs and plug-in petrol-electric hybrids, to rise by 31% annually to 9 million units in China in 2023.

Xpeng Motors has intensified its restructuring efforts by setting up a new financial platform to control costs and streamline the company’s workflow, according to an internal memo obtained by Chinese media Dianchang (Powerhouse).

Why it matters: The cross-functional financial platform is the latest in a series of restructuring actions undertaken by Xpeng to get its business back on track, after it faced declining sales and slimming margins in recent months due to rising costs and competition.

Details: Xpeng has set up a number of financial units under the new scheme, including two teams to implement specific cost-saving measures with its sales and marketing operations and research and development units, according to the report.

• The new teams will allow chief executive He Xiaopeng to take back control of the company’s finances that he previously handed to management executives, such as budget planning for supply chain and technology development.
• The EV maker has also established several teams dedicated to asset management, tax administration, and business analysis to enhance its expense control, make more accurate cost estimates, and improve compliance practices.

Context: Xpeng has unveiled organizational changes that include setting up a number of committees for corporate strategy, product planning, and technology road mapping in the past few months, following criticism about the pricing and specs of its new premium crossover G9.

• With around RMB 40 billion ($5.74 billion) in cash on Xpeng’s balance sheet, CEO He told investors on Nov. 30 that the company still has enough capital to support its business growth for the coming years.
• The EV maker has recorded losses of nearly RMB 6.8 billion for the first three quarters of 2022, while annual revenue growth has slowed from 152.6% to 19.3% during the same period.

Chinese EV makers Nio, Xpeng Motors, Zeekr, and Aito, as well as Tesla’s operation in China, are racing to get the last slice of the sales pie before the end of 2022, offering special promotions with the country scheduled to phase out subsidies for electric vehicles beginning next year.

Why it matters: Analysts have projected slower EV sales in the coming months after the phase-out but remain positive on the overall growth of the EV sector in China in 2023.  

The end of subsidies: The Chinese government currently grants a small number of subsidies to EV buyers, with all-electrics and plug-in hybrids eligible for subsidies of RMB 12,600 ($1,836) and RMB 4,800 ($689) per unit, respectively. Beijing reduced the incentives gradually by 10%, 20%, and 30% from 2020 to 2022. 

• Multiple Chinese automakers, including Nio, Xpeng Motors, Volkswagen’s Chinese partner SAIC, Geely’s premium EV unit Zeekr, and Huawei-backed EV brand Aito, have recently promised to cover the price increase if customers place their order before the end of 2022 when those subsidies expire and EV prices rise accordingly. 

Tesla’s multiple discounts: Tesla China has offered various discounts on its vehicle lineups amid investors’ fears of a looming slowdown in demand, including an additional discount of RMB 6,000 and a rebate of RMB 4,000 on customers’ end-of-the-year orders.

• The US automaker kicked off the price war on Sept. 16 by offering customers an insurance incentive of RMB 8,000 and then slightly lowered the amount to RMB 7,000 for orders made from October to December.
• This was followed in October by a round of price cuts of its base Model 3 sedans and Model Y sports utility vehicles by at least RMB 14,000 and RMB 20,000, respectively.

Outlook for 2023: Some other automakers have announced the upcoming car price rises in advance, pushing customers to place their orders by the end of the year. 

• BYD said on Nov. 23 that the price of most of its EV models would be up by up to RMB 6,000 starting next year to offset the increase in vehicle costs from expiring government subsidies and rising battery prices.
• GAC’s EV unit Aion and Ford’s manufacturing partner Dongfeng followed suit by previewing a price increase for the next year of up to RMB 8,000 and RMB 9,000, respectively.
• The phase-out will also increase profit pressure for EV makers, who have already been hampered by the rising cost of battery raw materials and other supply chain issues over the past year. Carmakers are facing challenges to increase market share while maintaining their margin guidance, UBS analyst Paul Gong told Chinese media outlet Caixin in a Tuesday report.
• Gong remains positive on the market’s growth prospects for 2023 and forecasts that the penetration rate of new energy vehicles (NEV), mainly all-electrics and plug-in hybrids, will rise to 37% of all new car sales next year from the current level of 27%. China’s state council in 2020 set a goal of NEVs to account for 20% of new car sales by 2025, which was completed well ahead of time.
• Cui Dongshu, secretary general of the China Passenger Car Association (CPCA), expressed a similarly positive sentiment during an online conference on Thursday, saying he expected China’s NEV sales to more than double annually to 6.5 million units this year. The CPCA estimates the number will reach 8.5 million units in 2023, representing a 31% growth year-on-year.

Context: Beijing’s various policy measures and a vast selection of offerings by automakers have allowed the Chinese EV industry to thrive even amid increased competition. EV buyers will still be exempt from a 5% purchase tax next year, the central government said in August.

• In November, retail sales of passenger NEVs increased 58.2% from last year and 7.8% from the previous month to around 598,000 units. BYD and Tesla are the two most prominent players, recording sales of 229,942 and 100,291 units respectively, according to CPCA figures (in Chinese) published Thursday.

Volkswagen faces a growing public backlash in China over malfunctioning software in its electric vehicle ID Series — including sudden black screens and frequent internet disconnection — after a group of Chinese drivers penned an open letter to complain. The German automaker responded to Chinese media outlet Jiemian, saying that it is investigating the cause of these issues and apologizing for the inconvenience. 

Why it matters: The complaints lay bare the challenges established carmakers face in trying to transition to EV making and in particular in incorporating ever more complex driver assistance systems and other digital technology into their vehicles. 

Details: Dozens of disgruntled car owners recently published an open letter demanding SAIC-Volkswagen stop selling its China-made ID Series EVs and issue a complete repair plan to eliminate safety risks in their vehicles, Jiemian reported on Dec. 4.

• The varied software issues reported by these owners include sudden blank screens on the dashboard and central control displays, frequent disconnection from the internet, and cases where the in-car navigation system does not work.
• Three ID Series vehicles are reportedly affected: Volkswagen’s ID.4 sports utility vehicles, seven-seater ID.6 crossovers, and ID.3 family hatchbacks.
• In the letter, the drivers argue that a malfunctioning in-car system poses serious safety hazards. Some drivers said they experienced all of the vehicle’s information disappearing from their in-car display screens, including driving speed and battery status.
• In a statement sent to Jiemian, Volkswagen apologized for the inconvenience and added that it has developed corresponding solutions which will be implemented soon.
• There were at least 30 submissions this year related to malfunctioning in-car software systems in Volkswagen EVs on 12365auto.com, a Chinese online complaint platform, according to a calculation by TechNode.
• SAIC-Volkswagen is a joint venture between the German automaker and Chinese manufacturer SAIC, which began local production of the ID.4, the first ID. family member launched in China, in October 2020.

Context: Volkswagen reported sales of around 112,700 electric vehicles in China for the first nine months of 2022, representing an increase of 139% from a year earlier. The German carmaker expects to sell 3.3 million cars in China this year, a 14% cut from its previous target, Bloomberg reported on Nov. 22.

• In October, Volkswagen’s software unit Cariad invested 2.4 billion euros ($2.3 billion) in China’s Horizon Robotics to strengthen its software offering.
• Domestic automakers are riding the wave of China’s green energy transition, accounting for nearly half of the market share in the passenger EV segment as of September, according to figures from China Passenger Car Association. China recorded sales of around 4.5 million new energy vehicles, mostly all-electrics and plug-in hybrids, from January to September.

Chinese electric vehicle makers reported slower growth in deliveries in November and some even saw decreases as the market continues to be hit by a macroeconomic downturn. Nio and Li Auto posted record deliveries, but Xpeng continued its delivery slump. For other automakers, Aion, Hozon, and Huawei-backed Aito reported a monthly decline in vehicle deliveries in the month while Zeekr and Leapmotor started to show signs of slowing growth.  

Why it matters: The latest figures reflect a slowdown of China’s electric vehicle market as consumer confidence is hit by fears of a potential recession while an ongoing rebound of Covid cases in the country impacts vehicle production.

Sales recovery: 

• Li Auto and Nio saw significant sales recovery in November following a slump linked to growing competition and supply chain disruptions. The pair reported new record deliveries of 15,034 and 14,178 units, an increase of 50% and 41% from a month earlier, respectively.
• Nio expanded its product portfolio from three to six models on sale this year. It began deliveries of its first sedan model, ET7, in March, followed by the medium-size ES7 crossover in August and the long-awaited ET5 sedan a month later.
• Li Auto adopted a similar strategy, as delivery of its second large-size crossover the L9 started on Aug. 30 and that of the L8, a smaller version of the L9, came in October.

Xpeng’s slump:

• Xpeng Motors has continued to report lackluster sales, saying November deliveries totaled 5,811 vehicles, a 14% increase from a month earlier but still far from the historic high of 15,414 units in March.  
• The Alibaba-backed EV maker, once touted as a “Tesla killer” in China, is facing a number of challenges amid economic headwinds and fierce competition. Speaking to analysts on Thursday, chief executive He Xiaopeng said he expected its second crossover the G9 to drive deliveries back up to the threshold of 10,000 units in December.

Monthly declines: 

• Aion on Thursday reported (in Chinese) sales of 28,765 units in November, 4% lower than last month, though it still represented a 91% growth from the same period last year. Vehicle deliveries totaled 241,149 units from January to November for the EV unit of state-owned automaker GAC, which represents a near doubling of last year’s total of 123,660 units.
• Hozon, backed by Chinese battery giant CATL, followed a similar trajectory as deliveries increased 51% year-on-year but fell 16% from October to 15,072 vehicles last month. Year-to-date deliveries reached 144,278 units, with three entry-level crossovers and one mainstream sedan on sale from the brand.
• Aito’s sales in November represented the firm’s first monthly decline since delivery began in March, down 31.3% month-on-month to 8,260 vehicles. The Huawei-backed EV brand provides two plug-in hybrid crossovers, the M7 and M5, which compete against Li Auto’s L9, a successor model based on the latter’s popular Li One SUV.

Slowing growth: 

• Geely’s premium EV brand Zeekr said it delivered 11,011 vehicles in November, a nearly 9% month-on-month rise, compared with a 22.3% increase a month earlier. And yet year-to-date deliveries reached 66,611 units as of last month, inching closer to its annual goal of 70,000 vehicles.
• Meanwhile, Hong Kong-listed Leapmotor reported a 14.4% month-on-month sales rally of 8,047 vehicles. However, vehicle delivery fell for a third straight month as of October after the Zhejiang-based automaker sold a milestone 12,525 cars in August.
• Nevertheless, Zeekr and Leapmotor have emerged as strong competitors in the Chinese EV market. 

Chinese EV upstart Nio will continue its investment in battery and chips research and development and keep expanding into overseas markets, according to an internal speech (in Chinese) from the company’s chief executive William Li in which he also reaffirmed a goal to break even in 2024 despite challenging economic conditions. 

Why it matters: Li’s comments come at a time when China’s electric vehicle sales start to slow amid potential recession worries, growing competition, and supply chain disruptions due to frequent Covid comebacks. As a result, EV startups like Nio are facing pressure from the market as their sales slow and costs rise.

• Sales of passenger new energy vehicles, mainly all-electrics and plug-in hybrids, declined 9% in October from a month earlier to around 556,000 units, despite a 75.2% year-on-year increase, according to figures published by the China Passenger Car Association (CPCA).

In-house batteries and chips: Speaking to employees in Shanghai on Friday, Li highlighted the company’s strategy to enhance research and development across its batteries and semiconductor units. The chief executive said in-house battery and chip capability will be essential in lowering production costs and increasing vehicle margins.

• Li said the company would “have no chance at all” of turning a profit in 2024, or of with hitting a 20% gross margin for its entry-level EVs, if it cannot be more self-sufficient in battery and chip making (our translation).
• Making batteries and chips in-house could improve Nio’s vehicle margin by at least 10%, according to Li, who added that the automaker plans to maintain external collaboration with a long-term outlook of securing 30% of required batteries from suppliers.

Global push: Li also said that the company’s next-generation vehicles would be introduced to American customers, without providing a specific timeline, while a team of more than 700 employees in Europe is upping efforts to offer more test drives on the continent.

Cost control: The chief executive asked Nio’s nearly 30,000 employees to be more effective and control spending. The company nearly doubled its employees a year ago and now takes a more restrained approach in hiring.

• He urged the workforce to streamline business operations in a systematic way, such as using more efficient planning for building battery swap stations based on user data. 
• He also promised the company would be deliberate with layoffs and shut-downs.

Context: Nio booked a record loss of RMB 4.1 billion ($577.9 million) in the third quarter of 2022, a significant increase of 392.1% from a year ago, while the firm’s vehicle profit margin fell from 18.1% to 16.4% over three consecutive quarters this year.

• The automaker is also making a foray into the competitive smartphone market with plans to launch its first phone model within the next 12 months, a defensive move against smartphone makers such as Huawei and Xiaomi making EVs.

Aion and Zeekr, the electric vehicle subsidiaries of Chinese automakers GAC and Geely respectively, each broke their monthly records for vehicle deliveries in October, while US-listed EV trio Nio, Li Auto, and Xpeng Motors lagged behind their peers.

Why it matters: Although Tesla and BYD have long been the undisputed leaders in the Chinese EV market, GAC and Geely are among the traditional automakers leading the chase. The October delivery results also reflect the strong momentum of Huawei-backed EV maker Seres and the mounting troubles faced by Xpeng.

GAC: The state-owned automaker said on Tuesday that it delivered 30,063 Aion-branded vehicles in October, an increase of 149% from the same month last year. That number brings Aion’s total delivery numbers this year to 212,384 vehicles.

• Toyota’s Chinese manufacturing partner is ramping up efforts to meet an annual delivery target of 250,000 Aion-branded EVs this year, with its second auto manufacturing plant for Aion beginning operations in Guangzhou in early October.

Geely: Zeekr made deliveries of 10,119 EVs in October, a record high for Geely’s premium EV brand. Year-to-date sales totaled almost 50,000 as of last month, with the brand close to reaching its goal of delivering 70,000 cars this year.

• Geely is looking to spin off Zeekr for an initial public offering, through which Volvo’s parent company expects to fund its plans to introduce six Zeekr-branded models within five years.

Seres: Huawei‘s manufacturing partner delivered 12,018 Aito-branded EVs last month, a 461% jump from a year earlier. October was also the third straight month that it has delivered over 10,000 units in a single month since the delivery of its first production car began in March.

Xpeng: Deliveries of the eight-year-old EV maker more than halved year-on-year to just 5,101 vehicles last month. Vehicle deliveries totaled 103,654 units from January to October, far from the company’s unofficial 2022 guidance of 250,000 vehicles set early this year.

• A total of 623 G9 crossovers were handed over to consumers last month after delivery began on Oct. 27. The company expects monthly deliveries of its second sports utility vehicle to surpass the threshold of 10,000 units next year after production ramp-up.
• The company’s second sedan model, the P5, which the company expected to be a hit in the mainstream segment with a starting price of RMB 157,900 ($21,707), has underperformed with deliveries of around 33,700 units as of October this year.

Nio and Li Auto: The two other EV upstarts each reported October deliveries of more than 10,000 units, slightly lower than the previous month. Yet both have enjoyed a solid performance despite ongoing supply chain issues amid the post-pandemic rebound.

• Nio’s premium sedan ET7 is the company’s most in-demand model on sale, recording deliveries of 3,050 units. At the same time, the company only handed over 1,030 units of the ET5, its second sedan model, as production is still ramping up.
• The automaker was also forced to cut production at its facilities in the eastern city of Hefei in mid-October due to Covid restrictions, Chinese media outlet 36Kr reported Tuesday, citing people familiar with the matter.

Hozon and Leapmotor: With three entry-level cars on sale, Zhejiang-based Hozon managed to exceed deliveries of 18,016 units in October, representing a 122% year-on-year rise, while Leapmotor deliveries dropped by more than a third to 7,026 units.

Aito, an electric vehicle brand backed by Huawei, has quietly cut the prices of its electric crossovers by RMB 8,000 (around $1,100), in what appears to be an immediate reaction by a Chinese firm to Tesla’s major price cuts aimed at boosting demand.

Why it matters: The move is the latest sign that a new price war has broken out in the world’s biggest auto market. Tesla on Monday offered a significant price reduction on its popular EVs, which analysts predict could force other automakers to follow suit.

• There could be further headwinds coming for young Chinese EV makers, including Nio, Xpeng Motors, and Li Auto, which have already faced slowing growth amid rising competition, Chinese media outlet Caixin reported on Monday, citing analysts.
• Sales of high-end models from BYD and traditional auto majors are also likely to be impacted. This would further erode profit margins for cash-burning carmakers, which have been struggling with the soaring cost of critical components, among other supply chain issues.

Details: The price cut, which Aito has not officially announced, affects its two all-electric sports utility vehicles, the M7 and the M5, Chinese media outlet The Paper reported on Tuesday. Customers who have already paid a pre-order deposit have been told to pay the remainder of the requested sum with a reduction of RMB 8,000, the report said.

• Aito currently has two models on sale: the M7 and M5 plug-in hybrid, with starting prices of RMB 319,800 and 259,800 respectively, as well as the all-electric version of the M5, priced from RMB 288,600. These amounts put them in the same price range as the Tesla Model 3 and Model Y in China.
• A spokesperson from Huawei did not respond when asked for comment by TechNode on Wednesday.

Context: Last December, Richard Yu, chief executive of Huawei’s consumer business group, announced the launch of the M5, Aito’s first car model equipped with Huawei’s HarmonyOS operating system and manufactured by Chinese automaker Seres.

• Since mid-2021, the Chinese telecommunications giant has been selling vehicles via its nationwide retail network for its partner, which reported monthly deliveries of more than 10,000 Aito-branded vehicles for the first time in August, just five months after delivery began in March.
• Nio, Xpeng, and Li Auto have reported slowing sales growth from July to September amid continuous supply chain turmoil while facing increased competition from bigger rivals, including Tesla and BYD.
• Xpeng’s market capitalization has tumbled more than 80% to $6.84 billion, while that of Nio had dropped below $18 billion as of Tuesday, compared with a historic high of more than $56 billion in November 2020.
• China’s sales of new energy vehicles, including all-electrics and plug-in hybrids, more than doubled annually to nearly 4.6 million units for the first nine months of this year. And yet, industry experts project sales to slow into 2023 when the competition will be more intense as Beijing phases out subsidies for EV purchases entirely.

READ MORE: Chinese EV makers may face a price war in 2022: UBS

Aion, the electric vehicle unit of Chinese automaker GAC, said on Thursday that it has raised RMB 18.3 billion ($2.53 billion) in Series A from a group of strategic investors, the latest boost to the company’s ongoing transition into an electric automotive powerhouse.

Why it matters: The funding round gives the Guangzhou-based upstart a whopping valuation of RMB 103.3 billion, making it China’s biggest private, venture capital-backed EV maker. Aion also expects to gain more advantages in the EV supply chain with new backers ranging from battery resources to chip manufacturing firms.

Details: Among a group of 53 strategic investors in the latest financing round were Ganfeng Lithium, China’s biggest lithium compounds producer, and China Fortune-Tech Capital, an investment arm of top Chinese chipmaker SMIC, Aion said in a statement (in Chinese).

• Other prominent investors include a national fund for structural adjustment of state-owned enterprises, as well as Guangzhou Industrial Investment and Capital Operation Holding Group.
• As Toyota’s and Honda’s manufacturing partner in China, GAC is still the biggest shareholder of Aion with a 76.9% stake, while the new investors from Series A jointly acquired a 17.7% stake in the EV maker.
• Aion said it would use the proceeds to fund the in-house development of new models, batteries, and other key components, adding that the investment would also help provide a stable supply of raw materials and car chips.
• The company will kick off its Series B fundraising process by year-end and look to sell shares publicly as early as 2023, Chinese financial media outlet Caixin reported on Sept. 6, citing company executives.

Context: Aion is China’s fifth biggest EV maker, with sales more than doubling annually to 182,321 cars in the first nine months of this year, which gave it a 4.8% market share, according to data from the China Passenger Car Association.

• The GAC subsidiary said on Oct. 12 that its second auto manufacturing plant in Guangzhou had started operation, boosting its car production capacity in the country to more than 400,000 units annually.
• Feng Xingya, GAC’s general manager, confirmed the company’s goal of delivering 300,000 Aion-branded vehicles this year, citing delivery times of around two months to customers, Caixin reported on Friday.
• Chinese auto majors, including Dongfeng, Changan, and Geely, have all sought external investors’ support and accelerated their listing plans for their cash-bleeding EV projects in the face of recent economic challenges.
• BYD is the dominant leader in the Chinese EV market, holding 29.7%. The firm is followed by SAIC-GM-Wuling, Tesla, and Geely, with shares of 8.4%, 8.2%, and 5.3%, respectively, CPCA figures show.

Huawei on Tuesday revealed its first all-electric sports utility vehicle, the Aito M5, in collaboration with Chinese automaker Seres. The new model will compete with Tesla’s Model Y and others in the world’s biggest electric vehicle market.

Why it matters: Huawei, along with Seres, has quickly expanded its vehicle offering with two plug-in hybrid crossovers and a full-electric version, just six months after delivering the first Aito-branded vehicle in March. The telecom giant’s moves in the space could pose a serious threat to major EV makers.

Details: The Aito M5 all-electric will have an estimated driving range of 620 kilometers (385 miles), surpassing its rivals. For example, Tesla’s Model Y has a 545km driving range, EVs from German automakers BMW and Audi offer around 550km between charges.

• Richard Yu, chief executive of Huawei’s consumer business group, said that the Aito M5 performs “far better” than Tesla’s Model Y and offers a more luxurious in-car experience. Yu claimed the M5 is easier to control on rough roads and has a quieter cabin.
• Huawei said it received more than 30,000 pre-orders in just four hours after the all-electric M5 was announced, local media reported. In December, the tech giant saw 6,500 reservations in four days after releasing the first vehicle model under the Aito marque, the plug-in hybrid M5.
• The new model comes at a price range of between RMB 288,600 and RMB 319,800 ($41,395 to $45,870), at least RMB 38,800 higher than the starting price of its plug-in hybrid counterpart but lower than Tesla’s Model Y, which is priced from RMB 316,900.

Context: Huawei broke its delivery record with more than 10,000 EVs to customers in August, bringing the company’s total delivery numbers for this year to 39,433 vehicles as of August. Meanwhile, sales of rivals such as Li Auto and Xpeng Motors slid last month due to cannibalization by new models and increased competition.

• Huawei is also making a push into the mobility sector with the launch of the public beta version of its ride-hailing app “Petal Chuxing” on Tuesday. The aggregation platform currently provides Huawei smartphone users access to ride-hailing services such as T3 in 92 domestic cities.

READ MORE: Li Auto deliveries halve in August while Seres and Zeekr see growth

Chinese electric vehicle upstarts Li Auto and Xpeng saw declines in August, while Huawei’s auto partner Seres and Geely’s Zeekr saw strong growth. Among them, Li Auto reported a record decline in August deliveries, more than 50%, as the electric vehicle maker’s new crossovers cannibalized sales of its existing model. Seres deliveries up28% in August while Geely’s EV brand Zeekr grew more than 42%. 

Why it matters: Li Auto’s shortfall took place when Seres and Zeekr saw growth, highlighting a more competitive EV landscape and a preference among Chinese consumers to gravitate towards the latest products, according to Tu Le, managing director of consultancy Sino Auto Insights.

Li Auto’s decline in August: Li Auto’s deliveries fell more than half in August to 4,571 crossover vehicles from a month earlier, extending a month-on-month decline of 21.3% in July.

• “Li Auto and Xpeng have recently had some high-profile vehicle launches that have likely led them to lose focus a bit,” said Le. “For Li Auto specifically, the new L9 has really cannibalized sales of the Li One, so it’s like they only have one product in the market again.” 
• This echoed a comment Shen Yanan, Li Auto’s president, made during an earnings call last month, in which he acknowledged that many customers “with enough budget” preferred the L9, the company’s second sports utility vehicle, over the cheaper Li One. The company began delivering the L9 on Aug. 30.
• Analysts also worry that the upcoming L8 crossover, confirmed by chief executive Li Xiang as a redesigned model of the Li One and scheduled for delivery in November, will have an even more significant cannibalization effect. 
• The eight-year-old EV maker on Monday confirmed to state media outlet Jiemian that it will phase out production of the Li One three years after its release in 2019, introducing a price reduction of RMB 20,000 ($2,882) for its first car model in some markets.
• The price cuts have angered some owners who accused the company of cheating them over the new car release and price changes. At least 1,000 Li One owners have filed complaints against the company on “Black Cat,” a complaint platform owned by Chinese tech firm Sina.

Rise of Seres and Geely: Meanwhile, Seres and Geely have both seen healthy growth in August. Xpeng Motors’ deliveries also declined by 16.9% to 9,578 vehicles in August from a month earlier, while Nio saw deliveries grow 6.2% month-on-month to 10,677 vehicles. There is a major concern about demand for Xpeng’s current models, as buyers might wait for the introduction of its G9 crossover, scheduled for delivery by year-end, as well as a retrofitted P7 sedan set to be released next year.

• Huawei’s manufacturing partner Seres saw a monthly record by delivering 10,045 vehicles in August, up from 7,807 vehicles in July, while Geely’s premium EV brand Zeekr also reported a record delivery number of 7,166 vehicles, representing a 42.7% month-on-month growth.
• Le expects that sales of both Seres and Zeekr will continue to grow. With Seres being able to sell via Huawei retail stores and Geely backing Zeekr, these “pseudo-startups” have support structures that most other “true” EV startups do not, which gives them quite an advantage, Le added.

Context: BYD maintained its leadership in the market by delivering 174,915 vehicles last month. Tesla is expected to have delivered more than 77,000 cars from its Shanghai facilities, according to estimates by the China Passenger Car Association on Sept. 1.  

• BYD and Tesla have much more production capacity than their counterparts, Le said, adding that the two companies’ leadership will continue amid “particularly tough” competition in the mainstream, small- to medium-sized SUV segments.

Pindudouo is reportedly planning to launch a cross-border platform designed to connect Chinese and overseas suppliers with global customers as the Chinese e-commerce giant expands its approach to take on rival Shein.

Why it matters: The move highlights a growing trend of Chinese technology companies considering going global, partly accelerated by China’s regulatory crackdown on the tech sector as well as intense competition and weakening consumption in the domestic market.

Details: Pinduoduo is currently seeking sellers for its new cross-border online marketplace, which the company aims to make available first in the US in September, Chinese media outlet LatePost reported on Wednesday, citing people familiar with the matter.

• The online retailer is offering registration and referral fee waivers for small and medium-sized merchants in a bid to attract them to sell on its platform, the report said. It is also providing various fulfillment services such as picking products, packing orders, and arranging shipments once the goods are transported to its warehouses in China.
• Aiming to differentiate itself from Shein, which primarily focuses on fast fashion, beauty, and lifestyle products, Pinduoduo’s new platform will be more of a general marketplace for low-priced household products and other daily necessities, where the company has experience and a competitive advantage.
• Pinduoduo has set up a team of 80 employees in the southern city of Panyu, where Shein is headquartered, and chief operating officer Gu Pingping is leading the project, according to the report.
• Pinduoduo did not respond to TechNode’s request for comment on Thursday. 

Context: Shein’s success selling clothing products at super-cheap prices has prompted more Chinese tech firms to follow its model, while existing major players are ratcheting up efforts to maintain their lead in the market.

• Alibaba was considering the expansion of its Southeast Asian arm, Lazada, into the European market to boost overseas growth, Reuters reported in April.
• JD.com partnered with Canadian e-commerce company Shopify in January to allow Chinese merchants to sell products to consumers on the latter’s platform, TechCrunch reported.
• TikTok parent company Bytedance launched a standalone shopping app called “Fanno” late last year in several European countries, including France, Germany, and Britain, SCMP reported.
• Driven by interest in its summer sales, Shein became the most downloaded e-commerce app in the US with 6.8 million downloads during the second quarter of 2022, surpassing those of Amazon for the first time.
• Pinduoduo’s active buyer accounts increased 10% to 868.7 million last year, lower than analysts’ expectations of 883.3 million, according to a Bloomberg report.

On Tuesday, the self-driving car startup Pony.ai announced that it partnered with ride-hailing company Caocao to provide robotaxi services in Beijing.

Why it matters: Autonomous driving is still a long way from commercialization. The deployment of autonomous vehicles on a familiar ride-hailing app might help Pony.ai get closer to making money from its pilot projects.  

Details: Starting from Wednesday, public passengers will have the option to choose Pony.ai’s custom-made test models of robotaxi from the Caocao app on their phones. However, the robotaxis fleet of 30 or so will be restricted to a designated area in southern Beijing. A safety driver behind the wheel is not required, but each car will have a monitor in a passenger seat.

• There is an RMB 18 ($2.67) base fare for all rides, and longer routes will cost RMB 3 per kilometer beyond three kilometers during rush hours and RMB 2.6 during off-peak hours. By comparison, local ride-hailing services usually have a base fare of RMB 14 per ride and RMB 1.8 per kilometer over three kilometers.

Context: In April, Pony.ai and Baidu received permits from the Beijing city authorities to offer driverless rides in an area of 60 square kilometers (23 square miles) in the city’s southeast Yizhuang district. The local government allowed the two companies to charge fares last November.

• Backed by big automakers Toyota and FAW, Pony.ai has been operating a robotaxi pilot project commercially on the outskirts of Guangzhou since May and has partnered with T3, an emerging rival to Didi, as well as Ontime, a ride-hailing service of Chinese automaker GAC.
• Last August, Chinese tech giant Baidu launched its proprietary autonomous ride-hailing platform called Apollo Go, also known as “Luobo Kuaipao” in Chinese. The company completed over 196,000 trips during the first three months of this year. Baidu has launched commercial operations of robotaxis in three domestic cities, including Beijing and the southwestern municipality of Chongqing.
• Rival WeRide also collaborated with GAC for a commercial launch for customers of Ontime in Guangzhou this year, while self-driving unicorn Momenta is piloting a non-commercial fleet of 60 robocars for ride-hailing with SAIC in Shanghai and the nearby city of Suzhou. ByteDance and Meituan-backed Qcraft also deploy a few dozen autonomous vehicles with T3 for free in Suzhou.

Chinese electric vehicle makers Aion, Hozon, and Leapmotor, reported record deliveries in July, overshadowing the numbers reported by leading players Nio, Xpeng Motors, and Li Auto as the landscape in the world’s biggest EV market continues to evolve.

Why it matters: Nio, Xpeng Motors, and Li Auto are facing increased competition. Traditional brands and new challengers have recently introduced an avalanche of lower-priced models to the market thanks to improving battery technologies, vastly expanding consumer options.

Details: Aion, the EV arm of Chinese state-owned automaker GAC Group, saw monthly deliveries surge about 138% year-on-year to 25,033 vehicles in July, meaning the firm has put roughly 125,000 cars into customers’ hands through the first seven months of the year. GAC, Toyota’s manufacturing partner in China, has a broad EV portfolio under the Aion marque with a price range between RMB 163,800 and RMB 469,600 ($24,218 to $69,430).  

• EV startups Hozon and Leapmotor followed suit, reporting triple-digit yearly growth with July deliveries of 14,037 and 12,044 vehicles, respectively. Zhejiang-based Hozon attributed its growth to increased production capacity.
• Meanwhile, Xpeng, Li Auto, and Nio lost their lead in the Chinese EV market, delivering 11,524, 10,422, and 10,052 vehicles to customers in July, respectively, with all three brands seeing a decrease of more than 20% month-on-month. Nio’s chief executive William Li said on July 31 that the company reduced production of “several thousand units” last month due to parts shortages.
• Seres, Huawei’s manufacturing partner and formerly known as Sokon, posted sales figures of 7,807, while Geely’s premium EV brand Zeekr claimed it sold 5,022 vehicles last month.
• Chinese auto majors such as BYD and Great Wall Motor have yet to release their July sales numbers.

READ MORE: BYD records over 162,000 deliveries in July

Context: Nio, Xpeng, and Li Auto are also expanding their product range in a fight to keep their lead positions.

• Nio plans to diversify its offerings by mulling a separate sub-brand targeting cheaper price points. The company is also on track to roll out a separate mainstream brand codenamed the Alps in 2024.
• Li Auto has already launched a full-size crossover, the L9, with delivery scheduled for this August, and plans to release its first medium-sized, lower-priced vehicle model in 2023. 
• Xpeng said it will soon begin taking pre-orders for its first premium sports utility vehicle, the G9, this month and launch three new models by 2025.

Chinese telecom giant Huawei is entering the ride-sharing market with the launch of a standalone car-hailing app “Petal Chuxing.” The company looks for ways to expand its car-related business and diversify revenue sources as sales of its smartphones slow.

Why it matters: Huawei’s foray into ride-hailing is a natural extension of the company’s ambition to become a key player in the automotive space as the autonomous ride-hailing service has the potential to make up a significant percentage of new car sales in the long run.

Details: Huawei launched a ride-sharing app called “Petal Chuxing,” based on its navigation app “Petal Maps,” which allows users to request rides from multiple ride-hailing providers, state media publication National Business Daily reported on Friday.

• Users can now access two domestic ride-hailing companies — Shenzhou Zhuanche, a Chinese car rental firm Car Inc subsidiary, and state-backed Shouqi. Huawei is testing the service in Beijing, Shenzhen, and the eastern city of Nanjing, the report said.
• At a press conference last week, Huawei’s head of consumer business Richard Yu said that the company has made Petal Maps more competitive than similar offerings by seamlessly linking users’ Huawei handsets to the HarmonyOS-powered vehicles.
• A Huawei spokesperson declined to comment further when contacted by TechNode, saying the company will share more information once it is available.

Context: Huawei first launched its proprietary mapping service for overseas users in October 2020, a year after US sanctions barred the company from including Google software and services on its devices. The service now has 28 million users from over 160 countries.

• The company also obtained a permit to draw up high-definition maps in its home country in mid-2019, a stepping stone to developing its self-driving car technology.
• Chinese tech companies Alibaba and Meituan also operate ride-sharing aggregation platforms, while automakers such as Geely, FAW, and Dongfeng, have built their own ride-hailing apps to take on long-time market leader Didi Chuxing.

READ MORE: Huawei begins selling EVs in stores, may offset sinking phone sales: CEO

China’s electric vehicle industry has experienced a strong recovery in June, recording over 140% growth in passenger EV sales amid the ongoing impact of the Covid-19 pandemic and supply chain challenges, data from the China Passenger Car Association (CPCA) showed on Friday.

Why it matters: The growth was driven mainly by a strong comeback from BYD, Tesla, and other Chinese auto brands like Nio and Li Auto, after Shanghai and other cities lifted pandemic-related lockdowns, showing the impressive resilience of the Chinese EV space.

Details: The CPCA said on Friday that the wholesale volume of passenger EVs in China hit a record monthly high in June with a total sales of 571,000 vehicles, a whopping yearly 141.4% increase. In June, passenger car sales, including combustion engine cars and EVs, increased by 22.6% from last year to 1.94 million units.

• The boost in sales comes as China rolls out hefty stimulus measures, which include additional subsidies and tax cuts, Cui Dongshu, CPCA secretary-general, told reporters during an online conference on Friday. 
• Tesla’s Shanghai Gigafactory came back “with a vengeance” after a 22-day stoppage in April due to Shanghai’s lockdown, chief executive Elon Musk previously told investors, with shipments surging 145% month-on-month and 135% from a year ago to 78,906 vehicles.
• BYD has maintained its top place with almost 25% of the market share, with sales in June hitting 134,036 units, tripling 2021 levels. Meanwhile, EV sales from domestic auto majors Geely and GAC’s EV unit Aion rose by 393% and 182% to 29,671 and 24,109 units, respectively.
• Young EV makers Nio, Xpeng Motors, and Li Auto are also getting back to previous levels by ramping up production and working closely with suppliers, while Sokon, a manufacturing partner of Chinese tech giant Huawei, delivered 7,658 Seres-branded EVs last month, a 41% monthly growth.

Context: Forecasts for the Chinese EV market have remained bullish. Morgan Stanley raised its outlook for this year’s EV sales by 24% to 5.7 million vehicles in a research note on Li Auto on Friday, Chinese media outlet Sina Finance reported.

• CPCA expects China’s EV sales to edge up 84% to 5.5 million units this year, while consulting firm AlixPartners forecasts that number to be 5.1 million, with Chinese-brand vehicles retaining an enormous share of the market.

Aito, a Chinese electric vehicle brand backed by Huawei, received more than 10,000 pre-orders for the M7 in just two hours, after it was unveiled on Monday. The new model is the brand’s second production vehicle featuring Huawei’s HarmonyOS operating system for cars.  

Why it matters: While reservations do not always translate into actual sales, the M7 has captured people’s attention, signaling that Huawei is turning into a serious rival to existing carmakers since entering the burgeoning EV space about one year ago.

• Experts believe that the new car will become a direct competitor to Li One, a popular large plug-in hybrid vehicle launched by Chinese EV maker Li Auto that has similar configurations and a similar price point. Aito has the potential to achieve a sales volume of up to 100,000 units for this year, state media outlet Shanghai Securities News reported Monday, citing analysts from China Securities.

Details: More than 10,000 people pre-ordered the Aito M7 sports utility vehicle in the first two hours after the car brand began accepting RMB 1,000 ($149) deposits on Monday afternoon, a company spokesman told TechNode on Tuesday.

• With a four-cylinder, 1.5-liter engine developed by Huawei and a 40.6 kWh battery pack supplied by CATL, the M7 will be able to go as far as 1,220 km (758 miles) on a full tank and 100% battery charge. It consumes 6.85 liters of fuel per 100 km, well below the 7.8 liters of Li Auto’s L9 SUV and the 10.8 liters of the BMW X7.
• The car uses Huawei’s HarmonyOS operating system, enabling drivers to access “all the mobile services“ from Huawei’s app store, Richard Yu, chief executive of Huawei’s consumer business group said during a press conference.
• The six-seater luxury SUV will have a starting price of RMB 319,800 ($47,737) and will be delivered to customers in August. More than 600 Huawei stores around China will provide test drives starting July 23, and that number will be increased to over 1,000 stores by year-end, according to Yu.

Context: Huawei and its manufacturing partner Sokon have seen a steady increase in sales of the M5, their first vehicle under the Aito brand, shipping 7,021 crossovers in June, a 40% increase from a month earlier.

• According to the latest figures, Aito has reached total delivery of 18,317 units in just four months since delivery began in March. Prior to this, the two companies had experienced an initial setback, delivering only around 8,000 Seres-branded electric crossovers in 2021 after unveiling in April, last year.
• Huawei’s core business growth is still under pressure from US sanctions with revenue dropping by 14% year-on-year to RMB 131 billion in the first three months of 2022, CNBC reported. The smartphone maker has also partnered with state-owned automakers like BAIC and Changan to make EVs.
• Domestic EV makers Nio and Li Auto released their new crossovers, the ES7 and the L9, last month, respectively, and scheduled delivery to begin in August. Another rival Xpeng Motors is set to launch its second SUV model G9 in the same month and will begin delivery in September, with pricing expected to start at more than RMB 300,000.

Chinese automakers have moved quickly in the first five months of 2022, securing a lion’s share of the country’s electric vehicle market. The country’s EV makers are likely to keep that momentum going for the rest of the year, according to management consultant firm AlixPartners.

Domestic auto brands have extended their lead over their foreign rivals in the EV segment this year, making up 85% of all new EV sales in the first five months of 2022, up from 80% in 2021 and 74% in 2020, official figures show. This number may remain unchanged by the end of the year as Chinese brands continue to launch more new EV models than their foreign counterparts, Stephen Dyer, co-leader of AlixPartners’ Greater China business, told TechNode on Thursday.

However, as more traditional global automakers prepare to launch new EVs in the next few years, this share will likely go down due to the increased availability of foreign EVs, Dyer said, predicting an increasingly competitive environment for less experienced automakers.

China’s growing EV industry is holding up better than that for combustion engine vehicles and will likely maintain an upward trend in the coming months, despite Covid-19-related lockdown measures and supply chain constraints. AlixPartners projects that there will have been 5.1 million EV sales in China by the of the year, representing a 45% increase year-on-year and accounting for 22% of total new car sales.

With that said, overall auto sales may fall by 11% year-on-year to 23.4 million units in 2022, as stringent Covid control measures disrupt offline sales, the firm said during an online briefing on Thursday. Meanwhile, supply chain issues will continue to be a headwind for Chinese automakers until 2024, when chip supply issues will largely be resolved, allowing China’s auto sales to return to normal growth rates, according to Dyer.

Chinese EV makers have been moving upmarket and squeezing most international competitors out of their home market. Major Chinese automaker BYD’s EV sales more than tripled to 507,314 units as of May this year, driving its market cap to nearly $130 billion and making it the third-largest automaker in the world in early June.

SAIC-GM-Wuling, a joint venture between General Motors, SAIC, and Wuling Motors, is by far the country’s second-biggest EV maker, with sales of 164,552 vehicles over the same period, mostly thanks to its affordable Hongguang Mini EVs. US-listed EV makers Li Auto and Nio last month launched their new electric crossovers with price tags starting from RMB 459,800 ($68,418) and RMB 468,000 respectively, aiming to take on luxury carmakers such as BMW and Mercedes-Benz.

Tesla and Volkswagen are the only two global automakers with a major presence in the Chinese EV race, selling around 172,000 and 54,000 vehicles respectively to local customers from January until May. In November, Volkswagen moved to replace its China head Stephan Wöellenstein, in part due to lower-than-expected EV sales, according to a Reuters report. The German automaker announced on June 17 that it has set up a regional China board with a new leadership team that includes Marcus Hafkemeyer, a former adviser at Huawei, as technology chief.

US-listed Chinese electric vehicle makers Xpeng Motors, Li Auto, and Nio are undergoing significant restructuring as rising costs of raw materials and supply chain disruptions cut into profit margins. Meanwhile, EV battery makers are upping their investment to increase production capacities as China continues an accelerated shift to EVs.

Chinese EV makers are restructuring their businesses as challenges grow

Having enjoyed exponential growth over the past two years, Chinese electric vehicle startups are showing signs of contraction as supply chain constraints and rising raw material costs (partly worsened by the Covid-19 pandemic) continue to weigh on the industry. 

Facing a serious slowdown in economic growth and a resurgence of Covid-19 outbreaks, the US-listed Chinese EV trio of Nio, Li Auto, and Xpeng Motors are undertaking thorough reorganizations, laying off workers, and shifting away from non-core projects to meet their growth targets. The companies have been handling these challenges relatively well, but the outlook going forward is a bit unclear.

Xpeng Motors: Xpeng is facing a significant setback in its global ambition. Several senior executives, including vice president of overseas sales He Liyang, recently left the Guangzhou-based automaker amid a comprehensive restructuring across the company meant to streamline operations and save expenses, Chinese media LatePost reported on May 26, citing people familiar with the matter. The departures come after the EV upstart experienced lackluster sales of merely 438 vehicles in Norway in 2021, while leader Tesla took a nearly 20% market share in the country as it delivered more than 20,000 EVs over the same period, according to official figures.

In an effort to pare back losses, the Alibaba-backed EV maker is trimming its sizable staff in several major divisions, including a software team developing intelligent cockpit solutions and its data management department. As part of the change, Zhao Hengyi, a tech lead on Xpeng’s in-car voice assistant, left his position in March. The company also cut some of its plans of cultivating some fresh graduates, with dozens of them recently having their job offers rescinded.

Xpeng has been known to spend cash more quickly compared with peers. It posted a record loss of RMB 1.7 billion ($268.3 million) in the first quarter of 2022, widening from RMB 1.29 billion in the previous quarter. Analysts had warned of more losses to come from April to June due to high material costs and recent Covid lockdowns in China. The company earned a gross margin of only 12.2% during the first three months of this year, far lower than the 22.6% and 14.6% posted by rivals Li Auto and Nio, respectively.

Li Auto: A relative latecomer in a competitive industry, Li Auto is also facing a critical juncture and has scaled down some of its recruitment plans as it anticipates tough times ahead, the LatePost report said. Eight-year-old Li Auto recently lowered its delivery target for this year by 15% to 170,000 vehicles and planned to recruit 2,000 fewer people than it had initially planned, as the company worried about sales performance in the face of an economic downturn.

In anticipation of it becoming harder to get capital as investor sentiment worsens, Li Auto is also downsizing. Since March, the company has cut 20% of its full-time employees in its enterprise system development team after a large hiring spree, while dismissing some workers in its camera research and development team, formerly set up by then technology chief Wang Kai, LatePost reported.

The Meituan-backed EV maker was hit harder than rivals by the recent wave of Covid-19 lockdowns in the country, seeing its April deliveries down  62% and its second production model delayed amid the current supply chain disruption. The cuts could help the automaker reduce costs and survive a looming recession, yet investors were disappointed when the automaker forecast an even lower revenue target and warned of a worse margin for the second quarter of 2022.

Nio: Once the front-runner in the field of Chinese EV startups, Nio is making a pivot to battery-making, with plans to develop and potentially manufacture its own battery packs. The move marks a revamp of company strategy that comes as soaring material costs and supply chain bottlenecks slowing its factory output. Speaking to analysts during an earnings call on June 9, chief executive William Li said that the company now operates a team of over 400 employees on battery technologies and plans to launch an 800-volt battery pack for fast charging in 2024.

A new $32.8 million research facility is also slated for construction near its Shanghai headquarters this summer, aimed at developing lithium-ion battery cells and packs. This is in line with the EV maker’s battery strategy of both in-house development and outsourcing, a move that Li believes will benefit Nio’s overall competitiveness and profit-making capability in the long term. The company has warned that battery price hikes will continue to weigh on its margins in the second quarter.

Meanwhile, the company is reorganizing its autonomous driving team, which is at the core of its long-term ambition to become China’s top luxury car brand, following the departure of a long-time vice president of engineering in April. A team of more than 400 engineers, who work on diverse technology domains including sensors, algorithms, and system integration, has been reassigned to other departments to flatten the management structure for communication and combine functions where appropriate, Chinese media 36Kr reported.

Battery makers racing to expand capacity

Despite automakers’ short-term adjustments, the long-term prospects for China’s EV market remain robust with strong consumer demand. In response, major battery makers have kicked off a fierce expansion race in the hope of scaling up supply to meet the demand and take a larger market share. Government-backed industry group the China Passenger Car Association (CPCA) has maintained its forecast of 5.5 million passenger electric vehicle sales for this year in China despite the ongoing Covid-19 outbreaks across the country. 

Here are some of the major players’ expansion plans:

CATL is moving to become more directly involved in lithium mining in order to make its own supply of the EV battery material, thanks to soaring prices. The Chinese battery giant recently won approval to build a new lithium plant with a mining claim on nearly 1,600 acres in the central province of Jiangxi, state media CLS reported on June 1, citing government documents. The new RMB 2 billion ($297 million) facility would be capable of producing 30,000 tons of battery-grade lithium carbonate annually and is scheduled to be in production in  2023.

BYD is making a similar move and is said to be on the verge of closing deals to acquire six lithium mines in Africa, which experts estimate could allow the company to produce about 1 million tons of lithium carbonate, which translates into at least 27.78 million EVs. A BYD executive confirmed that it will supply lithium-ion batteries to Tesla “very soon” earlier this month. There has also been speculation that Nio and Xiaomi are looking at sourcing batteries from the company as well.

Gotion High-Tech is the latest Chinese battery maker to expand its local production by partnering with prominent players like Volkswagen and Great Wall Motor. The battery supplier announced (in Chinese) on May 31 that two new facilities have been put into production with a combined capacity of 30 gigawatt-hours (GWh) each year. The company is on track to double its total capacity to 100 GWh by this year and expand that number to 300 GWh in 2025.

On Tuesday, Li Auto announced the L9, a full-size, three-row sports utility vehicle, as part of its stated ambitious plan to achieve 1.6 million vehicle sales by 2025. The car’s starting price is less than half that of similar offerings from the likes of BMW and Mercedes-Benz.

Why it matters: With delivery planned to begin in August, the six-passenger L9 SUV will be the second production model from Li Auto and the Chinese EV maker appears to be confident that it might become a hit.

• Speaking to reporters on Wednesday, chief executive Li Xiang declined to reveal specifics about order volume, but said that the L9 will outsell its existing Li One, which was the top-selling large new energy SUV in China last year, according to official figures.

Details: The L9, a plug-in hybrid, is described by the company as the pinnacle of large luxury SUVs, with what it says is a spacious interior specifically for Chinese three-generation family households. The automaker said the model offers passengers more room than other luxury automaker offerings.

• The plug-in hybrid has a driving range of 215 kilometers (134 miles) on a full charge but can drive for about 1,315 miles with a full fuel tank and a full charge, a 20% increase compared with the company’s first model. It accelerates to 100 km in 5.3 seconds, according to Li Auto. 
• The model comes with many high-end tech features. It has five screens, including two 15.7-inch touch-sensitive ones in the middle of the dashboard that control the in-car entertainment system, two smaller ones around the steering wheel,  and an OLED television screen for rear-seat passengers.
• The vehicle uses a combination of 24 sensors to detect and predict road conditions, including eight 8-megapixel cameras, a long-range lidar unit, and two Nvidia Orin AI chips to enable autonomous driving.
• The L9 will only enable assisted driving on highways, once delivered; the company has not revealed when its car system will support autonomous driving in city traffic. Its rival Xpeng Motors plans to send an over-the-air update that would allow its vehicles to drive autonomously on urban roads later this year.
• The vehicle will sell for RMB 459,800 ($68,418), a price that the seven-year-old automaker claims is lower than any other similar SUV on the market. For comparison, the BMW X7 and the Mercedes-Benz GLS crossovers start at RMB 1 million and RMB 1.07 million in China, respectively.

Context: Meituan-backed Li Auto has been at the forefront of the Chinese EV field with just one model on sale, recording deliveries of 90,491 Li One vehicles in 2021, a 177.4% increase from a year earlier. The sales number is close to the sales of all three of rival Nio’s models over the same period combined.

• CEO Li Xiang has set an ambitious target of delivering 1.6 million vehicles annually by 2025, according to an internal memo obtained by Chinese media outlet Caixin in February 2021.
• Li said earlier this month that monthly delivery of the latest model could reach more than 10,000 units starting from September, although investors now reportedly expect that number to be around 5,000-6,000 units due to supply chain constraints and Covid-19 control measures.
• Earlier this month, Nio also launched a new SUV model, the ES7, with a starting price of RMB 468,000. Alibaba-backed Xpeng said in April that it will launch its second SUV model, the G9, this month.

READ MORE: Drive I/O | Nio, Xpeng, and Li Auto face more challenges after a mixed 2021

Huawei has lowered its forecast for its car deliveries in partnership with various automakers this year due to worsening supply chain issues impacting the country’s auto industry, according to senior executives.

Details: Speaking to analysts on Tuesday, Huawei’s rotating chairman Hu Houkun confirmed that the company has scaled back its expectations for car sales and is now seeking support and understanding from the auto industry as it “is susceptible to making mistakes” as a newcomer (our translation).

• Hu also underscored plans to launch new vehicle models with several partners this year, without revealing any further details, and reiterated Huawei’s position to partner with automakers on vehicle technology rather than making its own cars, Chinese media outlet Caixin reported on Wednesday.
• Hu made the comment a week after Huawei’s chief of consumer and auto business Richard Yu admitted for the first time that ongoing supply chain disruptions, such as microchip shortages and soaring prices, have impacted the firm’s sales targets for its auto business.
• Speaking to a Chinese auto journalist on April 18, Yu talked about the Aito M5, the first premium electric SUV co-launched by Huawei and its partner Sokon in December, saying that sales of between 100,000 and 200,000 vehicles for the year would likely be a best case scenario.
• That is a significant cut from its original goal of selling 300,000 Aito-branded vehicles annually, which was announced during a company meeting early this year, Caixin reported (in Chinese).

Context: Sales of the Aito M5 appear to have run into a brick wall, with just over 5,000 vehicles sold during the first quarter of 2022. The luxury crossover, powered by Huawei’s HarmonyOS operating system, was launched at a price of RMB 250,000 ($39,053), but the base model cost will be increased by RMB 10,000 starting from May 5. The companies behind the model blamed soaring raw material costs for the price hike.

• Meanwhile, Sokon has ended production of the Seres SF5, its first EV model jointly developed with Huawei, after months of lackluster sales. The Seres SF5 sold around 8,000 units in 2021, while EV startups Nio, Xpeng Motors, and Li Auto each recorded deliveries of nearly 100,000 cars.
• The Chinese telecommunication giant also has plans to launch new EV models with state-owned automakers Changan and GAC this year, although another partner BAIC has not yet delivered new Arcfox-branded vehicle editions beyond the initial standard model, which were set to be equipped with Huawei’s advanced driver assistance system and released last April.

Although Nio, Xpeng Motors, and Li Auto recorded explosive growth in 2021, the US-listed share prices of the Chinese EV trio still trade much lower than their all-time highs. As the poster children of China’s electric vehicle revolution, the three automakers reported in March mixed results for 2021, with record revenue and significant losses. 

All three EV makers have seen doubled revenues and deliveries surge in their home market. And yet, having lost a total of nearly $10 billion in just 2021 alone, the US-listed EV trio is still struggling to make money. The share prices of Nio and Xpeng have slumped to under $30, falling over 60% from their respective highs two years ago, as they show no signs of turning a profit any time soon while facing risks of delisting from US exchanges.

Xpeng is expanding at a faster pace and higher cost than its competitors. In 2021, the company posted its biggest net loss in its eight years of operations, while revenue more than tripled to nearly RMB 21 billion ($3.3 billion). Li Auto has managed to make its business more efficient than its rivals, reporting a net loss of RMB 321.4 million last year, which is less than one-tenth of Nio’s and Xpeng’s losses. Nio’s sales growth slowed markedly last year, and yet the company earned the most among the three, thanks to its higher-margin luxury cars.

Key figures

Strong growth: Xpeng stole a march on Nio in the Chinese EV space in 2021, with its deliveries jumping 263% year-on-year to 98,155 vehicles. Nio, meanwhile, delivered 91,429 vehicles with a 109.1% yearly growth rate, Li Auto delivered 90,491 vehicles. Although Xpeng delivered the most vehicles among the three EV companies, it earned the least due to a lower selling price of RMB 196,000 for its offerings, almost a half of Nio’s and Li Auto’s prices. 

Heavy losses: With an aggressive expansion of its sales footprint and production capacity, Xpeng reported a record loss of RMB 4.86 billion last year, exceeding Nio’s RMB 4 billion for the first time over the past four financial years. Nio’s annual loss was 24.3% lower than a year ago, helped by growing sales, but the company expects to double its spending on research and development this year to ramp up the development of its self-driving technology. Li Auto once again proved to be better managed in terms of profitability. It increased net profit by 175% to RMB 295.5 million in the fourth quarter and kept annual losses far lower than competitors.

Other takeaways

New models: All three companies promised to speed up the launch of new models to keep their businesses strong, despite an intensifying global supply chain crunch. Nio began deliveries of its first sedan ET7 to customers in the eastern city of Hefei on March 28, with deliveries of its second sedan ET5 expected to start in September. In addition, the company is rushing to launch ES7, a new medium-sized SUV featuring its latest assisted driving technology, in the third quarter. During the same period, Xpeng is expected to deliver its second SUV model G9, in the hopes of grabbing a share of the high-end market from its peers. Meanwhile, Li Auto, which currently only has one model, will launch its second SUV L9 by June of this year, chief executive Shen Yanan confirmed during its earnings call on Feb. 25.

New plants: All the three EV makers are expanding their manufacturing capacities aggressively as orders continue to grow faster than supply. Nio’s second factory, scheduled for completion in Hefei in the third quarter, has the potential to produce 300,000 vehicles a year, the same capacity as its first plant, according to CEO William Li during the company’s earnings call on March 25. Both Xpeng and Li Auto plan to have three plants in the country by the end of 2023 with a total capacity of at least 500,000 and 750,000 vehicles, respectively, executives told investors during their earnings call. However, production could be disrupted by various supply chain shortages in the short term, while Xpeng CEO He Xiaopeng expects this situation to improve starting the second half of this year.

Conclusion

Looking ahead, the Chinese EV trio is still under pressure to capture demand and drive profitable growth in the short term. They face severe production problems due to chip shortages, rising material prices, and the recent lockdowns in Shanghai and nearby regions. Still, the companies are plotting a path to profitability in the long term, with some analysts expressing optimism about the EV upstarts achieving these goals. The gross margins for Nio, Xpeng, and Li Auto had improved to 18.4%, 12.5%, and 21.3% last year, respectively, and executives say that the companies could break even no later than 2024. 

As the industry faces challenges with supply chain constraints, including rising battery prices and a chip crunch, the sequential improvement in Li Auto’s gross margin could be “more limited” in 2022, Bernstein analysts led by Eunice Lee wrote in a March 1 note. And yet, that number could reach 25% in the longer term, as production volumes ramp up and fixed costs decline, Lee added.

In February, BYD overtook a Volkswagen’s joint venture in China (SAIC-Volkswagen) to become the second-largest passenger vehicles maker in the country, thanks to a surge in the company’s plug-in hybrid vehicles sales, industry data showed on Tuesday. Another Volkswagen Chinese joint venture, FAW-Volkswagen, kept its top seller position. 

Why it matters: This marks the first time that sales of a Chinese automaker have overtaken that of a long-established Volkswagen joint venture, as homegrown private companies ride a wave of strong demand for electric vehicles.

• Volkswagen has set up two main joint ventures in China with state-owned carmakers, SAIC and FAW Group. The FAW-Volkswagen has maintained its top position while BYD surpassed SAIC-Volkswagen in February. 

Details: Last month, BYD’s passenger vehicles retail sales grew 340% from last year to 89,000 units. Retail sales of SAIC-Volkswagen dropped by 19% to around 80,000 vehicles compared to the same timeframe the previous year, according to figures published Tuesday by the China Passenger Car Association (CPCA).

• SAIC-Volkswagen was slightly ahead of BYD in wholesale performance, moving 91,000 vehicles compared to the 90,000 units dispatched by BYD in February.
• FAW-Volkswagen led wholesale and retail sales figures last month, sold 129,000 and 105,000 vehicles, respectively.

Why BYD sold well: Industry analysts attributed BYD’s rising sales to stronger domestic demand for plug-in hybrid cars and the company’s capability to offer a wide range of plug-in hybrids. 

• BYD’s performance was buoyed by rising oil prices in recent months, resulting in the growing popularity of plug-in hybrids in the country, CPCA secretary general Cui Dongshu said during a Tuesday online briefing.
• Plug-in hybrids are generally more energy-efficient than petrol cars and much cheaper than all-electrics. BYD, a major player in the segment, was able to grab market share from traditional carmakers, according to Cui.
• BYD is the only Chinese company with a complete lineup of affordable and premium sedans, hatchbacks, and sports utility vehicles. That is a big reason why the company is taking advantage of the huge increase in demand for all-electrics and plug-in hybrids, said Tu Le, managing director of consultancy Sino Auto Insights.
• Another reason for their success is that BYD is the only Chinese automaker vertically integrated, manufacturing its own batteries and chips, Le said, adding that it could be difficult for its competitors to keep up due to their reliance on parts suppliers to ensure production.

Context: The Shenzhen-based BYD has also seen faster growth in electric vehicles sales, recording a more than sevenfold sales growth year-on-year in February with 88,283 deliveries, which were almost evenly split between all-electrics and plug-in hybrids. 

• The Warren Buffett-backed auto giant is expected to achieve sales of 1.3 million vehicles in 2022, a 78% increase from a year earlier, Chinese outlet Jiemian reported on March 3, citing analysis from Citigroup.

Note: This article was first published on TechNode China (in Chinese).

Ever since Huawei announced its push into the Chinese electric vehicle (EV) space last year, the industry has been watching the telecom giant’s moves. 

Huawei had some modest successes in the past year, first partnering with BAIC and Changan on their self-driving technologies. It also provided the powertrain system to a little-known Chinese automaker Seres, and its SF5 model debuted last April.  

Now it looks like the tech giant has pinned its hopes on a new car model released in partnership with Seres. Last December, the two companies released Aito M5, the first EV model equipped with HarmonyOS, Huawei’s alternative to Google’s Android operating system. (Huawei developed Harmony after Washington banned Google from working with Huawei in 2019.) 

On Feb. 18, TechNode China had a chance to test drive the Aito M5 in the southwestern city of Chongqing, home of the Seres’ factory. So how did Huawei do in EV tech? Here are our takeaways. 

Seamless connectivity for existing Huawei users

Aito M5 is the first luxury EV model manufactured by Seres. The hybrid sports utility vehicle claims to reach 1,242 km (772 miles) on a single charge and tank, with a price range from RMB 249,800 to RMB 319,800 ($39,518 to $50,592). By comparison, Chinese EV maker Li Auto’s plug-in hybrid crossover Li One, the best-selling medium-to-large size SUV in China last year, features a maximum range of 1,080 km and is priced from RMB 338,000.

The in-car version of the HarmonyOS shares a similar design language with Huawei’s smartphones along with some of the most frequently-used features. For example, we could activate most of the car’s functions by voice control. The car dashboard also has a shortcut bar for fast access to the most used features.

Aito M5 came with many apps, including a navigation map app, streaming services such as Tencent-backed Ximalaya FM, and Alibaba’s Youku. You can use Youku to watch videos or relax with music or audiobooks while driving when stuck in traffic. An alert system will also notify users of significant changes in road traffic.

Huawei’s ability to integrate its ecosystem with the car differentiates Huawei from other EV players. Huawei devices, smartphones, tablets, smartwatches can seamlessly work with the vehicle. Phone calls and messages could be synced on Huawei’s devices, including the car’s dashboard. That will probably become one of the biggest competitive advantages for rival EV players. 

Fast and accurate voice assistant

Huawei also brought a powerful in-car voice assistant called Xiaoyi to the car. The assistant is powered by Huawei’s in-house cloud infrastructure. During the test drive, the assistant provided accurate responses promptly. It recognized voice commands from riders in the front passenger seat and from the rear seats, opening windows and unlocking the doors for the respective speaker, for example. Huawei said Xiaoyi can control all the features in the vehicle.

Riders can even issue multiple commands to Xiaoyi without repeating the wake word (“Xiaoyixiaoyi” in Chinese). The assistant will continue to listen for another request after it completed the previous ones.

Huawei’s virtual assistant also serves as a voice guide. For example, Xiaoyi suggested turning on the in-car air purifying function when the car drove into a tunnel and encountered bad air quality. It also searched for a charging station and navigation when the vehicle battery ran low. 

Speaking to a virtual voice assistant for those control functions within the car is well-developed in the industry. Major rivals such as Nio and Xpeng have similar offerings. Nio owners could start a conversation with a voice assistant using the three-syllable phrase “Hi, Nomi,” while Huawei’s wake word “Xiaoyixiaoyi” has four syllables. Alibaba-backed Xpeng in late 2020 said each of vehicle owners used its voice assistants effectively 25 times per day on average, compared with 13 times from part of Ford models, Chinese financial media Caixin reported.

Integrating home and auto 

The Aito M5 helps Huawei build a connection between an EV and its wide range of digital and smart home devices. That connection is taking shape as Huawei and its auto partner have introduced dashboard-based smart home management tools for users to integrate their homes into the vehicle.

Being able to sync all their Huawei devices means users can read and send text messages directly by voice command in the car, then continue listening to music and podcasts at home exactly where they left off from the in-car system. However, the integration may not work as seamlessly for non-Huawei users. 

Challenging road ahead

The Aito M5 showcases in-car technologies that Huawei offers: a dashboard that performs many of the same functions as Huawei smartphones and a network that allows remote connectivity to a plethora of its home appliances.

And yet, the Chinese telecom giant and its obscure manufacturing partner will need to build a reputation for building quality cars. The Aito M5 is entering a Chinese EV market crowded with established players, competing heads on with similarly-priced rivals, such as Tesla’s Model Y and Li Auto’s popular crossover Li One. 

Meituan faces a profit squeeze as Chinese regulators order platforms to cut fees to help small businesses. Chinese e-commerce giant Alibaba is exploring rival JD.com’s direct sales model, one that Alibaba’s billionaire founder and former chief executive Jack Ma predicted would become “a tragedy in the future” in 2015. China’s Craiglist, 58.com, came under public scrutiny for recommending fake jobs to a user who was later trafficked to Cambodia as a “blood slave”. Kuaishou planned to block links to Alibaba and JD.com while building its own e-commerce business. Tencent closed social group-buy mini-program Xiao’e Pinpin, while ByteDance pulled the plug on a Shein-like fashion site just three months after its launch.

Meituan faces regulatory headwinds

News: Chinese on-demand delivery platforms, led by Meituan and Ele.me, are facing regulatory headwinds for monetizing the services they provide. Fourteen Chinese authorities, including the National Development and Reform Commission, issued a new guideline that requires goods delivery platforms to cut fees for restaurants. The guideline involves supporting policies for various service industries from catering and restaurants, to retail, tourist travel, and transportation. It’s designed to lower the operation costs for merchants who have been hit by pandemic prevention measures, according to a statement announced Feb. 18. Shares of Chinese life services app Meituan fell more than 15% on the news.

Insights: Reduced service fees will impact the financial performance of local life services giants like Meituan, for which food delivery accounted for more than half of its revenue in the third quarter of 2021. Chinese food delivery platforms, such as Meituan and Alibaba-backed Ele.me, have been criticized for charging excessive commissions from small merchants over the past few years. In one of the biggest merchant push-backs at the peak of the Covid-19 outbreak in April 2020, the Guangdong Restaurant Association accused Meituan of exploiting merchants by charging excessive commission rates that “most of the restaurants can’t endure.” In China, food delivery platforms charge commissions based on merchants’ size. Some small restaurants have to pay up to 18% to 20%, higher than the 10% to 15% commission rate proposed by the All-China Federation of Industry and Commerce in 2021.

News Link: TechNode

Cat filling in a dog’s shoe

News: Alibaba launched a new e-commerce service called Maoxiang under the direct sales model within its business-to-consumer marketplace Tmall on Feb. 18. The model would give the e-commerce giant more control over product quality, sourcing, and delivery in a manner similar to rival JD.com. The platform, which will be focused on consumer electronics products in the beginning stage, is in discussions with consumer electronics brands, including smartphone maker Realme, to join the platform, local media outlet LatePost reported. An Alibaba executive told local media outlet Guancha that Maoxiang won’t replace Tmall’s branding.

Insights: China’s top two e-commerce sites, Alibaba and JD.com, started with very different business models. Alibaba counts marketing services and commissions from third-party merchants as revenue sources, while JD earns a mark-up by selling products that it holds. The question of which model is better has been a long-running talking point. Alibaba’s “platform” model can yield higher margins than JD’s asset-heavy direct retail approach, which has to cover various extra costs, from warehousing to delivery. However, JD’s direct sales model offers better services with more quality control and strong logistics.

However, the distinction in the business model between the two companies has increasingly blurred. For example, JD expanded to adopt Alibaba’s platform model as early as 2017, while Alibaba runs a grocery store chain called Freshippo, which uses the direct retail model. But this is the first time that Alibaba has added a direct retail business to its core e-commerce marketplace Tmall.

With its model highly reliant on online user traffic, Alibaba is trying out new models to stave off the challenge of short video apps like Douyin, Kuaishou, and social commerce apps like Pinduoduo and Xiaohongshu. Moreover, tapping into a model that offers better products and services aligns with China’s consumption upgrading trend.

The new initiative is a major business shift led by Turdy Dai, the newly-assigned head of Alibaba’s Chinese e-commerce business. Dai reshuffled the back-end operations of Taobao and Tmall to bring the two pillar businesses together. 

News Link: TechNode (story 1, story 2)

58.com under fire amid job scam accusations

News: Chinese web-based classified site 58.com has come under fire after a Chinese national accused the site of hosting fraudulent job advertisements, which led him to fall victim to a human trafficking gang in Cambodia. The victim, surnamed Li, found a nightclub security guard position on 58.com last May. He then traveled to Guangxi province for an interview but was smuggled into Cambodia by a criminal gang and forced to work various telemarketing fraud schemes. Since September, his captors began repeatedly extracting blood from him, putting his life in danger. Police rescued Li with the help of local organizations. 58.com said in a Feb. 17 response that it would cooperate with the police investigation, although it had “not yet established” whether the fraudulent job ad had appeared on its platform.

Insights: As China’s Craiglist counterpart, 58.com provides classified ads for a diverse range of categories, such as recruitment, real estate, and second-hand goods and cars. Once a tech major in China, the company has lost momentum over the past few years after gaining a controversial reputation for being involved in many criminal lawsuits. This current scandal brings 58.com’s business ethics to public attention again. Other Chinese tech companies have also faced criticism for providing space to fraudulent or misleading advertisements, as long as they bring in revenue. In 2017, Li Wenxing, 23, was found drowned months after being recruited online by a pyramid scheme posing as a software company via Boss Zhipin, a direct hiring site. Apart from online recruitment, misleading health and medical information online is another area that has drawn public ire, most prominently in the case of Baidu’s “Wei Zexi Incident”.

News Link: Reuters

Kuaishou to block external links to Taobao and JD

News: On Feb. 22, Chinese short video app Kuaishou announced a plan to block external links to Taobao and JD.com, beginning in March. Taobao product links will be barred from displaying within the video app, while JD links will be blocked from showing in the shopping cart during livestreaming sessions, but will still be accessible through shopping charts in short videos and on information pages. The company has attributed the forthcoming changes to “agreement adjustments” without providing further details. 

Insights: Short video apps and e-commerce platforms have historically worked closely together within the trend of content-driven e-commerce. Video apps boast traffic and content, while e-commerce sites have brands and supply chains. As short video sites, notably Kuaishou and Douyin, build up their own e-commerce businesses, they want to keep users within their own ecosystem instead of sending buyers to other platforms to make purchases. Kuaishou reportedly achieved a gross merchandise value of RMB 680 billion ($108 billion) in 2021 and plans to achieve between RMB 900 billion to RMB 970 billion GMV in 2022.

News Link: TechNode

Business scale-back of tech majors

News: Tencent will shut down its social group-buy mini-program Xiao’e Pinpin, a feature that was expected to rival Pinduoduo when it was launched in 2020. Dmonstudio, a Shein-link fashion shopping website reportedly owned by ByteDance, is set to shut down three months after its launch. The lack of user interest is the most likely reason for the closure, according to local media. Meanwhile, JD Finance, the financial arm of JD, has stopped providing specialized services for college students, while ByteDance sold the operating body of online brokerage service Dolphin Securities to ChinaLin Securities.

Insights: Chinese tech majors are downsizing amid weakening consumer spending, intensified competition, and tightening regulations. China’s six major tech firms, collectively known as BATTMD (Baidu, Alibaba, Tencent, ByteDance, Meituan, and Didi), have closed or scaled back more than 20 projects since 2021, according to a rough count by local media outlet Geek Park. Edtech, fintech, and businesses that affect the benefits of small merchants and the daily life of regular people, such as grocery delivery, are facing business adjustments due to tightened regulations.

News Link: Guancha, TechNode, SCMP

Chinese electric vehicle (EV) sales achieved a strong momentum over the past two years, reporting robust figures in January. They are expected to reach 5.5 million units this year. Tesla ended 2021 with a solid profit performance driven by both strong consumer demand in China and Europe, and cost improvement from expanded production in its Shanghai factory. Battery maker CATL retained its competitive lead, dominating the global EV market last year, followed by a group of smaller domestic competitors. BYD’s chip unit is racing the clock to complete an initial public offering in the mainland stock market, thanks to explosive growth in EV sales amid a worldwide chip shortage.

January EV sales signal a strong 2022

News: China’s electric vehicle market remains buoyant despite the seasonal holiday slowdown and the looming impact of the recent subsidy reductions. January retail sales of new energy vehicles (NEVs), including all-electrics, plug-in hybrids, and hydrogen cars, totaled 347,000 units and a 132% yearly increase, according to figures published by the China Passenger Car Association (CPCA). However, this figure is a 27% decline from last December, as China auto sales in January and February tend to be affected by the Lunar New Year holiday (roughly the first two weeks of February this year) when consumers often delay purchases and automakers halt production, the industry group said.  

Insights: The market was relatively flat during the first half of January due to a last-minute push by automakers to get their cars delivered in December. Yet sales recovered fairly quickly during the last two weeks of the month, said Cui Dongshu, secretary general of the CPCA. Cui remained positive about the impact of Beijing’s 30% subsidy cut on EVs, with CPCA affirming its previous forecast of 5.5 million vehicle passenger EV sales in China this year. Although multiple automakers have raised prices for their EVs just enough to offset the subsidy cut, Cui expects overall EV prices to maintain relatively stable, as automakers have been taking various measures such as diversifying sourcing of parts to reduce costs.

News link: TechNode 

Tesla posts second profitable year as Shanghai factory reaches full capacity

News: Riding a wave of growing customer interest for green energy vehicles, Tesla on Jan. 26 posted a profit for the second year in a row. It ended 2021 with a net profit of $5.5 billion, a more than sixfold yearly increase. Annual deliveries also surged 87% in the year, marking the fastest pace of growth since 2019, thanks to strong sales in China and Europe. The US EV giant expects to achieve 50% annual growth in vehicle deliveries “over a multiyear horizon,” while warning that the ongoing global chip shortage could dent its production output “across all factories” this year.

Insights: Rising demand in China has been a key driver for Tesla’s growth. The total sales of Chinese-made vehicles reached 484,130 units last year, accounting for over half of its global deliveries, China Passenger Car Association (CPCA) data shows. The company’s Shanghai factory also plays a prominent role for its global expansion, becoming a “main export hub” with a shipment of around 163,000 vehicles last year to EU, Japan, among other regions, said Tesla’s financial chief Zachary Kirkhorn during its fourth-quarter earnings call.

Now, as EVs continue their current growth trajectory, Tesla has planned to invest RMB 1.2 billion ($188 million) to increase the production staff of the Gigafactory Shanghai by a quarter to about 19,000, Bloomberg reported in November citing sources. The Shanghai plant, which began deliveries in late 2019, was designed to produce up to 500,000 vehicles annually and has been regularly running at a capacity of 450,000 units per year.

News link: TechCrunch 

Battery giant CATL’s dominance unabated in China’s EV boom

News: CATL’s dominance of the EV battery market has continued unabated. It retained its top spot as the world’s biggest battery vendor last year, thanks to an accelerated shift of consumers embracing EVs in China. The Chinese battery giant supplied 96.7 gigawatt-hours (GWh) equivalents of EV batteries in 2021, representing a 167% yearly increase. It commands a 32.6% global market share, according to data compiled by market tracker SNE Research. South Korea’s LG Energy Solution came in second with 60.2 GWh, while Chinese auto major BYD ran a distant fourth with 26.3 GWh. Smaller Chinese players Gotion High-Tech, CALB, AESC, and SVOLT all rank lower in the world’s top 10 battery makers and form a combined market share of around 8%.

Insights: This has been the fifth year CATL retained its position as the world’s biggest battery maker, buoyed by a rebound in EV demand in its home market in 2021. A total of 150 GWh of battery capacity were deployed into newly sold NEVs in China last year. That number is expected to grow by over 50% year on year to 230 GWh in 2022, according to a Jan.12 report published by Chinese brokerage Huaan Securities.

The battery maker is also quickly expanding its manufacturing capacity to meet a surging demand. In December, it kicked off production at its largest plant to date in Fuding, a city in the eastern Fujian province, with a designed capacity of 120 GWh per year. 

News link: TechNode

BYD’s chip unit to list on Shenzhen stock market

News: The chip unit of Chinese automaker BYD is racing to go public with an offering that could raise as much as RMB 2 billion ($314.4 million), after getting a green light from the Shenzhen Stock Exchange. The listing is expected in the next few months and it would become the first auto chipmaker to list in China. BYD Semiconductor became an independent subsidiary of the Chinese EV giant in April 2020 and mainly develops less advanced chips such as microcontrollers (MCUs) used for controlling simple functions in cars. The company has become China’s biggest MCU manufacturer with nearly two decades of chip-making experience, Chinese media Caixin reported last month, citing analysis from market research firm Omdia.

Insights: The imminent listing comes at a time when the Chinese EV industry has seen a strong rebound in demand, despite significant disruption due to the global chip shortage over the past year. BYD Semiconductor estimated its net profit will jump by up to 574% yearly to RMB 395 million in 2021. Revenues are projected to reach an upper limit of RMB 3.2 billion, an 122% increase from 2020. However, the company is still a tiny player in the global automotive MCU sector, which is dominated by Japan’s Renasas and six other chip powerhouses with a combined market share of 98%, according to figures from information services company IHS Markit.

And yet, investors have high expectations for the subsidiary. It has already raised RMB 2.8 billion from a list of big names including Xiaomi’s industry investment fund, Sequoia Capital China, and CICC Capital prior to the IPO filing. BYD’s stake will fall from 72% to 65% after the listing is completed.

News link: TechNode 

Hozon New Energy Automobile has raised more than RMB 2 billion ($316 million) in a recent round as part of its Series D, which could value the electric vehicle startup at around RMB 25 billion, Chinese media outlet LatePost reported Monday.

Why it matters: The investment reflects continued positive sentiment among private investors towards Chinese EV companies. China’s EV industry enjoyed exponential growth in 2021 and the outlook for the industry remains strong for the next few years. 

Details: This latest round marks the close of Hozon’s Series D at RMB 8 billion. Investors include Chinese rail company CRRC Corp’s investment fund and the state-run Shenzhen Capital Group, LatePost reported, citing unnamed sources familiar with the matter.

• The Zhejiang-based EV maker recently kicked off a new fundraising process, targeting a RMB 45 billion valuation, with plans to go public in Hong Kong later this year, according to the report.
• Big name investors also expressed interest during the round but did not make an offer, the report said. These include SoftBank’s Vision Fund, Abu Dhabi Investment Authority, and the United Arab Emirates’ sovereign wealth fund, among others. Some of these investors reportedly worried about Hozon’s ability to compete with other more established rivals in the entry-level EV segment (usually priced under RMB 100,000). 
• Some investors also see Hozon’s sales in the ride-hailing market as a worrying sign of its ability to attract buyers in the private EV market. About 9% of Hozon’s vehicle sales go to business clients, such as taxi fleets, according to chief executive Zhang Yong.
• Hozon was not available for comment.

Context: In October, Hozon announced it had closed an RMB 4 billion Series D1 led by China’s biggest cybersecurity firm, Qihoo 360. This was followed by another RMB 2 billion in new funding from companies, including battery giant CATL and automaker BAIC as part of its Series D in December, said LatePost.

• The automaker currently offers three entry-level EV models for sale and delivered 69,674 vehicles in 2021, a more than threefold yearly increase and the most in terms of delivery, after US-listed trio Xpeng, Li Auto, and Nio. 
• Hozon has chosen banks like Citic Securities Co. and China International Capital Corp. to arrange its Hong Kong IPO, which could raise as much as $1 billion, Bloomberg reported last week. The company, along with rivals WM Motor and Leapmotor, had a combined market share of 6% in the Chinese all-electric EV segment last year, according to Bloomberg Intelligence.

READ MORE: Drive I/O | Meet the newest upstarts likely to grab chunks of China’s EV market

Chinese tech giant Alibaba is launching a new online platform running a direct sales model, similar to rival JD’s, Chinese local media LatePost reported on Wednesday. The new platform, called Maoxiang (our translation), will first focus on consumer electronics. 

Why it matters: Alibaba is trying out different models to boost business growth amid weakening consumer spending, intensifying competition, and tightening regulations. 

Details: Alibaba plans to rebrand its business-to-consumer (B2C) marketplace Tmall app to Maoxiang, LatePost reported, citing unnamed sources. Alibaba’s B2C retail group led the project and launched it at the end of last year.

• Maoxiang will adopt a direct retail model. The online platform can sell branded merchandise directly to consumers, having more control over sourcing, quality, storage, delivery, and after-sales.
• For starters, the platform will focus on selling consumer electronics products, big-ticket items that JD also focused on during its early days.
• Alibaba is in discussions with several consumer electronics brands, including smartphone maker Realme, to join the platform. 
• SF Express and Danniao Logistics are possible couriers for the service to ensure next-day doorstep delivery, the report added.
• Alibaba didn’t respond to TechNode’s inquiry when contacted on Thursday.

Context: Alibaba and JD, two of the largest e-commerce platforms in China, rose to prominence by adopting different business models. Alibaba operates under a “platform” model, where it derives revenues from online marketing services and commissions from third-party merchants selling on its marketplaces. Meanwhile, JD runs more like an online supermarket and earns mark-up by selling products it holds. 

• JD expanded to adopt Alibaba’s “platform” model as early as 2017 by introducing retailers, small merchants, and individuals to its business.
• In January, Alibaba’s domestic e-commerce business launched a major organizational reshuffle to connect the back-end operations of the company’s two core e-commerce marketplaces Taobao and Tmall.

Meituan is testing Zhenxiang, a shopping review feature similar to the one used by lifestyle community platform Xiaohongshu, as the Chinese food delivery and local services giant aims to boost its e-commerce business.

Why it matters: Meituan, known as the “Amazon of services” in China, is testing the feature for its physical goods e-commerce service, while fending off competition from rivals like ByteDance and Alipay in the area of local lifestyle business.

READ MORE: ByteDance is trying to take a bite of Meituan’s cake

Details: Zhenxiang, a shopping review community, is being tested among a group of users, most of whom have already used its e-commerce service Tuanhaohuo.

• The feature is now displayed in the most prominent part of Meituan’s e-commerce interface for pilot users. It was launched in December but was initially only accessible through less conspicuous entry points.
• Zhenxiang allows users to post product evaluations and tips in the form of notes, photos, and short videos for other potential buyers’ reference. Users can also rate products with a five star system, from “bad shopping experience” to “highly recommended.”
• A Meituan spokeswoman confirmed that the company is working on the pilot project, adding that it’s just one of its usual range of experiments aimed at testing new features.
• By integrating the product review feature into the app, Meituan could drive its e-commerce sales under the Zhongcao model, a marketing strategy that was first popularized by Xiaohongshu, local media Lu Lu Finance explained.
• The term Zhongcao (“planting grass”) refers to the idea that favorable and comprehensive reviews of a product can sow the seeds of an urge to buy in consumers. The actual action of purchase is referred to as Bacao (“pulling up grass”) in Chinese. 

Context: Content has emerged as the driver of Chinese e-commerce over the past three years. Chinese tech platforms like Taobao, short video apps Douyin and Kuaishou, and China’s Quora-like site Zhihu have also leveraged the Zhongcao model to boost e-commerce growth.

• Meituan has begun testing an expansion into the sale of physical goods online, entering into partnerships with consumer electronics companies, cosmetics brands, garment brands, and physical bookstores in order to diversify the physical product offerings on the platform.

China’s electric vehicle (EV) sales soared in 2021, bucking the national trend of slowing auto sales. Local automakers have shown strong competitiveness against overseas counterparts. However, industry players may face new challenges: a looming price war among competitors will likely reduce profits, a UBS Securities analyst said on Tuesday.

Why it matters: There might be greater supply than demand in the Chinese EV market this year, since consumption could be reduced by slowing economic growth amid the recharged pandemic, Paul Gong, head of China auto research at UBS, told reporters on Tuesday.

• An easing chip shortage may also help EV makers return to normal auto production this year, Gong said. He warned that an intense “price war” would push the prospect of profitability further away for automakers in the short term.

Details: Still, the rise of domestic EV makers will be “the way of the future” in China, as local players have generally “achieved greater progress” in the development of products and technology than foreign auto majors, according to Gong (our translation).

• UBS projects cautious optimism in its outlook for the industry over the long term. It expects that, compared to its 2021 projection of 3 million vehicles, China’s EV sales will increase by 35% to more than 4 million vehicles this year. Sales could grow to 7.05 million units in 2025, according to UBS. 
• Sales of new energy vehicles, which include all-electrics and plug-in hybrids, increased by nearly 160% year-over-year to 3.52 million units in 2021, according to a statement published by China’s Ministry of Industry and Information Technology on Wednesday.

Read more: Drive I/O | Auto China 2021: A banner year for Nio, Xpeng, and Li Auto

Context: The number of passenger electric vehicles sold in China surged 169% year on year to nearly 2.99 million units in 2021, according to figures published Tuesday by the China Passenger Car Association (CPCA). That figure beat the estimated 2.4 million units the industry group made in June.

• Tesla China sold a record 70,847 locally-made vehicles in December and saw its total 2021 sales reach 320,743, taking the third spot in the list of China’s top-selling EV makers. BYD dominated the market with sales of 584,020 vehicles, followed by SAIC-GM-Wuling with 431,130 cars, CPCA figures showed (in Chinese).
• US-listed Chinese EV trio Nio, Xpeng, and Li Auto are among the top 10 sellers, each achieving deliveries of nearly 100,000 vehicles. German auto giant Volkswagen sold around 130,000 passenger EVs, more than doubling its 2020 total, according to CPCA.
• CPCA raised its forecasts for China’s NEV sales, including passenger and commercial vehicles, by over 10% to 6 million units in 2022 from the previous year. The association added that China will maintain leadership in the global EV race.

Nio on Saturday revealed its second fully electric premium sedan model ET5, featuring an automated driving system, a fresh design, and a lower price point, to reach a larger customer base.

Why it matters: Speaking to reporters on Dec. 19, chief executive William Li said he expects the Nio ET5, which is priced 25% cheaper than the brand’s first sedan model ET7, will help the company attract more younger and female buyers.

Details: The new ET5 sports sedan comes with the same hardware package as the ET7, including a dozen ultrasonic sensors, 11 cameras, a Lidar unit, and Nvidia’s Orin autonomous driving processors, which allow the vehicle to detect its surroundings using supercomputing power.

• The new sedan comes in a rainbow of nine different hues, including a soft pink, the first time Nio has used such a shade for its models.
• It also features an in-car information and entertainment system equipped with custom augmented reality (AR) glasses that can project information onto the windshield for drivers.
• Priced from RMB 328,000 ($51,430), the ET5 sedan is scheduled for delivery in the third quarter of 2022. The price could be as low as RMB 258,000 if a customer pays a monthly rental fee of RMB 980 for the use of batteries.
• Nio also announced Saturday that it will begin delivering the ET7 on Mar. 28, 2022. ET7 and ET5 can achieve more than 1,000 kilometers (621 miles) on a single full charge with a new 150kWh battery pack.

Context: With three existing models, the seven-year-old Nio had so far delivered 80,940 vehicles to customers this year, a 120% yearly growth rate. Nio’s peers Xpeng Motors and Li Auto delivered 82,155 and 76,404 vehicles respectively during the same period.

• With a similar price range, Nio’s ET5 will compete against Tesla’s popular Model 3, Xpeng’s P7, and Geely’s premium EV model Zeekr 001.

Chinese tech giant Tencent announced Thursday it was ending its content creator incentive plan called “Project Dawn” after prompting wide backlash from content creators.

Why it matters: The competition among tech giants for quality content is reaching a fever pitch in China, but creators are pushing back against what they see as attempts to devalue their work.

Details: Tencent’s open content platform said in a Thursday statement (in Chinese) that it has terminated its content creator incentive program “Project Dawn,” which aimed to lure original content creators with monetary rewards for their work. On top of that, the company apologized to creators that were affected by the program.

• Tencent launched the project in July, pledging to give RMB 10 million ($1.5 million) in subsidies to empower and attract more video content creators to its platform. The project aimed at creators from various popular platforms such as Bilibili, Xiaohongshu, and video apps like Kuaishou, promising to help the creators promote their content across platforms and increase their revenue. 
• Several creators on the Chinese video platform Bilibili began to voice their discontent (video, in Chinese) last week, claiming Tencent tricked them into joining the program, which failed to deliver its promises. 
• The creators claimed that Tencent ran the program through a number of multi-channel networks (MCNs), which would take as much as 90% of the one-off incentive fee of RMB 200 promised to each creator by the platform.
• Bilibili creators who gave their ID information to MCNs after joining the program found their videos, which had already been uploaded on Bilibili, were copied to the Tencent platform and labeled as exclusive content there. As a result, their accounts were subsequently blocked on other sites for alleged piracy. Tencent refuted these claims in its statement, saying that it has never labelled content exclusive, “nor has it tried to obstruct creators’ profile on other platforms.”
• Tencent said content creators that want to leave their platform can cancel their account, an option that only became available on Nov. 9. Those who want to stay will now get the promised income from Tencent directly, instead of through MCNs, the company said.

Context: This is not the first time Tencent has faced a content creator backlash. The company’s online reading arm China Literature was subject to an author revolt due to what they saw as exploitative rules in 2020.

READ MORE: INSIGHTS | Who owns ‘internet literature’?

Update: The story has been updated with Tencent’s statement on exclusive content complaints.

Huawei ramped up its involvement in the Chinese electric vehicle (EV) space on Monday, offering in Shanghai the first view of the Avatr 11 sports utility vehicle (SUV) with partners Changan Automobile and CATL. The first model in the Avatr brand, the car features a full suite of Huawei’s autonomous driving technology. Huawei partnered with carmaker Changan and battery supplier CATL a year ago to form the Avatr premium luxury brand of EVs.

Why it matters: The Avatr 11 electric SUV will be the second mass-produced car to get Huawei Hi, a complete automotive hardware and software suite that includes the company’s operating system Harmony OS as well as computing platforms for autonomous driving.

• The three companies expect the new models to take a significant share in the Chinese premium EV segment and to fulfill their ambitions to establish a “world-class, high-end” Chinese car brand, Changan Chairman Zhu Huarong said on Monday at a press conference in Shanghai.

Details: The first EV model produced with Changan and CATL features a supercomputer developed by Huawei and running at 400 trillion operations per second (TOPS). That compares with Tesla’s 144 TOPS for its two-chip full self-driving computer.

• The electric crossover will have a driving range of more than 700 kilometers (435 miles) in a single charge with batteries supplied by CATL. It will also boast a high-volt, fast-charging electrical system that will support a maximum of 200 kW of charging power. That is a bit lower than the charging power of Tesla vehicles which, offer up to 250 kW.
• Changan plans to build the Avatr 11 SUV in a manufacturing plant in the southwestern municipality of Chongqing. Annual capacity is projected to be 350,000 vehicles, with delivery to begin in the third quarter of 2022. Prices have yet to be released but Chinese media, citing Changan sources, have reported a figure around RMB 300,000 ($47,000).

Context: Changan, CATL, and Huawei announced their smart EV tie-up back in November 2020. That was followed by the establishment of a joint venture with the state-owned automaker as the biggest shareholder in Avatr.

• Changan, Ford’s Chinese manufacturing partner, in August announced goals to have 35% of its annual car sales, or 1.05 million out of 3 million vehicles, be EVs by 2025. Rivals Geely and SAIC have previously launched their own premium EV brands, called Zeekr and IM, respectively, as Chinese companies step up their competition with Tesla. 
• Huawei and state-owned automaker BAIC in April co-launched the Arcfox-branded Alpha S, the first mass-produced vehicle model equipped with Huawei’s self-driving technology and priced from RMB 388,900. That’s more than 50% higher than the price for Tesla’s China-made Model 3, SCMP reported.

READ MORE: Huawei begins selling EVs in stores, may offset sinking phone sales: CEO

Geely unveiled on Monday an electric semi-truck model. The company said to deliver the model with highly autonomous driving functions in 2024. Such a commercial vehicle from the Chinese automaker could pose a threat to Tesla and other manufacturers.

Why it matters: The launch will allow Geely to expand its presence in the global commercial market, poised for double-digit growth in the coming years, and to compete against Tesla’s long-awaited Semi truck model and similar offerings produced by Daimler, Nikola, among others.

Details: Called the Homtruck, the semi-truck will be available in several power options, including fully electric and plug-in hybrid, and feature a modern sleeper cab interior, which Geely said will give drivers extra comfort.

• Geely did not reveal many specifics about the first premium truck model in its new commercial vehicle group, to be branded Farizon Auto, but said in a Monday statement that it has begun taking advance orders with an initial deposit of RMB 2,000 ($313).
• Scheduled for delivery in early 2024, the Homtruck will have highly autonomous features that allow drivers to cruise around hands-free on certain roads, the company said, intending to achieve full autonomy in 2030.
• Geely, the parent company of Volvo, intends to expand its presence globally with the launch of the semi-truck, eyeing markets such as Europe, Korea, Japan, and North America, Mike Fan, chief executive of Farizon Auto told CNBC on Monday.
• Farizon Auto is targeting an annual sales of 250,000 clean energy vehicles in 2025. It expects that number to more than double by 2030 with a 20% share in the market, Fan said during a press conference in Shanghai on Monday.

Context: The Chinese electric vehicle (EV) industry has been on a rebound after a market slump that began in late 2019 and lasted an entire year. Carmakers sold 357,000 EVs in China in September, accounting for more than 20% of monthly new car sales for the first time.

• Geely announced on Oct. 31 that it is aiming for 40% of its annual sales, by 2025 to be new energy vehicles; that share would total 1.55 million out of the 3.65 million vehicles and would include battery electric, plug-in hybrid, and hydrogen cars. The company also promised to invest RMB 150 billion into research and development by 2025, SCMP reported on Nov. 1.
• Tesla unveiled its electric truck model Semi in November 2017 but has since delayed volume production until 2022. The Semi truck’s first customer, Pepsico, is expected to accept delivery of 100 pre-ordered vehicles in the last quarter of this year, CNBC reported on Monday, citing PepsiCo CEO Ramon Laguarta.

Chinese electric vehicle maker WM Motor showcased its first sedan model named M7 on Friday. The company boasts that the car has an advanced sensor package and will be affordable as it aims to carve out a place in the country’s competitive auto market.

Why it matters: WM Motor’s first sedan model, the M7, will compete head to head with Nio’s highly-anticipated ET7, Xpeng’s P7 and P5 sedans, and the Zhiji L7, a premium electric vehicle co-launched by SAIC and Alibaba.

Details: The M7 sedan features extensive autonomous driving hardware, with 32 sensors, including three lidar units that use light to create a three-dimensional representation of surrounding objects. The model can provide advanced driving capabilities on highways and urban roads.

• It also delivers a total computing power of 1,016 trillion operations per second (TOPS) with four Nvidia Orin chips, matching that of Nio’s ET7 and offering around seven times the power of Tesla’s two-chip full self-driving (FSD) computer. This tech spec provides headroom for upgrading the vehicle in the future, the company said.
• WM Motor has yet to reveal the price of the sedan. But founder and chief executive Freeman Shen said the M7 will target China’s mainstream vehicle segment with prices ranging from RMB 150,000 to RMB 300,000 ($23,505 to $47,010) in a press conference on Friday in Shanghai. 
• It is unclear whether the Baidu-backed EV maker will use the Chinese search engine’s self-driving technology in the new model. WM Motor expects to start deliveries of the M7 sedan by the end of 2022.

READ MORE: Lidar is hard—but it’s coming soon

Context: WM Motor, which is also backed by Hong Kong billionaire Richard Li’s telecommunication firm PCCW, has delivered over 70,000 vehicles, failing to match rivals such as Nio and Xpeng, which have handed over 140,000 and 100,000 vehicles respectively as of September.

• WM’s rival Nio has plans to deliver its first sedan, the ET7, with a price range between RMB 378,000 to RMB 506,000 in the first quarter of 2022. Nio is also reportedly mulling a new sub-brand targeting the middle to lower auto market.
• Meanwhile, Xpeng is on track to begin delivering its Lidar-equipped P5 with a starting price of RMB 157,900 at the end of this month. It has sold over 50,000 P7 cars, its first sedan model priced from RMB 229,900, since deliveries began in July 2020.

Over the past two years, the vicious price war among Chinese delivery companies has taken a toll on an industry that’s often referred to as the “backbone” of the country’s e-commerce boom. Recently, signs have emerged that the grueling battle may finally be reaching a breaking point.

Beginning in September, six delivery services started to charge an extra RMB 0.1 ($0.02) per parcel, a major change in pricing strategy, given that courier companies have charged less than delivery costs for years in pursuit of capturing market share. 

The companies that joined the price increase are some of the biggest in the sector: ZTO Express, YTO Express, STO Express, Yunda Express, Best Express, and J&T Express. All pledged to use the extra money to boost delivery worker incomes and protect their rights. 

The change is mainly a response to intensifying regulatory pressure to improve conditions for delivery workers. But there are other, perhaps more pressing motivations for Chinese courier companies to use this shift to mark the beginning of the end for a price war that has had an impact on the long-term and sustainable development of the industry.

“The price war shows signs of easing, but there’s still a long way for the whole industry to get back on track to healthy development,” Lei Zhongnan, CEO of logistics tracking platform Kuaidi 100, told Chinese media recently.

Express delivery is no longer a lucrative business: Data from China’s National Post Bureau (NPB) shows that the volume of parcels delivered in China surged 40.1% year on year to 67.3 billion in the first eight months of this year. That’s already 81% of last year’s volume of 83 billion units. 

• However, the expansion in volume comes on top of a much slower revenue growth. Revenue generated from the sector climbed 23.4% year on year to RMB 650.9 billion over the first eight months, or 74% of 2020’s RMB 875 billion total revenue, NPB data shows.
  
• China’s express delivery market is a highly concentrated one that’s dominated by a few top players including SF Express, Alibaba-backed Best Express, and a number of couriers collectively known as “Tongda Operators” — ZTO Express, YTO Express, STO Express, and Yunda Express. The six operators represented more than 80% of China’s express delivery market in 2020, according to data from market intelligence platform askci.com.
  
• In a crowded market, the companies, mostly offering the same services, had been relying more and more on lowering prices to gain market share. Per parcel delivery price dropped 13.1% year on year to RMB 9.8 ($1.5) in the first half of this year.

The negative impact of the price war is explicit in the gloomy financial reports of the major players, as courier companies see their revenue skyrocket while profits sink. Six out of the seven listed courier businesses achieved double-digit revenue growth in the first half of this year; YTO and ZTO lead the group with an over 30% year-on-year revenue jump. But net profits slumped across the board, with STO suffering the steepest plunge of more than 300%. STO and BEST Express are recording losses.

• Delivery companies are less willing to bleed for market share. In August, per parcel delivery price of YTO Express increased 5.45% month on month, or a 0.95% increase compared with a year ago. 
  
• Similarly, SF Express and Yunda Express increased per parcel price by less than one percent month on month, although the figures still represent year on year drops. 

How the war began: Despite competitive tensions, there was a delicate balance among major courier companies before 2019. But that balance was disrupted by the entrance of Southeast Asian delivery upstart J&T in 2020. Founded by a Chinese entrepreneur in Indonesia, J&T Express expanded to China later after becoming a quick success in the Southeast Asian market in 2015.

• The company expanded rapidly, reaching the 20 million parcel per day milestone within 10 months of entering China, a feat that took rivals like STO, YTO, ZTO, and Yunda Express more than a decade to achieve. Its most effective weapon is, of course, price cuts.
• In one of its fiercest campaigns, which took place in March last year, J&T offered nationwide delivery for just RMB 0.80 per parcel for users in Yiwu, China’s eastern commodity center, compared with the RMB 1.2 to RMB 1.3 per parcel offered by rivals.
• Similar to “Tongda” couriers’ early boom being driven by orders from Alibaba marketplaces, J&T’s initial boom in China has mainly been driven by delivery for e-commerce upstart Pinduoduo, which accounts for around 80% of its orders. 

Price wars in the China tech arena are generally fueled by venture capital and express delivery is no exception. J&T has received multiple hefty rounds of investment over the past two years at sky-rocketing valuations.

• J&T Express completed a $1.8 billion financing round at a valuation of $7.8 billion in April, higher than market cap for STO Express, Yunda Express, and YTO Express at the time.
• The company closed a $250 million strategic investment deal in August.
• J&T Express reportedly plans to raise over $1 billion from a U.S. initial public offering (IPO) as soon as the fourth quarter, at a $5 billion valuation.

Delivery workers are working more for less: Price wars have also led to lower incomes for delivery drivers who earn on per package delivery fees. As delivery drivers shift to other industries for better pay, the delivery worker shortage has become a serious problem for courier companies. 

• China had more than 4 million express delivery workers in 2020. But as a result of deteriorating working conditions and lower pay, the voluntary turnover rate of express logistics personnel climbed to 33.1%, the highest across all industries.
• Increased pay and better working conditions could solve the labor shortage, but for courier companies, higher pay for workers means increased costs, making their low-price model economically inefficient.

Regulators have recently stepped in to protect the rights of express and food delivery drivers as part of the state’s efforts to help lower-income workers amid the authorities’ declared aim of creating “common prosperity.” Local and central government agencies have rolled out rules trying to end unreasonable low-price deliveries.

• April 9: The municipal postal authority in Yiwu cracked down on delivery services J&T Express and Best Express for price-dumping, partially closing their distribution centers in the county-level city.
• April 22: Zhejiang provincial government issued a guideline forbidding courier companies from taking parcel orders at lower than the cost of delivery. E-commerce platform operators were also warned against using technological means to interfere with merchants’ choice of couriers.
• July 8: Seven central government regulators, including the Ministry of Transport, the State Post Bureau and the National Development and Reform Commission, issued guidelines to protect the rights of express delivery workers, including measures aimed at ensuring more reasonable salaries, having companies buy them social insurance, and clarifying the companies’ responsibilities to protect workers’ rights.

What’s next?

• Increased pay and improved welfare may alleviate the delivery force shortage to a certain extent. An experienced courier can handle 200 to 300 parcels per day, an anonymous delivery worker told local media. That means the RMB 0.1 per parcel increase would boost their average monthly income by about RMB500.
• Instead of providing similar services, the couriers are trying to expand their product lines. “Tongda” couriers have expanded into the high-end express delivery market, and SF Express has upped its investment in cold chain delivery and delivery installment services.  
• Some companies are ditching price wars altogether. Lan Haisong, CEO of ZTO Express, said it’s “irrational and unsustainable” to compete for market share with “unnecessary” price cuts. ZTO Express topped the seven major courier businesses with RMB 180 million net profit in Q1 this year.

Conclusion: Price wars have been a successful weapon for market entry for many delivery companies such as J&T. But such tactics are not likely to last. The state is tightening its regulation on irregular pricing, while there is renewed focus on the rights of delivery workers and the impact on the user experience. Increasing costs also mean that a number of major courier companies are now turning their backs on the delivery price wars. 

Also in the news

Investors bet on robot delivery: Increasing labor costs have propelled the growth of robotic delivery technologies recently. This month, investment has flocked to a bunch of business-faced startups ready to apply robotic delivery tech in various fields, from warehouse management to the service industry.

• Chinese service robot maker PuduTech announced a RMB 500 million ($78 million) investment on Sept. 14.
• Keenon Robotics made public the next day the completion of a $200 million Series D funding led by returning investor SoftBank.
• Hai Robotics, a Chinese warehouse robotics startup, announced on Sept. 22 two financing rounds totaling more than $200 million.

Alibaba expands community group-buy push amid rival startup fallout: Consolidation in China’s community group-buy market continues. As startup casualties increase, Alibaba is pushing further to fill the market gap left by the collapse of smaller rivals.

• Alibaba-backed online grocer Nice Tuan is reportedly downsizing its operations in August.
• Meicai, a Chinese app that supplies farm-to-table produce for restaurants, has been reducing its operations and laying off employees this month.
• Chengxin Youxuan, the community group-buy unit of Chinese ride-hailing giant Didi Global, shut down operations in 22 provinces, accounting for more than 60% of its service locations.

Alibaba rebranded its community group-buy unit to “Taocaicai” on Sept. 16 as some rivals have lost momentum after rounds of market consolidation. The new brand will incorporate Freshippo Market and Taobao Maicai, Alibaba’s two existing community grocery services.

Cao Cao Mobility, the ride-hailing unit of Chinese private automaker Geely, announced Monday that it had raised RMB 3.8 billion ($589 million) from investors led by a group of state-owned enterprises. The move came two months after the country’s dominant ride-hailer, Didi Global, was put under an ongoing cybersecurity review.

Why it matters: It is the biggest funding the company has received in two years, Cao Cao said in a statement (in Chinese) published Monday.

Details: This new round brought Cao Cao’s total funding to around RMB 5 billion. Lead investors include Suzhou Xiangcheng Financial Holding Group, an investment company held by the Xiangcheng district government of Suzhou, as well as Suzhou High-Speed Rail New City Group and three other state-controlled enterprises.

• Cao Cao said in the statement that it plans to use the funds to further scale its business, such as upgrading technology and expanding its fleet. 
• The company currently offers passenger transport services in 62 domestic cities, almost double the number that its rival T3 serves, but far behind the footprint of Amap, Alibaba’s ride-hailing and map platform.
• Geely began testing ride-hailing service Cao Cao in the eastern city of Ningbo in late 2015. It raised RMB 1 billion in Series A from several Chinese venture capital firms in January 2018.

Context: Chinese ride-hailing platforms, either backed by tech giants or legacy automakers, have been rushing to take market share from Didi after regulators ordered the ride-hailing giant in early July to temporarily stop adding new customers.

• Meituan’s ride-hailing unit and Cao Cao in July saw their volume of rides increase by 24% and 32%, respectively, from a month earlier, while Didi’s only rose by 13.1% during the same period, according to Ministry of Transport figures (in Chinese).
• In July, on average, Amap completed fewer than 5 million trips while Meituan completed around 1 million trips per day, Chinese media LatePost reported on Monday, citing people familiar with the matter. Didi counted about 25 million rides a day in the first quarter of 2021.

Read more: Didi app ban ignites race for ride-hailing market share

Chinese video-streaming platform Tencent Video said it has filed a lawsuit against ByteDance’s short-video app Douyin for copyright infringement and unfair competition over clips from a hit TV drama, seeking RMB 100 million ($15.4 million), Chinese media reported Wednesday.

Why it matters: Tencent Video’s legal action is the latest attempt by a streaming platform to control the spread of clips on short-video platforms. Streaming platforms fear that widespread posting of clips will undermine the value of expensive content.

Details: In the complaint, Tencent Video accused Douyin of circulating clips of “Crime Crackdown,” a hit TV drama, without consent. Claiming ownership of exclusive right to the online dissemination of the drama, Tencent said Douyin had allowed users to upload clips from the show and failed to take any measures after receiving a notification letter from Tencent. 

• In a response, Douyin claimed that it had signed a cooperation deal with the co-production company of the drama, under which the company will open an official account on the platform while Douyin will be responsible for curating promotional activities. Douyin also said that it had taken down clips immediately after receiving complaints from Tencent.    

READ MORE: ByteDance rages against Tencent over link blocking. Here’s why

Context: Tencent won a similar case against Douyin over clips of “Honor of Kings,” a hit Tencent game, earlier this month. ByteDance was fined RMB 600,000.

• Mainstream video-streaming platforms have recently ramped up criticism of their short-video peers over alleged copyright infringement practices. Tencent vice president Sun Zhonghuai lashed out at short video content, comparing it to “pig’s feed” and complaining of widespread copyright violations at an industry conference held in June.

Chinese chipmaker Wingtech said on Monday that it had closed a deal to buy Newport Wafer Fab (NWF), the UK’s largest chip fabrication plant. The deal was closed after the UK government initially considered blocking it. 

Why it matters: The UK government’s clearance on the deal is a breakthrough for Wingtech, which quickly established its dominant position in China’s car chip industry through overseas acquisitions since 2018. But the single approval doesn’t mean Chinese chip firms looking to buy chip plants abroad will enjoy a smoother regulatory environment.

• NWF is a manufacturer of low-end chips. The plant mainly produces 180-nanometer (nm) wafers, while the industry’s bleeding edge is the 3-nm process by Taiwan’s TSMC and South Korea’s Samsung.

Details: The UK government gave Wingtech the green light to take over NWF’s parent company on Aug. 12, according to a Wingtech filing (in Chinese) to the Shanghai Stock Exchange.

• Wingtech said its acquisition of NWF had been closed as of Monday. It now fully owns the UK firm through Nexperia, Wingtech’s Dutch chip subsidiary. 
• NWF’s operation might be affected by domestic and overseas industry policies, said Wingtech’s filing, without elaborating.

Context: The NWF deal, conducted through Nexperia, was previously subject to a national security investigation by the British government following backlash from some UK lawmakers.

• Nexperia offered GBP 63 million (around $87.2) to buy NWF on July 5. The deal met with little regulatory pressure when it was first announced, but it soon met with more official scrutiny in the UK. 
• Some UK politicians have advocated taking a hard line on the deal. Tom Tugendhat, a UK parliament member and the chairman of the parliamentary Foreign Affairs Committee, told CNBC on July 5 that he would be “very surprised” if the deal was not being reviewed under the National Security and Investment Act, a November law passed to protect key UK assets from foreign takeovers.
• On July 7, UK Prime Minister Boris Johnson said he had ordered national security advisor Stephen Lovegrove to review the acquisition. Lovegrove had 30 days to complete his review.

Meituan, a Chinese life services and food delivery platform, is testing a social feature for food-ordering users, Chinese media Tech Planet reported (in Chinese) Thursday.

Why it matters: The social feature is part of Meituan’s effort to find new growth areas. The move comes as the food delivery sector becomes more crowded—social media giant ByteDance has been reportedly testing a food delivery feature through its short-video app Douyin since last month.

Details: Named “Fanxiaoquan,” the new feature allows users to share orders with their contacts on the Meituan app, in a format that is similar to WeChat’s Moments or Facebook’s News Feed. 

• Users can comment and like posts, access merchants’ shops through posts, and place similar orders.
• Users can add friends either through WeChat contacts or phone contacts. The platform also recommends new contacts based on users’ past behavior on the Meituan app, such as the mobile games they have played. 

Context: After years of fast growth, China’s food delivery industry is now growing at a slower pace. The market expanded 15% yearly in 2020, the slowest growth in the past decade, according to market consultancy Zhiyan (in Chinese). 

• Meituan hit a record in the number of transacting users and active merchants using its flagship app in the first quarter of the year, 569.3 million and 7.1 million, respectively, according to its financial statement. The growth is partly driven by the company’s popularity in lower-tier Chinese cities. 
• Meituan is seeking new growth areas in recent months by introducing social and content features, including a Pinduoduo-like group buying feature in its Meituan-Dianping unit and a short video feature in its flagship app.

Li Auto closed down 0.85% on its first trading day in Hong Kong Thursday. The Chinese electric vehicle startup opened at an issuing price of HK$118 ($15) per share. 

Why it matters: Li Auto is the latest Chinese tech firm listing in the US to seek a dual-primary listing in Hong Kong. Tech companies increasingly see Hong Kong as an attractive market as they seek to hedge risks when both Chinese and US regulators accelerate regulatory scrutiny.

Details: Li Auto’s Hong Kong debut met with a lukewarm market response. The company’s shares closed at HK$117 ($15.03), 0.85% lower than its issuing price, falling by as much as 2% soon after starting trading. 

• Speaking to reporters on Thursday in Hong Kong, Li Auto’s president Shen Ya’nan said the company has been considering a listing in the mainland, without revealing details.
• The company said it will use the proceeds from the Hong Kong listing to develop new car models and autonomous driving technology, and to expand charging infrastructure and sales networks.

Context: Backed by Chinese life services giant Meituan, Li Auto first went public on Nasdaq last July. The company is the second Chinese EV maker to seek a Hong Kong listing. Its rival Xpeng Motors raised $1.8 billion in Hong Kong in June.

• Li Auto so far has only one model for sale. The company delivered 8,589 cars in July, surpassing both its competitors Xpeng and Nio in vehicle deliveries for the first time in July.
• Both China and the US have issued new regulations that make it more difficult for Chinese companies to raise money in the US markets. In July, Chinese regulators proposed new rules requiring some Chinese companies to seek official approval before listing in overseas markets. The US has threatened Chinese companies with delisting over a dispute about accounting procedures.

Read more: Drive I/O | The untold story of Li Auto

A dozen years after it set out to build an industry from scratch, China boasts the world’s largest number of electric vehicles. More than 6 million clean-energy cars and trucks are running on Chinese roads. 

That’s 6 million electric vehicle (EV) batteries that are going to wear out one day. The oldest electric cars are starting to retire their batteries: More than 200,000 tons of them went offline in 2020, Xinhua (in Chinese) reported in April, citing figures from the China Automotive Technology and Research Center. From 2021 to 2030, the auto industry will shed 7.05 million more tons of EV batteries—about 168 times the weight of Beijing’s Bird’s Nest Stadium, Greenpeace wrote in an October report. 

It’s either a huge mountain of toxic waste, or a gold mine of rare metals. It all depends on battery recycling.

There are no public records of how much of the 200,000-plus tons of the EV batteries retired last year got recycled, but it is widely agreed that the current recycling rate is very low. China first authorized EV battery recycling in 2018, but the first batch of licensed recyclers have found it a tough business. With high costs, limited demand, and competition from cheaper pirate recyclers, it will take more carrots and sticks for the industry to take off. The key, experts told TechNode, is likely to be stronger enforcement of rules that make carmakers responsible for disposing of end of life batteries.

Second lives for old EV batteries?

If you’ve owned a device with a rechargeable battery, you already know: They wear out. The longer you use a battery, the less charge it holds. 

EV batteries are good for eight to 10 years. By the end, they’ll store only 70% to 80% of the charge they held when new. That’s when they reach the end of their useful life in a car.

The battery pack is the most single most expensive component of an EV, accounting for about 30% of the total cost to consumers. It pushes up the cost of an 80.5 kWh battery pack in Tesla’s Model Y crossover to about $9,250, BloombergNEF estimated in a December report. The components may be still useful after batteries reach the end of their first life: A customer recently sold the used battery pack of his EV to an unnamed “highest bidder” and earned more than RMB 10,000 ($1,544), according to a Xinhua News Agency report (in Chinese) in April.

The first five companies got on the white list in July 2018. That was it until December 2020, when the Ministry of Industry and Information Technology (MIIT) certified 22 more companies to recycle EV batteries. While forging alliances with automakers, these little-known companies vary greatly in backgrounds. They are subsidiaries of big battery makers or associates of cell material suppliers, or simply units of traditional scrap recyclers.

A few of these larger players already claim to be profitable. A Shenzhen-based company called GEM is a leader in the industry, with a 10% share of the market and a client list of more than 280 domestic and foreign automakers. The company, which is also the country’s largest battery materials producer, said in its 2020 annual report (in Chinese) that the amount of batteries it recycled more than doubled from 2019, its first year to turn a profit from the practice. It didn’t disclose any numbers, however. 

Other recycling companies are still investing heavily to scale up the business. For example, Hefei-based Gotion High-tech, along with the government of the city’s Feidong district, on March 22 announced they would invest RMB 12 billion ($1.85 billion) to build a new facility for the manufacturing and recycling of raw battery materials in the capital of eastern Anhui province. The move came just two weeks after Gotion established a recycling subsidiary with a registered capital of RMB 50 million. The Volkswagen battery supplier aims to ensure annual production of 100 gigawatt hours (GWh) of batteries by 2025, with raw material sourced from used packs.

Yet many of the other white-listed recycling firms are struggling to break even, according to Yang Xulai, a professor at Hefei University and a former research lead at Gotion High-tech. One reason: Not enough spent batteries are being funnelled to proper recyclers, since owners of EV vehicles are not required to turn them over to an MIIT-licensed company. 

As a result, over half of spent batteries are probably being recycled by unsustainable, polluting practices, Bao Wei, a general manager at Zhejiang Huayou Holding Group, a recycling partner of BMW in China, told business news site Caixin (in Chinese) in January.  

Where did the batteries go? The easiest and most profitable destination is the illegal one: Unscrupulous companies, usually traditional auto scrap yards, strip the electrolyte packs of valuable raw materials like cobalt and nickel, and dump the hazardous leftovers in a nearby landfill or waterway. That’s in violation of environmental regulations but enforcement is lax.  

The licensed players thus find themselves competing against lower-cost rivals which can pay higher prices to EV owners for their waste batteries, as they are normally not subject to environmental regulations and have been disposing toxic battery wastes to landfill without proper treatment.

“This leads to a low collection volume of waste batteries for qualified recyclers, and this problem gets further exacerbated by poor consumer awareness of the importance of waste battery treatment,” Chinese and Australian researchers wrote in a paper published in May.

The three types of EV batteries 

Whether their processes are dirty or clean, recyclers consider the materials in nickel-manganese-cobalt (NMC) batteries and nickel-cobalt-aluminum (NCA) batteries the most valuable. These two types of batteries are known for enabling a long driving range with a high-energy density. However, the two current mainstream recycling techniques, which recover materials through burning or the use of strong acids, produce extensive chemical waste and greenhouse gases—and at very high expense, experts told Caixin in a January report (in Chinese).

When it comes to the third type of battery, Lithium Iron Phosphate (LFP), which offers a shorter driving range but boasts better thermal stability, the outlook is less promising. The key components are too cheap for recycling to be economical. Dismantling one ton of spent LFP batteries for key materials only generates revenue of about RMB 9,300 ($1,440), which is far from covering the cost of recycling, investment advisory firm Guangzheng Hang Seng said in a report in mid-2018.

The potential profit that can be extracted from an expired NMC or NCA battery fluctuates with the fluctuating prices of cobalt and nickel. At the metals’ current prices, the 60-kilowatt NMC811 battery used in a Tesla Model 3 might yield revenue of RMB 6,254.

Nonetheless, the recycling business could take off soon, spurred by the anticipation of a shortfall in cobalt, nickel, and batteries’ other raw materials in the coming few years. Demand for cobalt used in EV batteries will reach 980,000 tons over the decade to 2030 in China, around seven times the global output of the raw material in 2019, in Greenpeace’s estimation.

Read more: Drive I/O | How Chinese EV batteries broke through

Storage and solar power

There may be alternatives to stripping spent EV batteries for their components. Perhaps they can be converted into lower-quality batteries or used for something other than powering machines. 

MIIT in a draft guideline (in Chinese) issued in October 2020 called for recyclers, EV makers, and battery suppliers to cooperate to produce new uses for spent EV batteries. In particular, the guideline  encourages companies to repurpose old batteries for backup power systems for utility-scale projects or telecommunication base stations. One such model is BMW’s reuse of EV batteries to power the forklifts in its local factory in northern Shenyang city. Such a forward-looking policy could help “enhance overall electric grid efficiency and reliability,” wrote the regulator.

Other companies such as State Grid, the country’s largest public utility, are hoping to repurpose EV batteries for energy storage. Old packs can be reassembled into a battery energy storage system that can store solar energy power for use during periods of scarcity and provide greater flexibility for grid demand spikes.

Economic deterrent

However, this storage industry is also having trouble squeezing out profits in the face of technical and commercial challenges. Second-life batteries need to be standardized in performance and safety standards, such as charge capacity, recharge time, and longevity. But the hard reality is: Batteries from different manufacturers vary greatly in design and construction, since they are custom-designed to work with a given car model, consulting firm McKinsey wrote in a 2019 report.

Recyclers need to take battery cells apart for standardization, refurbishing, and reassembly before they can be used in energy storage. Yet the performance limits and health status of these batteries vary greatly and are often not disclosed to recyclers by battery manufacturers and carmakers, according to Bao of Zhejiang Huayou Holding.

Then there are safety concerns, which have led to large energy storage plants recently being banned from using spent EV batteries. Nonetheless, Beijing is still pushing for more trials, including battery storage programs for small-scale commercial and industrial facilities such as 5G base stations.

All these practical challenges combine to form an economic deterrent: It is simply cheaper for energy  companies to start with all-new batteries than to use retired packs, according to Zhao Guangjin, an expert with State Grid.

Whether the next stage is energy storage or recycling of materials, the transportation of spent batteries is another steep expense because both the transport vehicles and warehouses need to be customized with safety measures. 

Regulatory and business outlook

A national market foundation has been set, but the government will need to provide a mixture of carrots and sticks to help the market gain scale, Zheng Mingyang, Toxics Campaigner at Greenpeace, said in an interview with TechNode on July 14. For instance, South Korea has made it mandatory for car owners to return EV batteries to designated drop-off sites. “Such mandatory enforcement measures to end users is worth consulting,” Greenpeace wrote in its October 2020 report (our translation). 

Greenpeace has proposed incentive and punitive measures to ensure players such as automakers, battery makers, and recycling companies bear their responsibilities and develop new applications for used batteries. For instance, the government should levy higher taxes on battery makers that use original raw materials, while rewarding battery makers that use recycled materials.

Loss-making companies also need an incentive to look for the value that second-life batteries promise. Zhang Tianren, chairman of recycling company Tianneng Group and a delegate to the National People’s Congress, the Chinese parliament, in March called for stimulus policies such as subsidies and tax cuts for certified recycling companies, most of which are struggling to eke out profits. 

The vice chairman of China’s biggest battery supplier, CATL, publicly dismissed the idea as “a fake proposal” in late 2018. Huang Shilin said that the company was developing new battery types made for energy storage. In 2020, the Tesla partner sold 2.39 GWh of batteries for energy storage systems, according to its annual report. 

The Chinese government has established a policy framework that places responsibility for battery recycling on EV makers, experts warn that it’s not clear how it plans to regulate the sector. Beijing has not specified a clear target for the overall collection of waste batteries, nor a clear definition of the scope of authority among multiple central and local government agencies taking a shared responsibility, according to a paper by Chinese scientists published in May in the Journal of Environmental Engineering and Landscape Management. 

One murky legal area concerns automakers’ responsibilities. According to regulations issued in 2018, the makers are required to make their dealers buy back spent batteries from auto customers. Direct-sale companies like Tesla, Nio, and Xpeng are responsible for taking back the old batteries themselves. Unfortunately, dealers have little motivation to do so.They still face no penalties for failing to take back batteries. They are more motivated to sell cars than to take back batteries, Caixin (in Chinese) reported in January, 2019 citing Zhang Guofang, a professor at Wuhan University of Technology. 

Local governments with significant auto industries may offer a way forward. In a draft action plan (in Chinese) issued by the Guangzhou Municipal Development and Reform Commission on June 22, both domestic and foreign automakers would be required to report the establishment of recycling stations for EV batteries in the city. Meanwhile, Shanghai authorities plan to create a recycling network across the city and an online tracking system to manage the fabrication, sale, and recycling of EV batteries by the end of this year, Chinese media The Paper reported. 

For now, the major obstacle to clean reuse remains profitability. Being on the cutting edge of market creation, each stakeholder needs a little more incentive to be part of a sustainable recycling process. 

 “If there is money to be made, more companies and investments will be attracted,” (our translation) Huang Shan, an industry insider told China National Radio.

At 9 a.m. on a recent Thursday, Sheng Li got out of a Didi ride at his office in downtown Shanghai. The ride-hailing company has had a rough ride recently, but for users like Sheng, Didi is still the first choice when hailing a car.

The 28-year-old office worker says he’s been experimenting with other apps lately. He’s noticed longer wait times as Didi struggles amid a “cybersecurity investigation,” temporary removal from Chinese app stores, and lawsuits from angry US investors.

Sheng told TechNode he doesn’t worry about the privacy and security issues the regulators are investigating. “That’s a matter for the state, not us,” he said. For him, it all comes down to price, service, and wait times.

Still, a Shanghai taxi driver surnamed Wu told TechNode that he has shifted his driving time to other platforms including aggregator Amap (Gaode Ditu in China), as there are now “much fewer orders” from Didi (our translation). Some former Didi users even deleted the app from their phones in a show of patriotism, the Shanghai-based driver added.

Founded in 2012 as Didi Dache, Didi has long been dominant in China’s ride-hailing market. It fended off an early challenge from Uber, buying out the US company’s Chinese operations when it left the market in 2016. The most recent estimates put its share at 90% of the Chinese market.

Now, challengers are racing to take advantage of Didi’s troubles. Like Sheng, millions of Chinese users are trying out other ride-hailing platforms. The rivals have begun a price war, offering steep discounts and subsidies to win over users and drivers.

Default Didi

Didi remains the default for most users TechNode met during rush hour interviews in Shanghai. Although Didi apps are no longer available for download on Chinese app stores, those already on users’ smartphones still work.

Chris Sun, a Shanghai-based video producer did not hesitate when choosing Didi to hail a ride to the city’s railway station for a business trip last week. Speaking to TechNode on July 22, Sun said he had no plans to try other services, adding that he “has got used to” Didi, despite some technical flaws such as inaccurate pin locations from drivers (our translation).

Chen Jie, a recent graduate, is also sticking with Didi. The 23-year-old tried Alibaba-backed Amap last year, but immediately switched back to Didi, frustrated by long waits at peak times.

Springing into action

Shopping and delivery titan Meituan, a longtime rival of Didi, relaunched its standalone ride-hailing aggregator app Meituan Dache on July 13, followed by a WeChat mini-app with the same name last week.

Meituan has offered ride-hailing services since February 2017, but shut down its standalone app in 2019 to cut expansion costs. Since then, it’s been available only as a mini-program within Meituan’s main app.

The company has boosted its subsidies to attract users after the long absence. Using a RMB 10 ($1.54) coupon, TechNode paid RMB 23.4 for a nine-kilometer trip on Meituan Dache on July 16 in Shanghai. A ride on Didi for the same route cost RMB 35 on July 2.

Upstart T3, a joint venture of state-owned automakers FAW, Dongfeng, and Changan, is among the most ambitious contenders. From its base of 21 cities and 15 million users in 2020, the two-year-old ride hailer has set goals to enter 15 new cities and add an average daily order of 1 million rides by the end of July, Chinese media reported, citing a company memo. 

Daily downloads of the T3 app on iOS peaked at 60,000 million on July 2, later stabilizing to around 40,000. In June, T3’s app was downloaded just 10,000 times a day, according to data from app-tracking service Qimai. Chinese media report that T3 staff have been working long overtime hours as the Nanjing-based company rushes to expand.

Alibaba-owned aggregator and mapping service Amap, launched in 2018, is also offering massive subsidies to both riders and drivers, including RMB 100 coupons for rides and a one-week zero-commission period to new drivers. Amap downloads on iOS have more than doubled since July.

Meanwhile, Tencent and GAC-backed Ontime is offering 50% off coupons plus a RMB 25 incentive to those who invite a friend to use the platform and take their first trip. Not everyone is joining the price war.

Chinese media reported that management at Caocao Chuxing have decided not to drive down prices,, but the company has adopted the infamous 996 work schedule following Beijing’s investigation into Didi.

Future landscape

Didi could be back on app stores later this month. Regulations specify that cybersecurity reviews should take no more than 45 days, and 45 days after Didi’s review began will be Aug. 16. However, the same regulations authorize regulators to extend the review if they find that the matter is especially complex or serious.

Some observers believe that Didi could face significant threats from smaller ride-hailers that are expanding their presence in China’s growing inland cities.

“Didi is mature in tier-one cities but not in second or lower-tier cities. There is still an opportunity for online ride-hailing in China, and Didi will not have a 90% share in China forever,” Tu Le, founder and managing director of business intelligence firm Sino Auto Insights, said during an online interview on July 6.

Didi controlled more than 90% of China’s ride-hailing market share before the government’s investigation into the company. There might be “double-digit” market share redistribution if the subsidy war meaningfully deteriorates the Didi app or mini-program core experience, according to Michael Norris, head of research and strategy at AgencyChina.

The supply of drivers, who are sensitive to subsidy and platform policy changes, will be key to winning the battle. “Didi’s competitors need to poach drivers to the point Didi’s app becomes unreliable to hail a ride,” he said.

“The competitive landscape depends on how hard Meituan pushes. Recall that Meituan, with one eye on its balance sheet, backed away from self-operated ride-hailing in late 2018. Meituan’s foray into community group-buy, including associated financing activities, have primed investors for big moves.” Norris said.

Meituan declined to comment on the story.

Still, at least one ride-hailer has decided to advance at its own pace. Rather than spending lavish sums for a victory likely to be temporary, Shouqi, operated by the namesake automaker, has publicly stated its goal is high-quality development, focusing on passenger and driver safety along with data security. With a footprint in over 170 Chinese cities, the state-backed company is now the country’s sixth biggest ride-hailer but lags far behind Didi in monthly active users, according to figures published by app tracking firm Aurora Mobile in May.

“China’s ride-hailing market has always been strictly regulated. Looking ahead, compliant, healthy, and sustainable development will be the major path for all the players,” a Shouqi spokesperson told TechNode on July 20 (our translation).

Read more: How did Didi get in trouble with data regulators?

China’s securities regulator on Thursday approved China Telecom to list on the Shanghai Stock Exchange, two months after the state-owned telecommunications company was delisted from the New York Stock Exchange (NYSE).

Why it matters: China Telecom’s domestic listing comes as US-China rivalry spreads to the equity sector. The US has set stricter rules for Chinese firms listing on US stock markets, and China has in recent months increased scrutiny on companies seeking overseas listings.

Details: The China Securities Regulatory Commission said in a Thursday announcement (in Chinese) that it had approved China Telecom’s plan to issue shares in Shanghai, without providing a listing date. 

• The company said in its prospectus (in Chinese) that it plans to raise RMB 54.4 billion (around $8.4 billion) in the Shanghai listing.
• The funds will be used to expand its next-generation 5G networks, and for research and development, the prospectus said.
• China Telecom plans to issue up to 12.1 billion Chinese A-shares in Shanghai, or up to 13% of its total equities after the listing.
• China Telecom went public in Hong Kong in 2002, the same year of its New York listing. The company’s Hong Kong-listed shares have surged more than 49% since the beginning of this year.

Context: In May, the NYSE delisted three state-owned Chinese telecom operators, China Telecom, China Mobile, and China Unicom.

• The three operators received delisting decisions from the NYSE in January. The decision came after former US President Donald Trump signed an executive order in November that bars Americans from investing in Chinese firms that the US said aided China’s military, intelligence, and security services.

Local service superapp Meituan is cutting back on mobile power bank rentals while bringing back a ride-hailing app, as ride-hailing market leader Didi faces a cybersecurity review. Tea drink chain store Heytea secures $500 million in Series D. Amazon expands a crackdown on Chinese sellers.

Meituan adjusts offerings

• Meituan plans to downsize its mobile power bank rental service, Chinese media reported on Wednesday. Donews reports that Meituan is selling its rental service in 33 Chinese cities to local operators. Most of these cities are second-tier ones such as Jinan, Baoding, and Changsha. Gao Cheng, head of the rental service division in Meituan, recently left the company. Many business development staff from the division have transferred to Meituan Youxuan, a community grocery division. [Donews, in Chinese]

• Meituan relaunched a standalone ride-hailing app on Friday, three years after removing Meituan Dache to cut expansion costs. The launch came as market leader Didi’s apps are banned from accepting new users during a cybersecurity review. Meituan’s ride-hailing service continued operating as a mini-program within the Meituan super app during the app’s hiatus. [SCMP]

Heytea raises half a billion

Modern tea drink chain store Heytea completed a $500 million Series D. Investors include Sequoia Capital China, Hillhouse Capital, Tencent Investment, and Temasek. Founded in 2012, Heytea popularized “cheese teas” and runs about 695 stores across China. The brand is popular among young, urban Chinese consumers. [Ebrun, in Chinese]

Amazon widens crackdown on Chinese sellers

Amazon closed 340 online stores operated by one of the largest Chinese retailers on the platform for allegedly violating Amazon’s rules without specification. Shenzhen Youkeshu Technology Co. sells a variety of products, including electronic gadgets, toys, and outdoor equipment. Amazon froze $20 million in payments due to the retailer. The ban may reduce Youkeshu’s first-half sales by 40% to 60%, according to a recent filing by the retailer’s Shenzhen-listed parent Tiza Information Industry Corp. Amazon banned in June three electronics brands under Shenzhen-based electronics company Sunvalley Group for soliciting positive reviews with gifts. [SCMP]

Suning chairman steps down after bailout

Zhang Jindong, the billionaire founder of Suning, resigned as chairman of the Chinese retail conglomerate this Monday. Zhang lost control of the company when the business sold a nearly 17% stake to a government-led consortium. On July 5, the troubled retailer secured a $1.36 billion bailout offer from a group of investors led by the state asset management committees of the Nanjing and Jiangsu governments. Alibaba also joined the funding consortium, alongside Chinese electronics makers Midea Group, Haier Group, Xiaomi, and TCL Technology Group. [Bloomberg]

Louis Hinnant contributed to the reporting. 

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

In this episode the guys welcome Emma Lee back to discuss MissFresh and Dingdong Maicai. Key topics include what grocery e-commerce is, who the players in the space are, how they are different, and more. Elliott and James also discuss Didi Global. The conversation with Emma Lee was recorded on July 1, 2021 and the rest of the episode was recorded on July 2, 2021. 

Hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• Bilibili
• Xiaomi
• JD
• Pinduoduo
• Meituan-Dianping
• Kuaishou

Hosts:

• Elliott Zaagman– @elliottzaagman
• James Hull– @jameshullx

Guest:

• Emma Lee – TechNode

Editor:

• Peter Isachenko

Podcast information:

• iTunes
• Spotify
• RSS Feed
• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

China approved a Chinese firm to acquire South Korean chipmaker Magnachip in late June, a week after the US government paused the acquisition for review and the South Korean government initiated a deal review. Wise Road Capital, a Beijing-based private equity firm, received approval from Chinese regulators to acquire Magnachip on June 21.

Why it matters: Magnachip is a world-leading manufacturer of driver chips in smartphone displays, producing circuits controlling other components like organic light-emitting diode (OLED) displays. The acquisition has raised concerns in South Korea that the country may lose its chipmaking advantage to China.

• China’s approval alone won’t close the deal, which needs approvals from the US and South Korean governments.

China’s approval: The antitrust bureau of China’s State Administration for Market Regulation said in a Wednesday statement (in Chinese) that it had “unconditionally approved” the deal between Wise Road Capital and Magnachip.

• China approved the deal on June 21, but only revealed it to the public on June 30. 
• Magnachip announced in March that it would sell to Wise Road Capital for $1.4 billion. 

US and South Korean reaction: The US blocked the deal on June 15. In South Korea, the deal was met with public pushback, prompting a review from the government.

• The Committee on Foreign Investment in the United States (CFIUS), a panel headed by the Secretary of Treasury and consists of nine other US cabinet members, blocked the deal on June 15 through an interim order. According to a June 17 filing by Magnachip, CFIUS also blocked Magnachip from delisting in the US stock market, which the Chinese firm reportedly said it planned to do after the acquisition.
• Magnachip is incorporated in Delaware, and listed on the New York Stock Exchange. Despite having little presence in the US market, Magnachip is considered a “US business” by US law. According to the Code of Federal Regulations, a “US business” refers to any entity engaged in interstate commerce in the United States, regardless of the nationality of the company or the person who controls it.
• On April 8, unionized workers of Magnachip staged a sit-in at the company’s campus in Gumi, South Korea, expressing opposition to the deal, according to local media Business Korea.
• On June 10, Business Korea reported that the Ministry of Trade, Industry and Energy of South Korea had proclaimed Magnachip as a “national core technology,” making the deal subject to the South Korean government’s approval.

Context: In 2004, Magnachip was spun off from South Korean memory semiconductor company SK Hynix and purchased by US firm Citi Venture. The company went public on the New York Stock Exchange in 2011.

• Despite being listed and incorporated in the US, Magnachip is based in South Korea. Most employees are South Korean, and most factories and offices are in South Korea, according to South Korean national news agency Yonhap (in Chinese). The agency added that it has always considered Magnachip a South Korean company.

Chinese ride-hailer Didi went public on Wednesday on the New York Stock Exchange in a much anticipated US IPO, raising $4.4 billion. 

Why it matters: Didi is the biggest Chinese IPO in the US since Alibaba’s $25 billion listing in 2014.

Details: The company priced its IPO at $14, the top of the expected range. It opened at $16.65 per share on Wednesday, and closed at $14.14, a modest 1% up from the initial offering price. 

• Two days before Didi’s debut, CNBC’s Jim Cramer recommended the stock on his show “Mad Money.” “If you want to speculate on a Chinese IPO, you’ve got my blessing to bet on Didi. I would try to get as many shares as you can,” Cramer said.
• David Trainer, founder of New Constructs, a US-based investment research company wrote that Didi is overvalued and worth “no more than $37 billion,” a little over half of its current valuation in a Wednesday analysis. He worries that Chinese regulatory risks and an “unprofitable” business model will hurt the company’s performance, despite Didi having a 90% market dominance in China. 
• Didi reported losses of $1.6 billion on $21.6 billion in revenue in 2020. The company turned a profit of $800 million on $6.4 billion in revenue in the first quarter of 2021, according to its IPO filing. 

Context: Didi performed better than its US counterparts on the first trading day. Uber fell below its initial offering price in its 2019 debut. 

• In May 2019, Uber opened below its initial offering price of $45 and dropped more than 7% on the first trading day. 
• Like many other leading tech companies in China, Didi faces increased regulatory scrutiny. Reuters reported in June that Didi is facing antitrust investigations from the country’s top market watchdog on whether the company had used unfair practices to squeeze out smaller competitors. 

READ MORE: The Chinese gaming startup outperforming Tencent overseas

With contributions from Jill Shen.

The Labor Ministry of Taiwan has told local recruiters to remove all listings for jobs in mainland China, especially those in critical industries such as semiconductors, Nikkei Asia reported on Friday.

Why it matters: The island is a hot destination for Chinese firms to hire chip talent. Taiwan is home to companies like Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker; and smartphone chip designer MediaTek, a major rival to Qualcomm.

• As China’s semiconductor industry races to catch up with international standards, talent is one of its highest hurdles. The China Semiconductor Industry Association (CSIA), an industry body backed by China’s Ministry of Industry and Information Technology, estimated that the industry faces a shortfall of around 220,000 skilled workers as of the end of 2020.

READ MORE: Where firms are looking to fill China’s chip talent gap

Details: The labor ministry banned recruitment platforms and headhunters from helping or representing any company hire individuals for work in mainland China, according to Nikkei, citing a government notice. The regulation is effective as of Wednesday, according to the report, which cited a local recruiter who informed clients of the new rules.

• “Due to geopolitical tension between the US and China, China’s semiconductor development has suffered some setbacks and as a result, China has become more aggressive in poaching and targeting top Taiwanese chip talent to help build a self-sufficient supply chain,” said the ministry in the notice.
• The ministry said headhunters may face fines if they violate the regulation. “If the recruitment involves semiconductors and integrated circuits, the penalty will be even higher,” the notice said.
• Taiwanese workers are still allowed to work on the mainland, including in the semiconductor industry.

Context: On March 9, Taiwanese prosecutors raided two local recruiters who allegedly broke the law by recruiting semiconductor workers from the island to work for a Chinese chipmaker, according to local media reports.

• Previously, there were no government bans on the hires of local workers for Chinese firms. A 1992 local law which forbids Chinese firms from doing business on the island without government approval has been used to restrict recruiting on the island previously.
• In August, Nikkei Asia reported two Chinese government-backed chip firms had together hired more than 100 veteran engineers and managers from TSMC. One of the firms was the now-notorious failure Hongxin Semiconductor Manufacturing Company (HSMC), which also hired former TSMC vice president for research and development vice president Chiang Shang-Yi as its chief executive.

Chinese electric vehicle maker Nio downplayed competition while delivering its first-quarter results on Friday, with chief executive William Li relaying minimal concern about its growing list of challengers in China.

“In the premium market, we haven’t seen any brand having the same level of competitiveness [as Nio] in terms of product, service, technology, user experience and community,” Li said during a call with analysts on Friday. Li added that many traditional automakers are “moving fast as followers” in building direct service channels and user community, but would face pressure in pricing their new products. Such automakers are “lagging behind“ in terms of in-car digital service and autonomous driving capabilities, he said.

“We believe we can solidify our position in the market… our competitiveness will continue to grow and stay strong in the long run,” Li said.

Nio on Friday beat Wall Street expectations for first-quarter revenue, boosted by better-than-expected deliveries despite an ongoing chip shortage that has hammered the auto industry globally. The company reported Q1 revenue of RMB 7.98 billion ($1.22 billion), exceeding the $1.06 billion consensus expectation in a FactSet poll of analysts, according to MarketWatch.

Nio’s Q1 delivery of 20,060 vehicles was a 16% quarter-over-quarter increase, and a fourfold increase on an annual basis. The company in late March lowered its Q1 delivery forecast to 19,500 vehicles from 20,000, citing the chip shortage. Automotive gross margins in the first three months of this year were 21.2%, up from 17.2% in the previous quarter and -7.4% in the first quarter of 2020, which the company attributed to increased adoption of higher-priced options and lowered costs for materials.

Losses attributable to shareholders expanded 183% year on year to RMB 4.87 billion, which the company attributed to the RMB 4.4 billion expense during the first quarter to redeem equity interest from investors of its China entity.

The company will not reduce the price of its cars in order to win market share, Li emphasized, but would increase investment to improve products and services with “a reasonable gross margin” as a long-term strategy. Nio announced last week during the Auto Shanghai expo that it would build 100 battery swap stations and 500 supercharging stations in China’s eight northern provinces over the next three years.

Nio also promised to invest heavily in the research and development of new products and technologies, aiming to gain a long-term competitive advantage as more big auto players move into the booming segment. Li said on Friday that he expected research and development expenses to increase significantly in Q2 as it moves aggressively to mass produce of its first sedan, the ET7, slated to begin deliveries in Q1 2022, as well as new models and self-driving technology development. The company in March announced it would double its R&D budget to RMB 5 billion this year.

Traditional automakers’ recent and aggressive push into electric cars is pressuring Tesla and young Chinese EV makers. In the latest example, state-owned BAIC partnered with Huawei to equip its latest premium sedan, the Alpha S, with customized software and hardware technologies from the tech giant. BAIC said it had secured over 1,000 orders after the debut on April 17. Two days earlier, China’s biggest private automaker, Geely, unveiled plans to deliver the first model from its new premium EV brand Zeekr in October, adopting a direct sales and community strategy similar to Nio’s.

“Competition will definitely heat up in the Chinese electric vehicle market, as not only legacy automakers from China and the globe but also local tech giants are actively joining in the race. The vehicle autonomy and electrification revolution will accelerate as more money pours into the market, but the competition would be very diverse, dynamic, and intense,” (our translation) Paul Gong, UBS’s China auto analyst said last week during an online conference call.

Chinese internet giant Tencent’s investment in Japanese tech firm Rakuten will be “monitored for national security implications,” Japanese government officials told their US counterparts prior to the meeting between the two nations’ leaders on Thursday, Nikkei reported.

Why it matters: Chinese tech companies’ overseas investment activity faces increasing scrutiny as the US pushes for a tech alliance with allies.

Details: Japanese officials briefed the US National Security Council on Tencent’s March investment in Rakuten, a Japanese e-commerce and telecommunications service provider, Nikkei Asia reported on Thursday. 

• Rakuten announced on March 12 that it planned to raise a total of JPY 242.3 billion (around $2.2 billion) by issuing new shares to investors including Tencent, Japan Post Holdings, and US retail giant Walmart.
• Tencent, through its Image Frame Investment subsidiary, paid JPY 65.7 billion on March 31 to acquire a 3.7% stake at Rakuten, according to Nikkei.
• Japanese officials worried that the investment might run afoul of an executive order signed by former US President Donald Trump in January which banned transactions with eight Chinese apps including Tencent’s WeChat Pay over national security concerns.
• Tokyo will “closely monitor” the tie-up to see whether Tencent has access to non-public technology, sources told Nikkei.

READ MORE: Before the bans, China tech investment turned away from US

Context: Rakuten is an online retail company founded by Japanese billionaire Hiroshi Mikitani. The company also runs a telecommunications business. It launched its 5G service in September.

• Japanese Prime Minister Yoshihide Suga is set to meet with US President Joe Biden in Washington on Thursday. 
• Biden has upheld the Trump administration’s tough policies on Chinese tech firms. Biden’s government last week imposed sanctions on seven Chinese supercomputer developers, barring them from acquiring US technology.

When Mi Jiayi was shopping for a car in Hangzhou in early 2020, there was no question in his mind it would be a Tesla. For the 30-year-old legal advisor with a local investment conglomerate, it would be the first car he ever owned. 

His respect for Tesla CEO Elon Musk was one factor in the appeal of the brand. On test drives, he was attracted by the design and some of Tesla’s fancy technological features. “The vehicles look so gorgeous compared with some other cars in similar price ranges,” he recalled. “Also, its Autopilot system is good at detecting vehicles and pedestrians on the road,” Mi said (our translation).

Mi’s mood soured ten days after receiving his new car, when Tesla announced plans to launch its China-made long-range Model 3 for delivery in June—and priced just 4% higher than its standard plus counterpart.

Mi had just missed out on the newer Model 3: Had he received his car on the date he expected—or just three days later than he did—he could have swapped it for a long-range vehicle under a seven-day return policy. He suspects that the delivery was rushed to him to prevent him from trading up.

Mi used to admire Musk, known as “the Iron Man” among Chinese fans, as “a great, powerful person.” Now, he says Tesla is being “dishonest” and “untrustworthy” (our translation). In December 2020 he filed a suit against the company for deceptive sales practices and is waiting for a court date. He says more than 600 Tesla owners nationwide have similar complaints. On a chat group he helped to form on Chinese messaging app WeChat, hundreds of Tesla owners air a variety of grievances with Tesla and Musk.

Cooling romance

So far, none of the lawsuits over alleged promises of sales staff are known to have prevailed in court, but the complaints of people in social media groups have spilled into the mass media. Then there are at least ten recent accidents that Tesla drivers have blamed on mechanical malfunctions, which early this year drew the attention of Chinese regulatory authorities. Some of the accusations of malfunctions are similar to those made by Tesla owners in the US. 

Through it all, Tesla executives have appeared little concerned about the tarnishing of the company’s once dazzling brand image in China. Tesla’s rare public responses are often dismissive. The company didn’t reply to TechNode’s numerous attempts to comment on the complaints and charges against it. In short, Chinese consumers’ short but hot romance with Tesla may be cooling off.

Imported Teslas began to arrive in China in 2014, but the first made-in-China vehicles only rolled out of the Shanghai factory in late 2019. Yet today the company dominates the country’s electric vehicle (EV) market. Tesla has boosted Beijing’s prized industry and is a pillar in the plan for it to become a global auto power.

Tesla is seen by many Chinese people as an innovator and Musk as a visionary. On the social media platform Weibo, he has 1.7 million followers. Among China’s status-conscious, middle-class urbanites, Musk quickly became an icon (in Chinese). These Tesla owners see themselves as early adopters at the forefront of a transport revolution and are inspired by the company’s stated mission to fight climate change.

“It seems like you will finally see a Tesla logo everywhere you look in the city,” says William Hu, a human resources expert in Shanghai who had just ordered a Model 3 sedan. To him and his peers, a Tesla is a signifier of social standing and fashion.

Market leader

There’s another reason why Tesla holds such a rarefied spot in China’s EV market: It offers the most competitive product.

Although the first Teslas made in China, the Model 3 sedans, only began deliveries in January 2020, today the company has a 21% share of the EV market and commands a huge lead over other EV automakers in the country. In 2020, it sold nearly 140,000 of the Model 3. China’s best-selling EV, the Model 3 now has a retail price starting at RMB 249,900 ($38,500), a price made possible by localization of car parts and generous government subsidies. Tesla’s big bet on self-driving technology also made its China-built vehicles a compelling consumer product that few can compete with.

“I am amazed by the superior experience of driving a Tesla,” Wen Wen, a BMW owner said recently after test-driving a Model 3 in the southwestern municipality of Chongqing (our translation). To compare, she told TechNode that she had just taken a “pretty good” ride in an Xpeng’s premium P7 sedan two days before.

Hu expressed a similar sentiment. “Tesla’s self-driving and intelligent capabilities are way more advanced,” he said, comparing the automaker to other luxury EV brands such as Nio.

The brand’s status value in China has bolstered its global bottom line. In January, the California-based company posted its 2020 results, showing its first full year of profitability and record delivery figures. Skyrocketing growth in the Chinese mass market has propelled its market cap as the world’s most valuable automaker. Revenue from the China market increased more than 120% year-on-year, reaching $6.66 billion in 2020 and accounting for 21% of Tesla’s global revenue, the company reported in an SEC filing on Feb. 8.

Tesla is now pumping up production of the Model Y sports utility vehicle (SUV) in its quest to reach a loftier goal: upping the total number of all Tesla deliveries this year by 50% compared to 2020. The Shanghai factory began manufacturing the Model Y only last December, but industry observers predict it will be the best-selling premium EV this year.

The experts also say Tesla is aiming to avoid the kind of mistakes Apple made in China. When Apple opted to strengthen its position in the high-end market, it inadvertently ended up giving cheaper-priced domestic rivals plenty of space to grow. The US carmaker, on the other hand, is using every means—notably a string of price cuts—to seize market share from both premium and mainstream automakers.

‘I feel cheated’ 

But as Tesla ramps up deliveries of the Model 3, it faces lawsuits alleging that it has misled buyers of the model. 

The first PR blow-up began last April, just around the time Mi Jiayi believes he was deceived into buying a Standard Range Plus Model 3. Other angry owners also accused Tesla sales reps of tricking them into buying that model shortly before the long-range model they wanted was released at only a slightly higher price. Videos of angry Model 3 owners spread like wildfire on Chinese social media. 

Some one-time Tesla superfans have sued the company over what they perceive as shady sales practices. Court action is expensive in China. Mi, who has legal training, is among a relatively small number of unhappy customers forging ahead. 

Another dissatisfied customer, who sued Tesla for sales fraud in a Beijing court last summer, is local resident Feng Chao, who told TechNode (our translation), “If I had known the long-range Model 3 would be launched in April, I would definitely have bought it.” The electrical engineer explained. “I frequently commute between Beijing and Tianjin, and don’t have a permanent parking space to install a private charger.” He lost his appeal in September due to insufficient evidence.

As Fang Chaoqiang, a lawyer at Beijing-based Yingke Law Firm, explained to TechNode, 

“It is difficult for a customer to win such a case, unless there is sufficient evidence that Tesla made false claims and manipulated customers to make a purchase” (our translation).

According to a December report by Chinese-language media site Sina Tech, Tesla’s management pushed its sales team to sell more of the Standard Range Plus Model 3 cars and rush to deliver them to customers before the end of March 2020. Citing company insiders, Sina Tech reported that China-based Tesla executives hid the imminent launch of the longer-range model from the sales team, and pushed to offload the existing standard models.

Tesla did not respond to TechNode’s requests for comments about this claim.

In fact, Tesla has not responded to a query from TechNode since October 2019. Sometime last year, the company eliminated its California-based global public relations team altogether. US trade publication Electrek got confirmation of the news in October. Musk’s relationship to the press throughout the world is prickly and he has long complained that coverage of Tesla is unfair.

TechNode has been unable to reach Tesla China’s PR team since Head of Communications Cheryl Zhang left the company in late 2019. If someone bears that title now, the information is not publicly available. Meanwhile, the face of the company in China, Grace Tao, whose title used to be “head of public affairs” was changed to “vice president of external affairs,” reflecting some of the title changes at global headquarters.

Sales pressure and price cuts

In chat groups on social media platform Weibo, Tesla’s China leadership is widely viewed as focusing on short-term goals without considering long-term benefits. “[Tesla China’s] business practices, the communication with the public and its brand reputation are getting worse. Maybe it doesn’t matter to them at all,” (our translation) Bill Lin, a Model 3 owner from the eastern city of Xiamen told TechNode.

Tesla is also facing backlash from Tesla owners who, otherwise happy with their cars, are angry that sales people rushed them to make a purchase only to see subsequent drastic price cuts.

These owners say sales staff claimed that the sticker price of the vehicles would remain unchanged for the foreseeable future. For example, a customer surnamed Zhang in Zhengzhou, Henan Province, said a local salesperson promised there would be no upcoming price cuts when she decided to buy her standard-range plus Model 3, about a year ago, according to a report by Henan Television, a state media unit. Less than two weeks after Zhang accepted delivery on April 13, Tesla announced a round of price reductions of nearly RMB 30,000 for the model.

By October, the starting price of a locally made, standard-range plus Model 3 had been slashed four times. In less than a year, the price fell from RMB 355,800 to RMB 249,900—a 30% drop.

Some Model X and S owners have even filed lawsuits alleging deceptive sales practices related to price cuts. According to public records, none have won and some have lost. Perhaps some of the owners won out-of-court monetary settlements from Tesla, as rumors have it, but such agreements do not appear in these records.

More lawsuits

Tesla customers regretted buying too soon to enjoy price cuts, and to benefit from a Tesla tax break. When the company won exemption from a 10% tax on imported cars in August 2019, some customers said they should have gotten advance warning.

In a lawsuit filed last April, one sedan owner claimed a Tesla salesperson in March 2019 told him there was no possibility of a tax exemption for the imported cars in the near future. The delivery of his car was completed with the payment of purchase tax in May, just three months before Tesla secured the exemption from the tax, thus reducing the sales price by as much as RMB 69,000.

A local Shanghai court in November ruled in Tesla’s favor in this case due to insufficient evidence, according to a verdict published on China Judgements Online, the official Chinese courts site.

Some complaints and hopes for compensation are more far-fetched. An owner surnamed Ouyang sued Tesla on charges of price fraud in May 2019. She complained of a dramatic price slash of RMB 222,600 nine months after her purchase of an imported Model X in Chongqing. She felt she should have been notified of possible future price cuts. In late 2019, she lost the case, with the court saying that a seller is free to change prices, a court ruling shows.

Customers have also made similar complaints about price changes with the locally-made Model 3, but TechNode does not know if any of these owners have sued Tesla. After a round of price cuts in May 2020, Tesla did respond to the subsequent uproar on social media with a public outreach campaign. In the following two months, top Tesla management visited showrooms around the country and hosted roundtables with owners, requesting feedback on how to introduce price cuts in the future.

Outdated chips

Although price cuts dominated the complaints about Tesla in 2020, the first wave of fraud claims concerned what disgruntled Model 3 owners call “hardware downgrading.”  Musk publicly stated in April 2019 on the company’s Autonomy Day that all Model 3, S and X vehicles were already being equipped with the hardware foundation for full self-driving software. With the new Hardware (HW) 3.0 chipset, designed in-house, Musk promised that owners would simply have to wait for the company to finish developing its self-driving software and then they could download a patch to get a highly autonomous car.

Early in 2020, multiple Chinese owners of locally-made Model 3’s complained that the chips in their cars’ computers were the older HW 2.5 Nvidia ones, instead of the HW 3.0 chips. Soon after, around 400 owners of imported Model 3’s reportedly complained (in Chinese) that their cars had the older generation chips as well.

Tesla blamed the issue on a supply crunch caused by the Covid-19 pandemic and promised to retrofit all the China-made sedans with HW 3.0 chips. However, the company later made a distinction between the owners of China-made Model 3’s and imported Model 3’s. Even though all owners faced the same problem, owners of imports were denied upgraded replacement chips.

If it seemed strange for a company to alienate customers who had paid RMB 439,900 to be among an elite group of early adopters, legal experts said the undisclosed hardware downgrade for China-made vehicles was also in breach of contract. However, the HW 3.0 chipset was not specified in the contracts with owners of the imports, reported National Business Daily (in Chinese).

Zhou Wanjun, a Shanghai web designer, is one of the owners of an imported Model 3 who believe the company lied to them. He bought his long-range import in late 2019, trusting a Twitter post by Musk in early January 2019 that said the model wouldn’t be produced at all in China. It turned out that Zhou’s purchase took place about six months before the long-range Model 3 began production in China. Zhou and his peers cite Musk’s public statement of April 2019 about the HR 3.0 chips being installed in all new vehicles.

Tesla China later clarified that it would provide the hardware upgrade for free for those who paid RMB 64,000 to subscribe to its “full self-driving (FSD)” function. The company has since maintained that the driving experience for the vehicles enabled by HW 2.5 is essentially the same as those equipped with HW 3.0 for owners who did not buy the FSD feature.

After tolerating quality glitches and feeling cheated by “a lack of transparency” in Tesla’s sales and customer practices for a year, Zhou expressed a profound sense of regret that he ever bought the car when he spoke with TechNode last month.

“I’ve been following Elon Musk on Twitter for a while and, for me, now he is a blowhard and behaves in a brash way with a history of overpromising self-driving cars. You used to see the brand as a tech innovator, however, the sharpness disappears once you have one,” (our translation), Zhou added.

“I’ve lost all my confidence and trust with the company, and my next car won’t be a Tesla,” he said.

Safety hazards

Amid complaints about pricing and deceptive sales practices, Tesla also faces more serious accusations: that the safety of its vehicles isn’t up to scratch. The company’s dismissive responses, sometimes blaming the victims, have made matters worse.

In the past nine months, drivers of Tesla vehicles in China have blamed at least 10 accidents on mechanical malfunctions. Dozens more owners have complained about brake failures, battery fires, defective wheels, and unintended acceleration over the past few months, according to multiple Chinese media reports.

For example, a Tesla vehicle in Beijing in January crashed into a car after the driver attempted to prevent the accident by slamming on the brakes. The accident led the driver to question whether her car had a braking problem, according to a recording obtained by Chinese media.

A Tesla service representative initially insisted that there were no brake problems and suggested that the female driver wasn’t strong enough to hit the brake and prevent the accident.

After the angry driver resorted to local media with her report of the exchange, the social media platform Weibo picked it up and spread it to a much wider audience. Thousands of incensed netizens shared the company’s insulting answer. Tesla later apologized (in Chinese) in a Weibo post for its language, blaming the accident on an icy road. It said the problem had been resolved.

Most recently, a Tesla owner produced what she told a local TV station was video evidence of a repeatable brake failure. As reported by the station, two Hainan residents, surnamed Yu and Meng, said Meng collided with a traffic barrier on March 11 when his brakes failed while driving Yu’s Model 3 in his company’s unpaved parking lot. The pair called a Tesla technician, who attempted to repeat Meng’s actions in a second Model 3, repeating the crash.

Tesla in a March 14 statement (in Chinese) confirmed that a technician had reproduced the accident when driving another Model 3 on the scene, but said, “Our initial findings show it was mainly due to the wet ground and insufficient pressure to brake pedal by the driver and in that case it requires extra stopping distance” (our translation). The video, shot by Meng, does show the technician’s car driving through a large puddle in the dirt parking lot, but seems to show the car failing to stop over at least two car lengths of relatively dry ground. Yu wrote in a March 19 statement that she had reached a settlement with the company and planned to refuse further interviews.

According to the Tesla statement: “We conducted two tests using different braking approaches using another Tesla vehicle at the site in order to find out the cause of the accident. During the first test, we repeated what the driver did when the crash happened, which is pressing the brakes lightly twice and hitting it hard the third time. It turned out the vehicle did skid on the wet road. However, in the second test, the vehicle finally stopped within the safe distance when our employee kept hitting the brakes hard all the time.”

The company reiterated that system data recorded no failures in the vehicle’s acceleration and braking systems, and pledged to “help the customers deal with follow-up issues in an active manner and improve product and service qualities, with safety being its top priority.”

Echoes of US complaints

In early February, five government departments responded to mounting owner complaints by calling in Tesla executives to urge them to obey Chinese law and protect consumer rights, according to Reuters and an announcement (in Chinese) by the State Administration for Market Regulation (SAMR). In a posted response, Tesla pledged to obey Chinese laws, strengthen investigations and to “systematically investigate problems … collectively reported by our consumers.”

Some of the accusations of owners in China echo criticisms of Tesla vehicles made earlier in the US. In response to a petition on behalf of more than 100 US drivers, the US National Highway Traffic Safety Administration (NHTSA) in January 2020 opened an investigation into a variety of issues, including unintended acceleration and brake failures. After examining 127 claims of product faults, however, the federal regulator concluded early this year that there was no evidence to support the complaints.

Tesla had said in a statement that it has been transparent with NHTSA and the claims made by owners in the US petition were “completely false.”

In particular, the US agency found no evidence that a system error could cause the cars to accelerate without the driver’s intention. Tao, the Tesla China vice president for external affairs, cited the NHTSA investigation when she rejected claims by Chinese drivers of unintended acceleration in a Jan. 9 statement on Weibo.

Social media platforms Weibo, WeChat, and Quora-like Zhihu, were then flooded with posts and comments (in Chinese) accusing Tesla of passing the buck. National state media finally weighed in on March 28 in a Xinhua opinion column criticizing the failings of various makers of new energy vehicles (in Chinese). The column singled out Tesla for shifting onto drivers the responsibility for accidents caused by unintended acceleration.

However impersonal or dismissive Tesla’s approach to customer complaints, the causes for most of the accidents in China are still unknown. Most owners give radically different versions of what happened when the errors occurred. And neither SAMR nor any other government authority in China has publicly initiated an investigation.

Indispensable?

It sometimes seems like Elon Musk and his company are made of Teflon.

Barring a catastrophe, two China industry analysts say it is unlikely sales will suffer this year. When complaints make an impact, the next quarter’s sales figures drop, said Tu Le, managing director of Sino Auto Insights, yet that certainly didn’t happen to Tesla last year and current sales seem “brisk.”

For all the Tesla owners angry about price cuts they missed out on, “a ton more” who benefited are quite happy with the company, Le said.

Michael Dunne, CEO of ZoZo Go and former managing director of JD Power’s China unit, agreed. “Armies of exceptionally satisfied Tesla owners effectively drown out noises generated by Tesla detractors,” he said. “That has been the reality so far in the US, Europe, and China. Who needs a public relations division?”

The demands for Tesla to address consumer complaints are nonetheless getting louder. In the last year, they have grown from scattered online complaints, to mass media, to official scolding. The March 28 Xinhua column reprimanding Tesla for blaming drivers for its vehicles’ quality lapses shows that top-level official media are paying attention to these consumer complaints.

There is no denying that Tesla has had persistent problems with quality, Le said, and the problems will continue to multiply because the company’s growth is so aggressive. “We will see even more as the Model Y ramps up,” he added. The rapid growth also partially explains the poor quality of service, he said: “Service has yet to catch up with demand.”

Yet when state media produced a list of the past year’s worst offenders of consumer rights on March 15, Tesla got a pass. To the surprise of the public and industry insiders, Tesla wasn’t mentioned at all when the annual televised gala marking Consumer Rights Day reprimanded other tech and auto companies before a national audience. However, Tesla was called out in a local Consumers Rights Day broadcast in Guangdong province (in Chinese).

For the time being, Tesla may have a layer of protection because the company is so integral to the growth of the nation’s EV industry. “There is a symbiotic relationship between the Chinese government and Tesla,” Le said. “Look, Nio wouldn’t be here without Tesla. Tesla is not leading the world in EVs without China. Maybe in five years, it will be different.”

Chinese electric scooter maker Niu Technologies said it is on track to open 10,000 stores nationwide over the next five years, as replacement demand stays robust following the implementation of tougher national standards for two-wheelers.

Why it matters: Nasdaq-listed Niu aims to sell 6 million scooters worldwide in 2025, a tenfold increase from 2020, CEO Li Yan said during a press conference on Wednesday.

Details: The company sees lower-tier markets as key to its growth in China.

• Speaking to journalists on Wednesday, Li said the company expects to nearly double its annual production capacity to 2.1 million units during the second half of this year.
• The company aims to be in a position to accommodate high demand during peak season, which starts in July.
• “We are expanding our footprint in lower-tier cities and even rural areas with a growing sales team and a diversified product portfolio… The market is huge and what we’ve covered is only the tip of the iceberg,” said Li (our translation).
• The company also launched ten new scooter models on Wednesday.

Context: Niu reported sales of around 602,000 scooters last year, rising 43% year on year. In the same time period, its store count increased by over 50% to 1,616 shops in China, despite the Covid-19 pandemic. The new shops are mainly in first and second-tier cities.

• Analysts expect Niu’s sales to rise as new scooter standards force drivers to replace their vehicles.
• Most of its competitors use cheaper but heavier lead-acid batteries, making it hard to meet a 55 kg (121 pounds) limit and offer a comparable driving range. Niu’s lithium-ion batteries deliver better range at lower weights.
• China International Capital Corporation (CICC) forecast record sales of around 30 million lithium-ion battery scooters in 2021, more than double compared to last year, according to a report (in Chinese) published last month.

READ MORE: Scoot over, cars: Niu CEO bets on luxury scooters

A few years ago, ByteDance was a media company. Now it’s moving from e-commerce into restaurant coupons.

ByteDance is on its way to building a business empire encompassing nearly every aspect of Chinese consumers’ daily lives. With core competency in content aggregation, the TikTok parent company has already expanded to entertainment, e-commerce, productivity, gaming, education, competing head-on with big names like Tencent, Baidu, and Alibaba. 

The tech giant recently accelerated its foray into local lifestyle, a RMB 1.3 trillion (around $199.9 billion) market that is dominated by long-standing incumbent Meituan, which operates two of China’s largest local lifestyle apps, Meituan and Dianping. Local lifestyle is a catch-all term for in-person services such as restaurants, movies, entertainment, and beauty care. Tech companies engaged in these areas typically adopt the O2O, or online-to-offline model, which entices online consumers to make purchases of goods or services from bricks-and-mortar stores by leveraging location-based features.

ByteDance is pushing into local lifestyle services in order to diversify and boost its revenue stream to support both the company’s rapid pace of development. With an IPO rumored to be coming soon, the company will also want to show strong revenue figures.

ByteDance recorded around RMB 240 billion of revenue in 2020, according to The Information, which cited people with knowledge of the matter. Revenue from its primary advertising business accounted for RMB 175 billion, or 72.9% of the total. The company has decreased its heavy reliance on ad income, which in 2019 accounted for over 90% of revenue. It may still need to improve that balance in order to fend off risk.

By advancing into lifestyle services, ByteDance is taking on a new rival: O2O giant Meituan. It’s a potentially Freudian moment for ByteDance founder Zhang Yiming, who has close connections to Meituan founder Wang Xing. Both men hail from the same town in rural Fujian, and they have a history. When Wang founded social media platform Fanfou in 2007, Zhang was his tech partner. They haven’t worked together since 2009, but the two CEOs appear to remain fond of each other, speaking highly of each other in public.

Deeper discounts, for now

Douyin’s newly launched local lifestyle section consists of four segments: group deals for restaurants and hotels, top lists for scenic spots, hotel reservations, a gourmet guide populated by reviews from social media influencers, and location-based check-in with prizes. The features have some overlap but are all focused on restaurant and accommodation reservations. Participating businesses are currently only located in top-tier cities including Beijing and Shanghai.

For users, Douyin’s local life offerings are largely a Meituan alternative. 

In addition to easy access to user attention, an obvious edge for the service is pricing. A Sichuan noodle restaurant chain in Shanghai is currently offering up to 60% off through campaigns marketed through Douyin’s new feature, while discounts from the same restaurant are only 30% on Meituan and Dianping. 

It’s hard to say how long the company will maintain its pricing edge, but it is an efficient and time-tested way to draw its first round of customers. 

“Meituan and Dianping are my go-to apps for lifestyle services. But if we can get a better bargain on Douyin for the same service, why not?” Deng Shuang, a Shanghai-based housewife who watches e-commerce livestreams on Douyin, told TechNode.

Merchants are also open to the new option thanks to Douyin’s favorable word-of-mouth reputation as an efficient marketing platform. Sandwich shop owner Xiao Yu spent RMB 500 for one promotional video on Douyin in an attempt to draw users to his restaurant which opened just two months ago. The review video, featuring a Douyin social media influencer visiting his Nanjing-based store, tripled daily sales of the store to RMB 3,000, increasing daily orders to more than 200 from around 70 per day. The traffic boost sustained for over a week. He told TechNode that the store’s initial low traffic may have exaggerated the growth rate, but he was satisfied with the results. Given this experience, he’s keen to try out the new group-buy feature if it launches in Nanjing.

At present, merchants with a Douyin enterprise account can use the service for free, partially lowering merchant marketing expenses. The current zero commission policy may be a big attraction for merchants who generally pay steep commission fees to Meituan of around 10%.

What’s ahead

User enthusiasm alone, however, won’t guarantee success for Douyin’s local lifestyle business. There are two difficulties in using Douyin to promote such destinations, according to Michael Norris, research and strategy manager of Agency China.

“The first is a technical challenge—whether Douyin can support the purchase and redemption of coupons as efficiently as Meituan’s Dianping,” he said.

As it gets started with the business, Douyin both cooperates directly with offline stores and acts as a traffic platform that helps to promote services offered by third-party platforms. A server at a Shanghai noodle restaurant told TechNode that she has seen few customers using Douyin group-buy coupons compared with those from Meituan’s apps. In another test, a meal voucher that a TechNode reporter purchased through Douyin could not be found in the restaurant’s ordering system. Restaurant management eventually noticed that the voucher was issued by another local lifestyle platform, Xiangku, and Douyin was only promoting the service. 

“The second is a user journey and experience challenge—in the case of restaurants, users generally search and redeem a discount coupon as they pay for the meal. How Douyin plans to support this behavior is key to whether it can be a credible threat to transactions in Meituan,” Norris says.

Although the products look similar, Douyin’s product is embedded in a different ecosystem—which probably means a different strategy.  

Meituan is all about convenience. People who are looking to buy food or services use Meituan to search for bargains available near their location to purchase immediately, usually for restaurants nearby while shopping or after finishing a meal at a restaurant. In addition, Meituan’s food delivery services, more frequently-used services although lower in margin, help the platform to accumulate merchants users. Meituan’s model relies on both ads and commission to make money.

Douyin appears to be counting on getting people excited enough that they’ll make a special trip to try a new restaurant. Based on its content and “Point Of Interest” feature, Douyin is trying to create demand using content marketing tactics including livestreams, videos, and other media. When a consumer sees that a friend owns an item, or an internet influencer recommends a restaurant, it plants a mental seed.

Another challenge will be very quickly ramping up and capturing a wide offline merchant network. Unlike e-commerce for physical goods, selling local lifestyle services is rooted in recruiting as many offline merchants as possible. The number of participating merchants is a crucial baseline for luring more customers. It is a difficult market to catch up in since such offline recruitment requires big teams and plentiful resources to support heavy offline operations. As a result, it is unlikely that Meituan will lose its first-mover advantage in the near term.

Broader e-commerce push

It’s no secret that Douyin has big plans for e-commerce, a coveted revenue source for tech firms. After earning RMB 500 billion in gross merchandise volume (GMV) in 2020, Douyin set a RMB 1 trillion (in Chinese) GMV goal for its e-commerce business in 2021. The company has launched a number of initiatives to increase sales transacted through Douyin, including shoppable short videos and livestreams. 

ByteDance is broadening its livestreamed e-commerce business to include online sales of services, or the local lifestyle sector.

READ MORE: Bytedance gaming play doesn’t threaten Tencent—yet

“A subset of these shoppable videos include coupons and group-buying deals for tourist attractions and eateries. The group-buying feature gives merchants, whatever they’re selling, new ways to facilitate purchases,” Norris said.

ByteDance has been adjusting internally, shuttering smaller or less successful ventures and investing further in businesses that are mature or seen as proven business models, in preparation for a public listing, according to a number of media reports. It shut down (in Chinese) paid knowledge-sharing services Haohao Xuexi and closed its smartphone business by integrating the Smartisan team into the education hardware unit. Meanwhile, it acquired the Wikipedia-like Baike.com and built an internet of vehicles team.

ByteDance appears to be willing to try anything and everything to power growth and stay ahead. It has been keeping pace with virtually all the bandwagons with huge market potential. Its leadership doesn’t seem to mind failure, only missing out on the next big thing in China’s cutthroat technology race. 

Chinese telecommunications giant Huawei will begin charging smartphone makers royalties of up to $2.50 for each 5G-enabled handset they sell that uses its patented 5G technology, the company announced on Tuesday.

Why it matters: The plan means global smartphone makers like Apple and Samsung are likely to pay 5G-related royalties to Huawei, the owner of the world’s largest portfolio of 5G patents, potentially opening a new revenue stream for the company as its smartphone sales shrink.

• Huawei has declared ownership of 3,007 5G patent families—groups of the same or similar patents filed in different nations, according to GreyB, an intellectual property research firm.
• Around 18.3% of Huawei’s patent filings are considered “essential” to the 5G standard—protocols and technical specifications that allow connectivity between 5G devices, according to GreyB. Smartphone makers have to pay for those “standard essential patents,” or SEPs, if they want to make 5G-compatible devices.

Details: Huawei has set the royalty for its 5G SEPs to up to $2.50 for each device, said Ding Jianxin, head of Huawei’s Global Intellectual Property, at a press event on Tuesday. The royalty will be charged based on the sales price of the handset at a “reasonable rate,” Ding said.

• Other major 5G patent owners are charging more than Huawei’s planned rate. Nokia said in 2018 that it will charge EUR 3 (around $3.57) per device for its 5G SEPs. Ericsson said in 2017 that its rate would be between $2.50 and $5 per device.
• Huawei will negotiate royalty rates and possible cross-licensing of patents with Apple and Samsung, Huawei Chief Legal Officer Song Liuping said on Tuesday. 
• Huawei said in a statement that it expects to earn between $1.2 billion and $1.3 billion from its intellectual property inventory, but it didn’t say how much of it will come from its 5G patents. The company has said it has invested 10% to 15% of its revenue in research and development (R & D) every year for the past decade.

Context: Huawei is losing its status as a smartphone powerhouse following US sanctions over the past two years. The company has been cut off from the global semiconductor supply chain and now relies on stockpiles to maintain production. But it remains a major standard-setter in 5G, meaning the world’s largest handset makers will still need to cooperate with the company to make 5G phones.

• In February 2020, Huawei filed two lawsuits against Verizon, alleging that the US carrier infringed on 12 of its patents.

China Telecom, one of China’s three biggest telecommunications operators, said Tuesday that its board had approved the decision to list its shares on the main board in Shanghai, following its suspension from trading in New York earlier this year.

Why it matters: The move comes after then-President Donald Trump in November signed off on adding China’s three state-backed telecommunication companies to a US investment ban. The New York Stock Exchange (NYSE) in January said it would delist the companies, which also include China Mobile and China Unicom.

• The other two telecom companies are likely to follow China Telecom’s move. The three Chinese state-owned firms all listed simultaneously in New York and Hong Kong. New York-listed shares of the three companies were suspended from trading starting from Jan. 11.

Details: The China Telecom board approved on Monday a proposal to apply for listing the company’s shares on the main board of the Shanghai Stock Exchange, the company said in a filing to the Hong Kong exchange.

• A Shanghai offering will help the company “establish more flexible and diversified financing channels” and utilize “both domestic and overseas capital markets, broaden sources of funds, enhance capital strengths and improve risk tolerance,” according to the filing.
• The company proposed to sell up to 12.09 billion shares in Shanghai, or 13% of its total issued share capital after the offering.
• The company separately reported on Tuesday that its revenue for 2020 grew 4.7% from the previous year to RMB 394 billion (around $60.5 billion) while its net profit grew 1.6% to RMB 20.9 billion.

Context: China Mobile went public in 1997 and was one of the first Chinese state-owned companies to go public in the US, followed by China Unicom in 2000, and China Telecom in 2002.

• The NYSE said on Jan. 6 that it would delist China Mobile, China Telecom, and China Unicom on Jan. 11, citing an executive order signed by Trump in November.
• An increasing number of US-listed Chinese firms are retreating from the American financial market or dual-listing shares on China’s A-share market or in Hong Kong amid recent US-China tensions. They include e-commerce site JD.com, gaming giant NetEase, and online media firm Sina.

Nio CEO William Li said Tuesday an industry-wide shortage of electric vehicle batteries and semiconductor chips will continue to hamper production for the next few months. The EV maker is planning a significant acceleration in manufacturing in the second half of 2021 as it gears up for an aggressive sales and service expansion to complete coverage of its home market.

Nio had achieved a production rate of 10,000 vehicles in its Hefei plant during the Chinese New Year in February, Li said during the company’s fourth quarter earnings call on Tuesday. However, the company expects monthly output to remain at around 7,500 units through the second quarter due to “lower-than-estimated” battery supply and a global chipset shortage.

With supply chain restrictions expected to ease in July, Li said the company does expect to have sufficient parts to meet its needs. This, along with a significant expansion of its retail footprint and recharging network, is forecasted to help reach “a much higher sales performance in the second half of the year,” according to Li, who did not further elaborate. Nio guided up to 20,500 deliveries for Q1, compared with Li Auto’s forecasted ceiling of 11,500 units.

READ MORE: Li Auto may have controlled its costs in 2020 too well

“China is a very big market… We are quite confident this should be able to help us to achieve our sales target,” Li said.

Nevertheless, it fell short of generating profits in Q4, reporting a wider-than-expected net loss of RMB 1.39 billion ($212.8 million), double analyst estimates, according to Bloomberg. Aggressive geographic expansion plans this year could limit its positive cash flow from operations in Q4 to a one-off, Jefferies analysts said in a Tuesday report.

Nio is pursuing an ambitious timetable to unlock growth in China’s booming EV market, the world’s biggest. It aims to open another 20 clubhouse-style showrooms called Nio Houses and 120 of its smaller Nio Spaces by year-end. The company is focusing efforts to expand in lower-tier cities where EV penetration is low. “In all the cities where Mercedes-Benz, BMW, and Audi have sales presence, we will also be there this year,” Li said (our translation). Nio has operated 226 sales locations across 121 major cities as of February.

The company is planning to more than double the number of its battery swap stations to upwards of 500, along with quadrupling the number of its supercharging stations to over 600 in the same time period. The seven-year-old EV upstart has become Tesla’s most prominent challenger in China, delivering 43,728 vehicles last year using a war chest of around $4.8 billion made by selling additional shares, and scoring a $1 billion cash injection.

Li Auto reported losses of RMB 792 million ($121 million) in its first annual result as a public company, significantly reducing losses from a year earlier, but has drawn criticism for underinvesting in future innovation. Its shares declined 9.8% on Thursday.

Benefiting from rising electric-vehicle demand in China, Li Auto earned nearly RMB 9.5 billion in 2020. Its first model, the Li One, was China’s best-selling electric SUV during the year, according to figures from China Passenger Car Association. However, its delivery guidance of 11,500 vehicles in the first quarter of this year was almost 30% lower than the preceding quarter, which it attributed to the Spring Festival holiday and an uptick of Covid-19 cases in parts of the country.

Cost controls gone too far

The company narrowed its loss per share of $0.28, or net loss attributable to shareholders of $121.4 million, a 76% decrease from the previous year. This was partly aided by net income of $16.5 million in the fourth quarter from “short-term investment income” according to CFO Li Tie during the call with analysts. The EV maker also benefited from streamlining its sales operations, spending RMB 1.1 billion on selling, general, and administrative costs for the full year, 40% of what NIO spent on the same expense in the first three quarters of the year.

However, Li Auto’s investment into research and development was substantially less than its peers, raising concern among investors. Company executives had promised investors during an online briefing held a few weeks ago that it will accelerate the launch of new models to ease concern about its transition from EREV to all-electrics, according to a report released by investment bank China International Capital Corporation (CICC) last week.

In a conference call with analysts on Thursday, CEO Li Xiang said it has been on track to expand its range of products as part of a strategic move to prioritize business growth over cost control. The company promised to launch at least one new model every year starting 2022, including its first all-electric model scheduled for 2023.  

Ambitious outlook

The goal is to occupy a larger share of the market from mainstream to premium for an annual sales target of “several hundreds of thousands of vehicles” by the end of 2024, Li said (our translation). It also expects to build out a retail network of at least 1,000 stores by that time. The company had 52 stores in 41 Chinese cities as of December; NIO and Xpeng Motors had promised a respective 200 and 150 shops by year end.

The Beijing-based EV maker currently has only one model for sale and mainly focuses on extended-range electric vehicles (EREVs), a technology which features a small internal combustion engine dedicated to recharging the vehicle battery, designed to resolve range anxiety. However, recent policy changes in China is pressuring the company to accelerate its transition to all-electric.

Policy influence

Following Beijing, the Shanghai municipal government early this month unveiled a new policy for new energy vehicles, which excludes new purchases of plug-in hybrid vehicles, including EREVs, from free vehicle registration starting in 2023. Company president Kevin Shen on Thursday reassured investors, saying he expects EREV sales will continue to be strong until then. The company confirmed that it will release its second EREV model, a full-sized SUV with advanced driver assistance capabilities, in 2022.

Li Auto vehicles combine popular features and an affordable price tag, making it a more attractive choice than most internal combustion and electric vehicles in China over the past year. However, the company lags significantly rivals where self-driving technology is concerned— NIO and Xpeng Motor have emerged as major rivals to Tesla. The Li One crossover does not offer intermediate self-driving capabilities, such as navigation from on-ramp to off-ramp on Chinese highways, similar to Tesla’s Navigate on Autopilot and those NIO and Xpeng have both introduced in their vehicles.

CFO Li said the company will increase its R&D investment to at least $464 million this year and it will exceed $1 billion by end-2024, with half of the budget to be used in vehicle autonomy. CTO Wang Kai said that the size of its self-driving team will double to around 600 engineers by the end of this year as it opens its new R&D center in Shanghai with the end goal of 2,000 total employees.

Bigger rivals, including Tesla and a number of Chinese tech giants, pose a real and urgent threat. Wang said 2021 will be “the year of preparation” for the release of Li Auto’s new vehicle architecture next year, powered by Nvidia’s most advanced auto processor, Orin. “Similar features offered by our rivals, along with some brand new features, will also provided to customers for sure,” Wang said.

Correction: An earlier version of this article incorrectly stated that Li Auto plans to double the size of its R&D team to 600 engineers this year, not that of the self-driving team. 

A joint venture between General Motors, Chinese automaker SAIC, and connected car startup PATEO has filed a formal complaint against Tencent for using illegal, anti-competitive tactics to bully its rivals.

Why it matters: The complaint, currently under review by local authorities, marks the first time Chinese auto players have cited anticompetitive practices in a complaint about domestic tech giants that are fighting for share in the automotive sector.

• This could lead to another investigation into Tencent over antitrust behaviors amid Beijing’s clampdown on monopolistic practices.

Details: Chinese connected car company PATEO on Tuesday said it has filed a complaint against Tencent, alleging the company pressured automakers to stop using its software which connects smartphones to the in-car system. The app enables users to send and receive messages using WeChat.

• SAIC-GM-Wuling, a joint venture between General Motors, China’s biggest automaker SAIC, and others, collectively filed the complaint with PATEO.
• Previously, the in-car service platform had been installed on Baojun RS-3, an entry-level crossover launched in late 2019 by SAIC-GM-Wuling.
• Tencent in August sent letters to automakers including SAIC-GM-Wuling demanding that they end licensing the software for which there was no legal cause, PATEO said in a company statement. It said that Tencent has used its dominance and market monopoly to snuff out competition.
• The Xiaomi-based car connectivity startup also said it has sued Tencent for patent infringement, demanding that the Chinese social media and gaming firm pay RMB 80 million (around $12.4 million) for using patented technology in Tencent’s mapping service.
• Tencent responded on Tuesday in an announcement (in Chinese), saying that the in-car platform gathered private data without authorization from Tencent and users.
• Tencent had filed a suit in September against PATEO alleging unfair competition and trademark infringement in Shenzhen, the company said.
• GM did not respond to TechNode’s request for comment.

Context: PATEO is one of the major players of providing car connectivity software backed by a list of Chinese auto and internet giants. It was also reportedly in talks with Tencent’s rival Bytedance in May about a partnership on in-car software.

• The Shanghai-based startup last year raised a Series B for an undisclosed amount from investors including Nissan’s manufacturing partner Dongfeng Motor and domestic smartphone maker Xiaomi, Chinese media reported.
• Chinese retail giant Suning, as well as Haier Capital, the investment arm of Chinese electronics and home appliances maker Haier Group, were also among its early investors.

With Joe Biden starting his term as president, China’s internet has lost one of its hottest topics: Donald Trump. 

Popular commentators have spent much of the past four years tracking the China-US tech rivalry, debating the impact of US policies, and speculating about China’s potential responses. Now, as a new administration takes office, these commentators are asking whether anything will change.

While Biden has marked his first days in office by reversing many of Trump’s policies, he may well retain some of the Republican administration’s measures targeting China’s tech sector, which since 2017 have ranged from export controls to stock market delistings and social media app bans. After all, many of the country’s China policies have seen bipartisan support. 

READ MORE: INSIGHTS | No going back for US-China tech under Biden?

Same old, same old

On Jan. 20, Biden started his term in office with a flurry of executive orders reversing his predecessor’s policies. But to do so is akin to operating “on a dying person,” quips Luke Wen, a prominent Chinese tech blogger who has been described as “one of the most prominent techno-nationalist voices” in the country’s blogosphere. 

Wen’s piece on the now-president’s swearing-in is titled “Biden Walks Into the Mausoleum,” suggesting that his presidency will be a doomed one. It is one of the most popular Biden-and-tech articles on WeChat, garnering at least 100,000 views (the maximum number that WeChat displays), around 3,800 “Likes,” and 2,500 “Wow” reactions.

Wen is not optimistic that Biden will work to ease tensions with China:

The US’s ultimate goal in re-emerging as the world’s policeman is still to suppress China’s rise as much as possible. Although Biden’s staff all outwardly tout a policy of “no Cold War, no decoupling” toward China, in actuality, they have already started a technological Cold War. The tech Cold War and the ideological war will be the main battlefields between the two countries: on one side, Biden’s team will keep making a fuss about Hong Kong, Taiwan, and Xinjiang, and on the other, they will strive to hem China in across all technological domains.

According to Wen, Biden will not lift restrictions on Huawei such as its ban from purchasing US-made chips, and may even further restrict Chinese tech companies in the US. Part of his disillusionment with the new president comes from Biden’s supposed inaction on China since assuming office. After all, the Democrat has yet to undo Trump’s acts of confrontation, such as the tariffs on Chinese products and the Jan. 14 blacklisting of Xiaomi and eight other companies.

There has been absolutely no sign of resolution […] Presumably […] these tariffs will just be used as a bargaining chip against China.

As of publication, Biden has been in office for just over two weeks.

Thanks, Obama

Not everyone sees the US’s current attitude toward China as solely the legacy of the Republican former President Donald Trump. In an article titled “Comprehensive Adjustment! In the Biden Era, China and the US Will Duke it Out in Three Areas,” a blogger that goes by “Rongping” blames the Democrats for the tech war:

Many people may not be aware that the beating down of China’s ICT industry—as represented by Huawei—and the launch of the US-China tech war was […] the continuation of the Democratic Party’s established policies.

As evidence of this, Rongping brings up a White House advisory panel report released in the final days of the Obama administration on Jan. 6, 2017, calling for greater vigilance against Chinese attempts to dominate the semiconductor industry. 

The report recommended that the US government tighten controls on exports to China and examine Chinese investment more closely, moves that the Trump administration has since implemented. Given that this Obama-era report predates Trump’s actions, Rongping claims:

From this, it can be seen that the Democratic Party is the driving force behind the tech war between the two countries!

The article has 53,800 views as of Feb. 3.

Driving force or not, the author does expect some changes with Biden in power:

1. More reliance on IP claims against China rather than national security excuses, so that the US can establish a better international image
2. More coordination by the US with its allies, and
3. A more consistent line on policy, as opposed to Trump’s reversals

Rongping warns that the US isn’t going to ease its pressure on China.

Gearing up for round two

If Biden isn’t going to let China off the hook, what are Chinese businesses to do? 

Not to worry, says one blogger. In “Hidden War: A Game With the Biden Administration,” which has accumulated at least 100,000 views, “Brother Cat” says the US is running out of ammunition. 

The Trump administration has played just about every card in the deck!

Now, the Biden administration is in an awkward position. If it wants to adopt hardline tactics to counter China’s hardline stance, its choices are few and far between.

Escalate the trade war? No luck, Brother Cat says: China’s busy forging ahead with two giant trade agreements, namely the Regional Comprehensive Economic Partnership (RCEP) among Asia-Pacific nations and another on EU investment. Escalate the tech war? “China’s made ample preparations there too,” Brother Cat claims. 

This “preparation,” he explains, is China’s new sanctions blocking regime, also known as a “blocking statute,” which the Ministry of Commerce (MOFCOM) released in January and formally calls “Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures.”

The new rules discourage companies from complying with US sanctions by allowing their business partners to sue for lost revenue in Chinese courts. 

It’s still unclear how Beijing plans to enforce the rules, but the blog claims:

The biggest financial backers of Biden’s election are tech companies. If the US does not lift controls against Chinese businesses […] then these US tech companies will face an unending stream of compensation lawsuits.

If the US turns a deaf ear to China’s preconditions, then this law will probably be swiftly implemented.

Other commentators were also drawn to the new blocking statute. Popular tech news blog Chaping suggested it should be used to retaliate for one of the last salvos of the Trump administration, namely the blacklisting of Xiaomi for its alleged links to the Chinese military. In “The US Sanctions Xiaomi, This Time China Can Finally Fight Back!” the author claims that the proposed blocking statute:

Exists precisely to prevent the US from abusing “long-arm jurisdiction” to infringe upon the legitimate rights and interests of Chinese enterprises.

Rather than focus on Biden, the Chaping article places Trump front and center, suggesting that his legacy could continue to define the US government. When the new president is mentioned, it is only to discourage fellow Chinese from anticipating any potential goodwill:

We cannot hang our hopes on other nations “discovering their conscience.” […] At the very least, [the blocking statute] allows Chinese companies to no longer tread as if on thin ice in the US, worrying constantly that at the next moment, this hegemonic sledgehammer disguised as “fairness” will smash upon their heads.

A few high hopes for Biden

Is there anyone in the China tech sector who is bullish on Biden? 

There are certainly optimistic voices, like this author (45,000 views) who argues that Biden will increase immigration by raising US visa caps and giving green cards directly to PhD graduates in science and tech:

Under Biden’s leadership, the odds that more new policies beneficial to international students will be rolled out is extremely high […] the US government will, within the next four years, provide an even friendlier environment for numerous international students and scholars to pursue research and studies.

There is also this article (29,000 views) that suggests Biden “may break the Trump-era tariffs and tech blockade” and that “Huawei’s chip supply disruption and sanctions against Chinese companies will most likely improve,” though the author expects Biden to rework the global economic framework in favor of the US.

But online, voices willing to venture optimism about a US-China tech detente are harder to find. Unless the US president takes significant steps to loosen restrictions from the Trump era, Chinese commentary is likely to stay cynical.

Douyin, ByteDance’s Chinese version of TikTok, said on Tuesday it had sued Chinese social media giant Tencent for monopolistic behavior including blocking Douyin’s content on its WeChat and QQ instant-messaging apps.

Why it matters: The legal move comes as China tightens antitrust regulations for tech companies and refines its laws to better rein in the internet sector. While similar lawsuits had often resulted in a stalemate, it is believed that officials and judges will now be less tolerant of internet companies and anti-competitive behavior.

• The lawsuit is also seen as a tactical move as Douyin’s biggest domestic rival, Tencent-backed short video platform Kuaishou, is preparing to list in Hong Kong.

READ MORE: China’s tech giants aren’t ‘immune’ to antitrust any more

Details: ByteDance has filed a lawsuit with the Beijing Intellectual Property Court, accusing Tencent of violating China’s Anti-Monopoly Law by restricting WeChat and QQ users from sharing Douyin’s short-video content, the company said on Tuesday.

• Tencent’s practice, it said, ran afoul of the Anti-Monopoly Law’s provision of forbidding “misusing a market-dominant position, and antitrust behavior of excluding and restricting competition” (our translation).
• ByteDance asked the court to require Tencent to cease such behavior and make a public apology. The Beijing-based firm is also seeking compensation of RMB 900 million (around $13.9 million) from Tencent.
• There are no other operators that provide services that rival WeChat and QQ, ByteDance said, meaning that Tencent enjoys a “market-dominant position”—the threshold for citing the Anti-Monopoly Law in court.
• Tencent said in a statement that ByteDance’s accusations were “false” and that the company will bring a countersuit.
• Tencent said Douyin had acquired WeChat users’ personal information by “means of unfair competition” and had breached the platform’s rules.

Context: China has ramped up antitrust regulations in the tech industry in recent months. In December, the State Administration of Market Regulation (SAMR), China’s top antitrust regulator, issued fines to Alibaba and affiliates of Tencent and logistics giant SF Express over three separate acquisition deals, a move that legal experts described as the country’s first batch of antitrust enforcements against tech firms.

• SAMR had previously proposed an overhaul of the Anti-Monopoly Law in January and introduced a set of antitrust guidelines tailored for the internet industry in November.
• In March, ByteDance complained that WeChat had started blocking links to its enterprise messaging app and productivity tool Feishu.

TikTok’s Chinese owner has rolled out an e-wallet feature on its Douyin video-sharing app, a move that could pose a significant threat to the Alipay and WeChat duopoly in China’s mobile payment sector.

Why it matters: Douyin, the domestic version of TikTok, is one of China’s most used apps with 600 million monthly active users as of September.

• Bytedance’s ambition to tap into the payment sector have long been hampered by China’s strict finance regulations. The company in September inherited (in Chinese) a payment license from a small payment firm based in the central province of Hubei it acquired two years ago.
• E-commerce behemoth Alibaba’s Alipay and internet firm Tencent’s WeChat Pay, a feature inside the instant messaging app WeChat, are the two dominant players in the market. Together they hold nearly 95% of China’s online payment market, according to iResearch (in Chinese), a market research firm.

Details: Douyin recently added Douyin Pay onto its checkout page, Chinese media reported Tuesday. The payment method allows users to buy virtual gifts for livestreamers and pay for goods on the app’s e-commerce platform.

• Bytedance said in a statement to TechNode that Douyin Pay was rolled out by the company to “supplement the existing major payment options.” A Bytedance spokesperson said the feature had been available for a while and was previously in test mode.
• The app previously supported WeChat Pay and Alipay. Douyin Pay allows users to link cards from 10 banks including Bank of China and China Merchants Bank.
• Payments are processed by Ulpay, the Hubei-based firm it acquired in 2018.

Context: An in-house payment tool is essential to many of Bytedance’s offerings, including e-commerce and lending services.

• Bytedance is building an e-commerce platform on Douyin around its active livestreaming community. The business model, known as livestreaming e-commerce, has seen massive growth in China since 2019.
• The company in October 2019 launched a lending app, providing users with consumer credit, installment payments, and credit card services. Douyin had also recently launched Dou Fenqi (literally translated as Dou Installments), a feature that allows users to pay their bills in monthly installments, Chinese media reported.

The Trump administration is revoking certain licenses for some suppliers of Chinese telecommunications firm Huawei, Reuters reported Monday, and it warned it would deny more applications.

Details: The Semiconductor Industry Association, an American industry group, said on Friday that the US Department of Commerce had issued “intents to deny a significant number of license requests for exports to Huawei and a revocation of at least one previously issued license,” Reuters reported, citing people familiar with the matter.

• One of the sources in the report said eight licenses were revoked from four companies. Intel, which supplies Huawei with systems-on-a-chip (SoCs) used in smartphones and personal computers, was among the companies.
• Another affected company was Kioxia Corp, a Japanese flash memory chip maker formerly known as Toshiba. The company had at least one license revoked, said two Reuters sources.
• Some 150 licenses for $120 billion worth of goods and technology ready to ship to Huawei were pending approval before the latest action.
• Another $280 billion of license applications for goods and technology for Huawei have not been processed, according to Reuters.
• The Commerce Department has told companies that it “intends to deny” those applications.

Context: According to two US government regulations issued in 2019 and 2020, companies around the world have to seek a special license from Washington if they want to sell products that contain US technology to Huawei.

• In September, Intel received a license from the US government to sell to Huawei. In November, US chipmaker Qualcomm was approved to sell 4G chips to the Chinese company.

Shares of Chinese smartphone maker Xiaomi plunged 11% on Friday morning after the Trump administration added it to a blacklist, forcing Americans to divest holdings and barring share purchases.

Why it matters: Xiaomi is the second-largest smartphone maker in the Chinese market and ranks fourth globally. The company has been caught in US-China geopolitical tensions for the first time, its troubles bearing resemblance to its main rival Huawei.

• However, Xiaomi is unlikely to face the same degree of US restrictions as Huawei, which has been essentially barred from the global high-end semiconductor supply chain. The Trump administration will end next week and there is no sign that it will place export restrictions on Xiaomi.
• A similar move against some Chinese telecom companies had led to their potential  delisting from US stock markets. Xiaomi is listed in Hong Kong, indicating that the price plunge on Friday could be shareholder panic selling.

Details: The US Department of Defense on Thursday added Xiaomi and eight other Chinese firms to a list of “Communist Chinese military companies,” according to a statement on its website. An executive order signed by US President Donald Trump in November bans American investment in such companies.

• Other companies added to the list include Commercial Aircraft Corporation of China, a state-backed aircraft maker; Gowin Semiconductor, a Guangzhou-based chip designer; and Beijing Zhongguancun Development Investment Center, a government-led venture capital firm.
• Shares of Xiaomi in Hong Kong dropped more than 11% on Friday morning.
• Xiaomi said in a statement Friday that it had confirmed that it is “not owned, controlled, or affiliated with the Chinese military,” and that the company’s products are all for “civilian and commercial use.”
• A Xiaomi representative did not immediately respond to a request for comment.
• US investors will be prohibited from buying Xiaomi shares and will have to divest their holdings by November, according to the executive order.

Context: Xiaomi shares reached a historical high of HKD 35.3 (around $4.6) on Jan. 5, driven by strong sales and a weakened Huawei. Market research firm Trendforce expects Xiaomi will be ranked the world’s third-largest smartphone vendor in 2021 while Huawei, which ranked third in last year, will fall to seventh this year.

• The Trump administration reportedly considered adding other Chinese tech giants including Alibaba, Tencent, and Baidu into the investment blacklist. All three companies are listed on US stock markets.
• On Wednesday, the Wall Street Journal reported that the US had decided to not to add them to the blacklist.

Update: This article has been updated to include a statement from Xiaomi and to correct a typographic error.

One of the prime industries slammed by the pandemic-induced economic downturn, China’s ride-hailing market is unlikely to recover its freewheeling, easy money ways.

Even before the coronavirus lockdowns, ride-hailing platforms in China struggled with increasing competition, as their usage slowed significantly in the country’s maturing transportation market.

The safety measures may not have been enough. Giant players seek to thrive, not just to survive, in a post-coronavirus world. To ensure growth, they have been introducing low-cost services and entering smaller cities. But the road to recovery of ridership could be slow and bumpy. 

Standing at a crossroads, China’s ride-hailing industry faces economic uncertainty, increased competition, and more regulation as the government steps up to offset the disruption caused by Covid-19. Looking ahead, as Chinese taxi companies and automakers ramp up, ride-hailing giant Didi could pay a heavy price to maintain its dominance.

This month, we review what happened in 2020 and what these trends mean for the future of ride-hailing in China.

Taxis vs ride-hailing

China’s ride-hailing and taxi sectors are converging after years of clashes, as both sides seek a level playing field and additional room for growth amid a deep economic downturn.

• Traditional taxi services have battered heads with Didi, charging the country’s biggest ride-hailing platform with unfair competition, partly because Didi’s ride-hailing drivers could offer cheaper fares with a dynamic pricing model. Taxi drivers have also been angered by Didi’s dispatch algorithms. These are the real-time mechanisms that match drivers with passengers; taxi drivers believe they favor Didi’s own vehicles over taxis, especially for long trips.
• A Didi spokesperson told TechNode that its technology facilitates matching of demand and supply and therefore helps drivers to grow their income, by dispatching, for example, a ride in the same direction as a driver’s route home when he comes off duty.
• Didi has offered taxi-hailing services since its inception, but it now only facilitates 3 million taxi rides per day. That’s only around 6% of the country’s daily taxi trips, suggesting massive growth potential. Until recently, the company didn’t charge state-backed taxi fleets that offered rides on its platform, while Didi drivers pay the company a 20% commission for every ride.
• Things started to change last summer, when Didi for the first time announced plans to charge taxi drivers. The company introduced the charges in lower-tier cities in August and then extended them to some of the country’s biggest cities. In Shanghai, Didi takes a fee of at least RMB 1,000 ($153) from a cab driver each month, around 10% of the driver’s monthly income. This made some drivers unhappy, a driver surnamed He told TechNode in late December.
• Didi explained that revenue from taxis will cover costs and boost demand by offering subsidies to drivers and passengers, and add an IT system for taxi fleets that helps with efficiency. Meanwhile, Alibaba’s mobility service, AutoNavi, has said that taxis and private vehicles will be treated equally on its platform, although drivers like He remain skeptical of the claims.

Untapped markets

Chinese mobility giants are hoping that expansion in the country’s hinterland will compensate for the steady chilling of the once red-hot markets of major cities.

• Didi has launched a budget ride-hailing app called Huaxiaozhu. The platform takes a leaf out of social e-commerce giant Pinduoduo’s book: It offers discounted rides to people who share the app with their friends on social networks. 
• Didi expects Huaxiaozhu to carve out a niche by winning the hearts of young, price-sensitive passengers in the 300 or so lower-tier cities where it operates. Currently, around 20 of China’s biggest cities account for 60% of Didi’s ride volume in its home market, but growth of its core business has been stagnating since 2017. The company’s woes were compounded by a drastic drop in rides early last year due to Covid-19.
• Looking ahead, another round of subsidy wars seems inevitable for Didi: more big tech companies are looking to tap new growth opportunities by offering cheaper services. In December, Alibaba-backed bike rental platform Hellobike launched a ride-hailing service in China’s southern Guangdong province. It claims its fares are 40% cheaper than its competitors. Early last year, Didi launched a RMB 10 billion subsidy program to attract drivers and riders in more than 130 cities across China.

Traditional automakers

Chinese automakers are collectively pushing into the ride-hailing market in order to gain a foothold in a world where vehicle ownership would no longer be a preferred choice for customers. 

• Volkswagen’s Chinese partner SAIC Motor is one of the automakers that could become a contender for Didi. Last month, the company closed a RMB 300 million Series A round from Alibaba and China’s top battery supplier CATL for its mobility service platform Xiangdao Chuxing. The platform offers on-demand ride-hailing and car rental for individual and enterprise customers, among other services.
• State-owned SAIC says its premium ride-hailing service has 20 million users after two years of operation, although its number of active users is only 1% of Didi’s, according to market research firm Analysys.
• Still, Didi has reason to worry. In September, SAIC launched a separate online taxi-hailing service in Shanghai with the support of the city government. Each driver is currently given as much as RMB 200 per day for taking orders on the platform, local taxi driver He told TechNode. Nearly every licensed taxi in the city is accessible through the app, SAIC said.
• More automakers are nibbling away market share from Didi. T3, a ride-hailing service launched by three state-owned automakers, last month said it plans to triple its order volume by entering 48 cities around China this year. The service currently offers 1 million rides a day after going live in mid-2019.

Regulation

Ride-hailing services face increased government intervention and regulatory uncertainty, as Beijing seeks more control to boost an economy hard hit by the pandemic and its aftermath.

• As the central government tightens the reins on big tech firms with anti-monopoly measures, a regulatory storm might be brewing for Didi. The China Taxi Industry Alliance last month called for regulators to review Didi’s 2016 acquisition of Uber’s China unit, according to an open letter published on its WeChat account (in Chinese).
• The industry group, formed by more than 50 licensed taxi companies, also called for Didi to be punished for its alleged monopolistic practices including offering expensive subsidies to promote Huaxiaozhu. A week after the proposal, Minister of Transport Li Xiaopeng pledged to enhance anti-monopoly regulation in China’s transportation sector as one of his ministry’s top priorities in 2021.
• Beijing is also looking to increase its influence in the technology sector as part of its five-year plan to boost its domestic market, last month requiring ride-hailing services to develop “hailing by one-click” features to accelerate adoption among senior citizens.
• Experts believe such moves could help reduce government expenditures for seniors’ medical care and unlock new sources of economic growth. Didi and seven ride-hailing platforms are now required to simplify their apps and launch the specially-designed feature before the upcoming Chinese New Year holidays in February, reported Chinese media.

Capital

Chinese ride-hailing companies are flocking to mainland and Hong Kong stock markets for IPOs, hoping to build their war chests to weather economic uncertainties and strengthen their balance sheets.

• Didi has finally resumed its efforts to go public, two years after putting the plan on hold following the murders of two female passengers using its popular carpooling service, Hitch. Claiming back in May that its “core business” was finally profitable, the company is reportedly (in Chinese) looking to list this year in Hong Kong at a valuation of HK$600 million ($80 billion). Didi has been in early talks with Goldman Sachs among other banks about possibly underwriting the offering.
• Didi has been diversifying businesses outside of its ride-hailing roots in search of new growth markets to justify its valuation, when its core business still struggles due to Covid-19. Its grocery delivery business in late 2020 exceeded 10 million orders per day, putting it at odds with Meituan, Pinduoduo, and more giants rushing into the grocery delivery sector.
• NIO-backed Dida, a distant second to Didi in China’s massive ride-hailing market, in October raced ahead by filing in Hong Kong for what looks to be Asia’s first ride-hailing IPO. Meanwhile, Geely’s ride-share unit Caocao in November hired UBS to raise its Series B and finally list on the public market, without revealing further details.

Chinese telecommunications giant Huawei, once the world’s largest handset vendor, will fall to seventh place in global smartphone shipment rankings in 2021 according to a report published Tuesday.

Why it matters: Huawei is losing its status as a smartphone powerhouse following US sanctions over the past two years. The company has been cut off from the global semiconductor supply chain and now relies on stockpiles to maintain production. To increase its chances of survival, it sold in November its budget handset brand Honor, which is now becoming a rival. 

Details: Huawei is expected to ship 45 million smartphones in 2021, ranking seventh among global vendors, according to a Trendforce report published Tuesday. Huawei shipped 170 million units in 2020, ranking third globally, according to the report.

• The changes in Huawei’s smartphone sales owe both to the US export restrictions and the Honor spin-off, according to Trendforce.
• Honor will become a direct competitor, thus making it harder for Huawei to regain market share for smartphones, the report said.
• Samsung will remain the world’s largest smartphone vendor and Apple will retain the second slot, said the report. Chinese company Xiaomi, which ranked fourth in 2020, will become the third-largest smartphone vendor in 2021. 
• Global smartphone shipments dropped 11% year on year in 2020 to 1.25 billion units, Trendforce said. The number is expected to increase by 9% to 1.36 billion this year.

Context: Huawei was briefly ranked the world’s largest smartphone vendor in the second quarter of 2020, according to market research firm IDC. The company’s smartphone shipments then plunged 22% in the three months ended September to 51.9 million units, causing it to fall to second place on the top smartphone vendor list for the quarter.

• Huawei has also lost access to popular Google services and apps including YouTube and Gmail because of a US trade ban in May 2019, making its handsets less appealing to overseas consumers.

Chinese market regulators announced an anti-monopoly investigation targeting Chinese e-commerce giant Alibaba Dec. 24. The same day, they summoned executives at affiliate Ant Group for a meeting about regulation compliance issues.

Why it matters: An investigation targeting Alibaba, a bellwether of China’s tech sector, highlights the country’s latest efforts to curb anti-competitive practices by China’s largest tech firms, which were practically “immune” to such regulations before.

READ MORE: China’s tech firms aren’t ‘immune’ to antitrust any more

• Chinese government previously adopted a laissez-faire attitude to the sprawling growth of Chinese tech companies like Alibaba and Tencent’s walled-garden empires. With a series of recent moves, Beijing is moving to clamp down on monopoly behavior and enforce increasingly stringent market and financial regulations.

Details: The State Administration for Market Regulation, China’s top market watchdog, said in a Thursday morning statement (in Chinese) that it has launched an investigation into accusations of monopolistic practices at Alibaba.

• The announcement didn’t offer much detail about the process and scale of the investigation, but named “forced exclusivity,” a practice in which platforms force sellers to use only one company’s platform or services, as a key focus of the investigation.
• Alibaba says in a Thursday response that it will “actively cooperate with the regulators on the investigation,” emphasizing that its business operation are continuing as normal.
• Alibaba’s Hong Kong shares dropped 8.1% on the news in Thursday trading.
• Over the coming days, sister company and fintech giant Ant Group will be meeting with top finance regulators in a parallel challenge to its dominance.

READ MORE: Ant Group to meet regulators ‘in the coming days’

Context: Alibaba has been in a years-long public spat over the subject of “forced exclusivity” with upcoming rivals like JD, Pinduoduo, and Meituan.

• Alibaba’s PR head Wang Shuai dismissed concerns over the matter last year, stating that “so-called forced exclusivity is a non-issue,” and arguing that criticism was a tactic used by rival platforms to lash out at competitors and whip up negative public opinion.

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

This week’s guest is Capucine Cogné, a real estate industry specialist based in Chengdu who has been following the rise and fall of China’s “second landlord” platforms. She discusses what led to their rise, the unique circumstances of their fall, and who might stand to benefit as the industry now consolidates.

Hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• Bilibili
• Xiaomi
• JD
• Pinduoduo
• Meituan-Dianping

Hosts:

• Elliott Zaagman– @elliottzaagman
• James Hull– @jameshullx

Guest:                   

• Capucine Cogné

Editor:

• Peter Isachenko

Podcast information:

• iTunes
• Spotify
• RSS Feed
• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

The US is planning to add dozens of Chinese companies, including the country’s biggest chipmaker, SMIC, to the same trade blacklist that has cut off telecommunications equipment giant Huawei from American technology and components, Reuters reported Friday.

Details: The US is expected to add around 80 new companies to the so-called entity list, nearly all of them Chinese, according to Reuters, citing two people familiar with the matter. American firms are barred from exporting technology and key components to companies on the blacklist without government approval.

• China’s biggest chip manufacturer, Shanghai-based Semiconductors Manufacturing International Corp., and some of its affiliates are expected to be included in the entity list designation, it said.
• The blacklisting would force SMIC to seek a special license from the US Commerce Department before buying key goods from American suppliers.
• Such restrictions could potentially curb SMIC’s ability to source US-made chip-designing software, raw material, and machinery needed for the company’s semiconductor production.

Go deeper: Exclusive-U.S. to blacklist dozens of Chinese firms including SMIC, sources say – Reuters

From social media to online shopping, China’s biggest tech companies have gone head-to-head for the attention of the country’s internet users. Now, they’re also fighting for dominance in a new area: car software.

A battle between automakers and tech giants is emerging for control of car software—the foundation for self-driving vehicles and in-car infotainment. Whoever gains the upper hand could see their profits skyrocket, as vehicles become more software-heavy in the leadup to a connected, driverless future. 

China’s biggest automaker SAIC, as well as Volvo’s parent Geely, are attempting to reinvent themselves as tech-savvy, next-generation car manufacturers. They select some parts of what the tech companies offer, while ramping up efforts to develop their own in-car software, attempting to elbow tech companies out of the equation.

Market potential

The global automotive software market is on an upward trajectory. Software subscriptions are expected not only to become an important source of revenue and a more profitable business than car manufacturing, but to drive significant growth of components including sensors and chips to meet the changing consumer preferences for in-car experience. 

• The global automotive software market is expected to more than double to $84 billion in 10 years from now, with self-driving, infotainment and, connectivity functions taking most of the market, according to analysis from McKinsey & Company.
• This figure is only a fraction of the $3.8 trillion the global auto market is expected to be worth in 2030. 
• As the transition towards autonomous, connected cars accelerates, experts believe it will also drive growth in demand for electronic components including sensors. McKinsey expects this market to reach $469 billion in 2030.
• Some observers say legacy carmakers are struggling to avoid simply becoming low-margin manufacturers in a fight against tech monsters. “It’s going to be a tough fight, [….] and when the war is over, there must be someone who will be the Apple with others becoming another Foxconn,” Wang Yao, a director from China Association of Automobile Manufacturers said during a conference in August, 2019 (our translation).

The tech giants

Considered the most prominent players in the China’s car software market, Alibaba, Tencent, and Baidu have for years competed for passengers’ attention. But they’ve made slower-than-expected inroads into China’s massive automarket, hindered by automakers’ concerns over working with them. Here’s where China’s tech companies stand. 

Alibaba: China’s biggest e-commerce group has for years disrupted a slew of brick-and-mortar markets. It hasn’t seen the same success in its pursuit of the auto industry. The company lost its early-mover advantage after two years of in-fighting with its partner, China’s biggest automaker, SAIC.

• Alibaba aims to deploy its car operating system AliOS in 10 million vehicles over the next three years, Chinese business site LatePost reported last month, citing company sources. This represents around one-sixth of China’s auto sales and means its install base would have to grow tenfold in three years.
• The Hangzhou-based online retailer made advances into the car software market much earlier than its competitors. It has deployed its OS as part of an exclusive agreement with SAIC since mid-2016. A year later, when Tencent and Baidu had just launched their own car OS’, more than 400,000 of SAIC’s Roewe-branded crossovers came equipped with AliOS.
• Alibaba’s joint venture with SAIC has been at a standstill since late 2018, as the two shareholders reportedly fell out after disagreeing whether to sell the software to other car makers. The companies settled the dispute earlier this year after restructuring the JV with Alibaba as a majority shareholder. Alibaba had denied claims about the fallout. 
• The company has installed its software in 1 million cars. Just 16 of every 100 new vehicles sold between January and July this year that shipped with an OS from the BAT trifecta came equipped with Alibaba’s OS. Meanwhile, Tencent accounted for 35 of the 100, and Baidu accounts for nearly half of the total, IHS Markit said in a recent report (in Chinese).

Baidu: Often touted as China’s leader in artificial intelligence, Baidu has focused on self-driving cars and voice recognition technology for nearly 10 years. China’s answer to Google expanded its reach in the auto industry in July 2018 by releasing DuerOS for Apollo, an Android-based, voice-controlled car operating system. The company has gained some market share in this field since last year.

• Baidu is ahead of Alibaba and Tencent after forging partnerships with more than 70 automakers. 
• Baidu’s in-car voice recognition technology is now available in more than 600 vehicle models, according to the company. IHS Markit estimates nearly 1.8 million new cars sold will be equipped with Baidu’s voice speech technology in 2022, more than Tencent and Alibaba combined. 
• Nevertheless, this is only a fraction compared with the true leader in the market; iFlytek, In June 2018, the Chinese speech recognition firm blacklisted by the US government, announced it had pushed its voice recognition services into 15 million vehicles. Currently, iFlytek holds more than 40% of China’s in-car voice recognition market, compared with Baidu’s 5%, Chinese market intelligence firm Shujubang said in a post (in Chinese) last month.
• In September, Baidu’s voice assistant DuerOS reached 5.3 billion voice queries per month, the company said in its earnings results. But it didn’t reveal details about the devices used to make the queries. Average daily in-car usage reached 40 times per day per person, the company told TechNode on Wednesday, compared with Xpeng’s 25, and Ford’s 13.
• Auto majors including Geely worry about deploying Baidu’s operating system as a whole in their cars. Instead, they have opted to use Baidu’s AI capabilities either with embedded code or as a third party service. Great Wall Motors and Chery are among a dozen automakers currently using Baidu’s full OS.

Tencent: A late starter, the company has adopted a more collaborative attitude than its peers. The tech behemoth launched the first generation of its Android-based OS in a partnership with Chinese automaker Chang’an in late 2018.

• A broad range of offerings from music streaming to social networks has given Tencent an edge in providing seamless personalized information and entertainment services in vehicles. The company claims users can sync music and audiobooks, among other media, playing on their smartphones to a car’s stereo. The feature allows users to pick up in their car where they left off on another device.
• Tencent has another advantage—WeChat. China’s most popular messaging app has automakers scrambling for in-car access to the app on their vehicles’ dashboards. 
• The reaction from car buyers has been positive. Chang’an’s CS75 Plus SUV, the first mass-production model equipped with a voice-operated version of WeChat, racked up 200,000 sales within a year of hitting the market. A spokesperson from Great Wall Motors recently told Chinese media that more than 80% of its owners have used WeChat’s in-vehicle app and it plans to embed the service into all new and revamped models.

Huawei: China’s most contentious tech company is emerging as a dominant player in the country’s auto industry. Huawei aims to become a full-stack hardware and software provider in the booming auto software market. Many industry insiders expect Huawei to eventually compete head-to-head with Bosch as a leading auto supplier.

• Huawei has a much broader range of offerings for cars than the likes of Alibaba. The company is capable of providing a feature-rich digital dash, but also deeper functions such as vehicle operations.
• These include features like 5G communication for data transmission between a car and a cellular base station, and a digital cockpit platform powered by its flagship Kirin chipset to handle natural language processing and object classification.
• Huawei has created HiCar, a platform built on the company’s Android replacement HarmonyOS. Similar to Apple’s CarPlay and Google’s Android Auto, HiCar mirrors features from a Huawei device to a car’s dashboard.
• The company said it has made deals with 20 car makers, including EV giant BYD, to launch the HiCar system in 150 car models and expects the platform to come installed in more than 5 million cars by 2021. Currently, state-owned BAIC and Chang’an are among several carmakers that intend to use Huawei’s entire hardware and software solution.
• Chinese carmakers worry that Huawei aims to make vehicles itself, which would likely disrupt the country’s traditional car manufacturing industry. The Shenzhen-based tech company recently restructured its car business, but reaffirmed that it has no intention to build its own cars.

Automakers

A number of Chinese automakers have allowed big tech companies to take control of their cars’ screens. Others, though, are not handing over the reins so easily. Instead, these companies have accelerated their push into intelligent, connected vehicles by building their own car software teams. They want to keep selling new services to customers without sharing the margin with tech companies.

Old-school crowd: Industry watchers largely shrugged off these moves, given traditional carmakers are still wedded to old car technologies.

• Geely: China’s biggest private car company appears to have pulled ahead among the country’s traditional automakers. In 2016, the manufacturer formed Ecarx, its connected car subsidiary, launching its Android-based operating system GKUI two years later. The OS has been installed on more than 40 car models, mostly under the lineup of the Zhejiang-based carmaker, and comes embedded with Baidu’s voice recognition technology and apps. In October, Ecarx closed an RMB 1.3 billion ($198 million) Series A led by Baidu. 
• SAIC: Volkswagen’s Chinese partner wants two strings in its bow. The company has forged an alliance with Alibaba to develop an infotainment system based on AliOS and in July made its in-house software team of 500 engineers an independent business unit. The company is following the lead of its German ally, with plans to focus on developing a new software architecture and expand its software team size fourfold to 2,200 employees by 2022.
• Experts are bearish on legacy carmakers: They lack the determination to abandon the current vehicle structure, and don’t have the senior talent to fully define the technology requirements of new systems. “Traditional automakers are really not as open to switching over to being more software-dominated, and they need to bring all the software development in house,” Tu T. Le, founder and managing director of business intelligence firm Sino Auto Insights, told TechNode.

The new kids: Young, tech native US-listed EV makers, including Nio, Xpeng, and Li Auto, are more agile and better prepared to respond to changing customer demands than traditional automakers, experts said. 

• Although still in their youth, the three companies have developed Android-based operating systems for infotainment in-house, and are surpassing established automakers by developing cutting-edge technologies including self-driving features for China’s urban highways. 
• Nio and Xpeng currently each have in-house research and development teams of more than 2,000 engineers and scientists, followed by Li Auto with around half that number. The three companies have already raked in billions, or are raising more money from new stock sales to extend their lead.
• Xpeng said it would likely reevaluate the pricing of its assisted driving system in its future car models. This change is expected to contribute “a considerable portion” to the company’s overall revenue going forward, Dennis Lu, Xpeng’s vice president of finance, said during a November earnings call.

The future of car software

China’s auto industry is quickly evolving into a market led by software development. The shift from traditional manufacturing is growing more urgent: car sales worldwide have plunged into recession since last year.

Legacy automakers are not good at developing software. That will have to change if they want to retain control over a user’s experience of their vehicles and hold onto brand loyalty from customers in the long run. 

But as smartphones and car software converge, the opportunity for the BAT trifecta is growing. One thing that China’s tech companies are good at is taking control of screens, and it might just be a matter of time before they’ve taken over car dashboards. 

The Trump administration faces further legal obstacles in its ongoing effort to ban Chinese video-sharing app Tiktok. In his final days in the White House, the US president is seeking a tough-on-China technology legacy, including blacklisting China’s largest chipmaker. Meanwhile, a bill passed by the US House of Representatives earlier this month could potentially accelerate the pace at which Chinese tech firms return home to list.

Tiktok untouched

On Monday, US District Judge Carl Nichols in Washington fully blocked the Trump administration’s move to ban Tiktok in the US, NPR reported.

• Nichols found that Trump “overstepped his authority” in using his emergency economic powers to try to block transactions between Tiktok and US companies. 
• Tiktok’s lawyers had demonstrated that Trump government officials’ “failure to adequately consider an obvious and reasonable alternative before banning TikTok” showed that the decision to ban the app was “arbitrary and capricious,” Nichols wrote in the ruling.
• The ruling blocks a Trump executive order issued on August 14 which would outlaw US transactions with Tiktok. The ban is set to take effect on Dec. 12. 
• On Oct. 30, a federal judge in Pennsylvania blocked the decision after Tiktok users challenged it in court.
• Trump administration had set a Dec. 4 deadline for Tiktok parent Bytedance to either sell or spin off the app’s business in the US. The government said that day that it would not extend or enforce the deadline. Trump said previously that he had approved “in concept” a deal in which American companies Oracle and Walmart would create a US-based company, Tiktok Global, to take over the app’s US operations. But the deal is subject to Beijing’s approval, which hasn’t yet said a word about it.

Tough-on-China tech legacy

The Trump administration on Thursday added Shanghai-based Semiconductor Manufacturing International Corp. (SMIC), China’s largest chipmaker, to a blacklist that could cut it off from American investment, Reuters reported. Foreign policy and political analysts said that Trump wants to leave a “tough-on-China” legacy that cannot be reversed by his successor, Joe Biden.

• The US Department of Defense on Thursday added SMIC and state-owned oil giant China National Offshore Oil Corp. (CNOOC) to a list of entities designated as owned or controlled by the Chinese military. 
• While the list, mandated by a 1999 law requiring the defense department to compile a list of Chinese military-controlled companies, did not trigger any penalties, a recent executive order issued by Trump will bar US investors from buying shares of the blacklisted firms starting late next year.

US bill to drive Chinese tech firms home

A bill passed by the US House of Representatives last week is likely to accelerate US-listed Chinese tech firms’ pace going home. The bill will bar Chinese companies from US exchanges if they don’t fully comply with American auditing rules, Reuters reported.

• The potential that US auditors will be able to inspect Chinese companies’ audit documents has already led some Chinese tech firms to delist from US stock exchanges or dual-list their shares in Hong Kong. 
• So far, companies like online media firm Sina and online travel agency Ctrip have decided to delist from US markets, while e-commerce firm JD.com and gaming giant Netease have debuted secondary listings in Hong Kong.
• “The Holding Foreign Companies Accountable Act” bars securities of foreign firms from being listed on any US stock exchanges if they have failed to comply with the US Public Accounting Oversight Board’s audits for three years in a row, according to Reuters.
• The act would also require US-listed companies to disclose whether they are owned or controlled by a foreign government.
• Chinese companies are likely to shrug off the bill because they have alternative capital-raising venues at home, the SCMP cited analysts as saying on Dec. 3. 
• The Hong Kong exchange, another popular destination for Chinese tech firms seeking to list overseas, is keen to attract tech firms with corporate shareholding structures allowing shares with extra voting rights, according to the SCMP.
• In mainland China, regulators are permitting companies that are not yet profitable to list, overhauling previous strict listing thresholds and potentially luring more tech firms to list at home.
• The audit bill was unanimously passed by the US Senate in May. The White House said last Wednesday that President Trump is expected to sign the bill into law.

Donald Trump’s administration on Thursday added China’s biggest chipmaker, SMIC, to a blacklist that could cut it off from American investment in the US president’s last days in the White House, Reuters reported.

Details: The Trump administration on Thursday added Shanghai-based Semiconductor Manufacturing International Corp. (SMIC) and state-owned oil giant China National Offshore Oil Corp. (CNOOC) to a list of entities designated as owned or controlled by the Chinese military, according to Reuters.

• The list, mandated by a 1999 law requiring the US Department of Defense to compile a catalog of firms “owned or controlled” by the People’s Liberation Army, did not trigger any penalties. However, a recent executive order issued by President Trump will bar US investors from buying shares of the blacklisted firms starting late next year, said the Reuters report.
• SMIC is listed in both Hong Kong and Shanghai, while CNOOC has a unit that is listed in Hong Kong. SMIC shares declined by more than 2% on Friday morning before trading for the company’s Hong Kong-listed shares was suspended.
• SMIC said in a stock market statement that it was assessing the impact of its addition to the list and said investors should be aware of the investment risks, according to Reuters.

China’s preference for its own 5G equipment vendors over European suppliers has created an unfair playing field in the country’s telecommunications market, according to the EU ambassador to China in a speech given during a major telecommunications event in Guangzhou on Thursday.

Nicolas Chapuis said Chinese telecommunication operators had “massively privileged their national suppliers” and complained about a market share “free fall” for European vendors in China’s telecom infrastructure sector during a pre-recorded speech at the opening ceremony of the World 5G Convention (W5GC) held in the capital city of southern Guangdong province.

Chapuis’s speech was not included in the detailed video recording of the opening ceremony published on the W5GC website. Instead, the 130-minute video recording of the opening ceremony includes around 40 minutes of a static image with music in the background. A representative of the Beijing-based nonprofit Future Mobile Communication Forum, which co-hosted the event along with provincial government bodies, said all speeches given by high-level politicians were not “live-streamed, published in video recording, nor included in the agenda of the event.”

“The bottom line is a free fall of European market share in the telecom infrastructure sector [of China], standing today at less than 11%, while their market share in other countries stands at more than 30%,” Chapuis said according to the text of the speech sent to TechNode. “This raises major questions on fair competition.”

The EU “is urging China to ensure openness, transparency, and equal opportunities for domestic and foreign suppliers,” he said, adding that the bloc will continue to press for “meaningful market access” for both 5G infrastructure and 5G-related services in China.

China has insisted that it is not biased in choosing 5G kit suppliers. “China always sticks to equal and fair principles when purchasing 5G telecom equipment. We never preset the market shares for domestic and foreign enterprises,” Miao Wei, minister of China’s top telecom regulator, said during a keynote speech at last year’s W5GC in Beijing.

China’s three state-owned carriers in April assigned more than 80% of their 5G base station buildout contracts this year to Chinese telecom equipment makers Huawei and ZTE. A small portion of their budget went to Swedish company Ericsson, while Finland-based Nokia was not awarded any contracts.

The Finnish firm, however, said in June that it had been selected by China Unicom, one of the state-owned carriers, to supply around 10% of its 5G core network.

Chapuis’s remarks are a rare direct complaint from the EU about its access to China’s telecommunications market, aligning with the bloc’s recent stance that calls for a Europe-China relationship based on “fairness.”

“We have a robust trading relationship with China… Trade can energize our economic recovery. But we want more fairness. We want a more balanced relationship. That also means reciprocity and a level playing field,” Charles Michel, president of the European Council, said in September.

China’s Huawei, the world’s largest supplier of telecom equipment, is facing a raft of challenges in Europe. Some member nations including the UK and Sweden have decided to exclude Huawei products from their 5G networks. Several other European countries, including France and Germany, have made moves to heavily restrict its participation in their 5G buildout. Experts have said the company could be completely excluded from the continent’s 5G core networks.

READ MORE: INSIGHTS | More European countries are turning their backs on Huawei

For more than a year, the US government has continued to pressure its allies to exclude Huawei equipment. Not doing so, it said, poses the potential risk of Beijing using vulnerabilities in the company’s gear to spy on foreign 5G networks, an allegation Huawei has repeatedly denied.

Without mentioning Huawei, Chapuis said during the speech that 5G gear suppliers are subject to the same security scrutiny in Europe.

“Suppliers, be they European as well as non European, have been required to prove their compliance with a set of rules, known as the EU 5G tool box,” he said. “Chinese companies have welcomed this framework, which is based on a solid, thorough, transparent, and objective assessment of risks and applies to all players.”

What do the global empires of China’s tech giants look like? I began asking myself this question months before starting Expanding Empires, a reporting effort to map out the global tech investment footprint of China’s biggest investors. Now, we’re bringing it to an end.

Over the past six months, I’ve scraped, analyzed, and visualized data to provide a better picture of where China’s biggest tech companies are investing, how the geopolitical climate has led to dramatic shifts in their focus, and where they might be headed next. 

Funding rounds in which Chinese tech companies have participated—or in numerous cases, lead—have created some of the world’s biggest tech giants. In the US, these include mobility companies Uber, Tesla, and Lyft; in India, Paytm, Flipkart, and Bigbasket; and in Southeast Asia, e-commerce giants Lazada and Sea Limited. 

For the final edition of Expanding Empires, we look back at where overseas China tech investment started, how things have changed, and where it’s going. While each company has its own trajectory, there are some broad trends that appear to be defining China’s involvement in the global tech industry. 

The early days

It all started in the US. In 2008, just months before the housing bubble burst, before Lehman Brothers collapsed, before the global economy plummeted into a deep recession, Tencent bet on a little-known gaming studio in San Francisco. 

An $11 million investment in Outspark set the tone for Tencent’s rapid expansion abroad. The Chinese company would soon become the biggest gaming firm in the world. But more importantly, the investment marked the beginning of China’s scramble for a foothold in the US tech industry.

By 2015, seven years after Tencent’s first US investment, Chinese tech giants including Tencent, Alibaba, Baidu, and Xiaomi had taken part in nearly 40 funding rounds worth a combined $2.4 billion for US companies. 

China’s investment footprint in the US was largely driven by Tencent and Alibaba, and some of the funding rounds in which these companies took part were massive. In 2016, Alibaba participated in a $1 billion round for mobility firm Lyft. Two years later, Tencent took part in a $9 billion round for Uber. 

The list of big ticket names goes on: Tencent invested in Tesla, Reddit, and Universal Music Group. Alibaba plowed money in Magic Leap, Snap, and participated in several rounds for Lyft. 

Tencent is unique among its Chinese counterparts—it’s far more global. The company has funded more than 140 companies outside China—double that of Alibaba. Many of these were early-stage investments. 

2015 to 2017 marked a spring in Chinese tech investment in the US. By the end of 2017, Chinese companies had taken part in more than 100 rounds for US companies, totalling more than $9 billion. 

But by 2018, that had all begun to change.

READ MORE:
66 startups: How Alibaba spends billions on global investments
From funded to funder: how Tencent places its VC bets

The great switcheroo

Chinese tech companies’ investments appeared to be paying off. Valuations of companies they had invested in soared. They were participating in funding rounds with unprecedented frequency. 

In 2016, Alibaba, Tencent, and Baidu took part in 20 rounds for US companies. But by 2019, that had fallen to a meagre three. 

What had happened? One reason is the allure of Asia’s developing markets. But another is politics.

The Trump administration had become increasingly critical of China, and began pushing back against some of the country’s biggest tech companies. Chinese telecommunications giants ZTE and Huawei quickly fell victim to US scrutiny. Washington’s offensive nearly killed ZTE after the company was found to have violated American sanctions against Iran and North Korea.

But the scrutiny also extended to foreign investments in the US—particularly those that came from China. 

In late 2018, the US changed its foreign investment rules and began scrutinizing deals for non-controlling stakes in US firms. Previously, investment reviews only took place when a foreign firm took a majority stake in a US company. 

The changes were directed firmly at Chinese companies, as lawmakers feared their investments were abetting tech transfers from the US to China. 

The US-China Investment Project estimates that Chinese venture funding in the US totaled $400 million in the first quarter of 2020, down from $640 million during the same period in 2019, and $1 billion in 2018. A global pandemic beginning in China also contributed to this fall.

The resulting dropoff in investment was “distinctively Chinese,” according to a report by the US-China Investment Project. Despite the decrease in Chinese investment, overall funding of US startups largely remained the same. 

Driven away from the US by increased regulation and attracted by the potential of big returns from developing markets, China tech quickly turned to the other side of the Pacific, honing in on South and Southeast Asia. 

READ MORE:
Before the bans, China tech investment turned away from US

Alibaba had seen potential for growth in Southeast Asia and India for years. In 2016, the company bought Southeast Asia’s biggest e-commerce company: Singapore-headquartered Lazada. 

The deal was Alibaba’s biggest overseas investment. It followed up a year later with another $1 billion investment, upping its stake from 51% to 83%. Then, in 2018, it plowed in another $2 billion.

The move to Southeast Asia coincided with its pull back from America. Between 2010 and 2015 Alibaba participated in 17 US-based rounds. But since 2018, that number dropped to five. During the same period, Alibaba has taken part in 19 rounds in India and eight in Southeast Asia.

Tencent made similar moves, though the majority of its investments are in the US. The company first invested in Southeast Asia in 2016, when it participated in a round for internet platform provider Sea Limited for an undisclosed amount. It followed up with an additional $1.4 billion round in 2019. Sea runs some of the region’s biggest online platforms including e-commerce service Shoppee and gaming platform Garena. 

Tech investment proxy wars

Since then, Tencent and Alibaba have divided up Southeast Asia and India. The battle between these two companies—as well as Xiaomi—is focused on fintech and e-commerce.

Despite Alibaba and Tencent operating their own digital payment platforms in several countries across Southeast Asia, the two companies have backed more than a dozen e-wallets in the region and India—and no one startup is backed by both.

Alibaba and Tencent have taken different approaches when backing e-wallets. While Alibaba backs a mix of conglomerates that run e-wallets as part of a wider business, as well as fintech-first companies, Tencent has only backed the conglomerates. 

In Southeast Asia, on the side of Alibaba and its fintech affiliate Ant Group are Myanmar’s Wave Money, Thailand’s Truemoney, as well as Lazada and internet service platform Grab, which run e-wallets as part of their business. In India, the two Chinese companies have funded Paytm. 

Meanwhile, Tencent has backed Sea Limited, which operates Airpay and Shopeepay; Gojek and its Gopay system in Southeast Asia; as well as Swiggy Wallet and Ola Wallet in India. 

But it’s not just fintech. For Chinese companies, the stakes for tech investment are high in India and Southeast Asia at large.

“These investments are building the muscles for a world-class clash of titans—with the big guys competing head to head and local players serving as proxies for the foreign giants,” consultancy Bain & Company said in a report describing the scramble for market share in the region.

READ MORE:
Chinese tech giants have tens of billions at stake in India
Proxy war? Alibaba, Tencent draw lines across Southeast Asian unicorn scene

Untapped markets

While the US has made it more difficult for Chinese companies to invest and competition in Southeast Asia heats up, another market has caught the attention of China’s tech companies: Africa.

Home to 1.3 billion people and six of the world’s ten fastest growing economies, the continent has a thriving tech scene. Firms like Huawei and ZTE have a long history in Africa. Roughtly 70% of all 4G base stations on the continent are made by Huawei.

But as connectivity across the continent improves, other Chinese companies have seen opportunities in providing—and backing—digital services. 

Tencent, gaming giant Netease, Meituan, and smartphone maker Transsion have already bet on African companies. Meanwhile, Alibaba has taken a different approach by launching training programs for aspiring African entrepreneurs. 

Their presence on the continent is still modest, but has grown steadily since 2018, with 2019 seeing record amounts of Chinese involvement in Africa’s tech sector. 

“Africa is often still a greenfields continent where Chinese companies have a more equal or better chance to compete,” Africa Analysis’ Dobek Pater told the South China Morning Post last year. 

Transsion, which controls around 40% of the continent’s smartphone market, has started delving into digital services in Africa. In 2015, the company launched music streaming service Boomplay through a joint venture with Netease. Primarily focused on the African market, 85% of its users come from Nigeria, Ghana, Kenya, and Tanzania.

Startups in Africa raised a total of $2 billion in 2019, according to data from global investment firm Partech. While a small percentage of the total came from China, Africa has seen an increase in attention from Chinese investors. 

Chinese-owned, Norway-based software company Opera in 2017 pledged to invest $100 million in Africa’s digital economy. The company later launched Opay, a super app that included payments and delivery services, in Nigeria. 

Meanwhile, Africa-focused fintech platform Palmpay launched in Nigeria after receiving $40 million in investment from Transsion and Netease. The deal also meant that Palmpay would come pre-installed on 40 million on Transsion’s phones this year. 

Ant Group, which runs one of China’s most popular payment platforms, has also taken notice. In 2019, the company partnered with Flutterwave, a Silicon Valley- and Lagos-based fintech company, adding Alipay as a payment method for Flutterwave’s 60,000 merchants. Ant has also partnered with South African mobile operator Vodacom to launch a payments app in the country. 

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China tech in Africa: flip phones to fintech

From sanctions on Chinese companies in the US to uncertainty from app bans in India, Chinese tech investors have had a rough ride. But there have also been many successes. In some cases, the effects of their influence have been subtle, quietly backing startups worldwide. In others, like Alibaba’s takeover of Lazada, their funding has allowed them to take massive portions of a developing market. 

So what’s next? One of the world’s largest continents. Only time will tell how the battles between these Chinese companies, as well as with their US counterparts, will play out. 

China’s Huawei is falling behind in the race to supply telecommunications equipment for 5G networks in Europe, its largest market outside of its home turf.

As Sweden decided in October to exclude Huawei from its next-generation mobile networks, seven out of 27 European Union member states have made moves to heavily restrict the Shenzhen company’s participation in the buildout of 5G. The list includes heavyweights like France and the UK. 

Among countries that have not made decisions on Huawei, six have signed a declaration of intent to keep their networks “clean” of Chinese technology under the US “Clean Network” initiative. Signing the Clean Network initiative does not appear to bind countries to bar Huawei gear. 

While regulators are driving the shift against Huawei, telcos are jumping the gun. In another five countries, telco operators have signed contracts to procure 5G equipment from Huawei’s competitors, Nokia and Ericsson, likely anticipating regulation.

Experts say that the Shenzhen-based company may eventually face de facto expulsion from Europe’s 5G networks as countries move to make their final decisions.

Huawei supplied around 50% of the equipment for Europe’s 4G networks, according to a 2017 report by the European Trade Union Institute, an EU-backed research center. However, the company now faces a much less welcoming environment for 5G—at least two countries have banned its gear outright, and a dozen others are considering heavy restrictions.

“Chinese vendors will play a minuscule role in parts of Europe’s mobile networks that are considered sensitive or critical,” Jan-Peter Kleinhans, director of the project Geopolitics & Technology at German think tank Stiftung Neue Verantwortung told TechNode. 

Kleinhans said that he could imagine a full exclusion of Huawei equipment from Europe’s 5G core networks “in the long run.” 

“Since the European Union put the onus on member states to objectively assess risks and adopt mitigating measures to ensure the security of 5G rollouts, most countries have increased their scrutiny of Huawei,” Jan Stryjak, associate director at market research firm Counterpoint, told TechNode. “Since no country would want to be alone in bucking the trend, solidarity seems to be the name of the game.”

European countries so far haven’t banned Huawei from all of their 5G core networks, a Huawei spokesperson told TechNode on Friday. “Huawei calls and pushes for the establishment of network security standards, and hopes all vendors to be subject to the same scrutiny.”

The company said its commitment towards the European market is “unchanged.”

The EU toolbox

The first step towards an EU-wide policy on 5G security came in January, when the EU Commission released the so-called EU 5G toolbox: A blueprint for how the 27 member states should evaluate 5G gear provider risks and trustworthiness. 

The toolbox requires member states to assess supplier risk profiles on a national or EU level and apply restrictions on those deemed high-risk. 

“The EU toolbox recommends a set of key measures that should be taken by all member states and by the Commission. These measures will apply to everybody, without targeting any actor or country in particular,” Marietta Grammenou, a European Commission spokesperson, told TechNode in an email. 

The toolbox does not mention Huawei or China by name, but instructs national regulators to consider the “risk of interference by non-EU state or state-backed actors,” echoing US rhetoric. 

Some countries have taken a middle-of-the-road approach: They have chosen to raise security requirements for all vendors in a way that amounts to a ban on Huawei without naming it.

The EU toolbox was rolled out after the US government embarked on a campaign to pressure allies into excluding Huawei equipment from their 5G networks, and marked a sharp shift from earlier guidance in EU security directives, where country of origin did not feature prominently as a concern. 

Scholars have said that Huawei is owned and controlled by the Chinese state but the company maintains that it is a private company 100% owned by its employees.

The toolbox leaves the decision to ban Huawei up to member states: “While everyone who complies with our rules can access the European market, member states have the right to decide whether to exclude companies from their markets for national security reasons,” Grammenou said.

“Since mobile networks are considered a critical infrastructure with a direct impact on national security, member states are free to develop their own strategy and thus balance between costs and security,” Kleinhans said.

As countries set their own paths, a likely result is “a highly fragmented regulatory landscape,” Kleinhans said.

Security concerns

As more regulators and telecommunication operators put limits on Huawei, it’s getting more tempting to jump on the bandwagon. Europe’s military and intelligence community, meanwhile, has been voicing objections to Huawei gear, citing national security concerns.

“With no country wanting to be the odd one out, it wouldn’t be surprising if all member states follow the same trend,” Stryjak said.

While only two countries have specifically banned Huawei from future network buildouts, lawmakers and politicians are signaling that other European countries will likely follow their example or heavily restrict the company’s involvement. 

In July, the UK banned Huawei from its 5G networks and ordered its telecommunication operators to remove existing Huawei gear from their networks by 2027, citing a US ban on the company in May that could cut the company off from the global semiconductor supply chain. 

In a similar move, a Swedish telecom regulator said in October that potential grantees of the country’s 5G spectrum must not use products from Huawei in new core networks and existing Huawei gear must be phased out before 2025.

Sweden’s Huawei decision was made based on assessments by the country’s Armed Forces and the Security Service, the Swedish Post and Telecom Authority (PTS) said. On the announcement of the Huawei ban, Klas Friberg, head of the Swedish Security Service, said “China is one of the biggest threats to Sweden.” The country, Friberg added, must not forget when constructing its 5G network that China “is conducting cyber espionage to promote its own economic development and develop its military capabilities.”

Europe’s biggest economies and political epicenters, including Germany and France, have also indicated that they are turning against Huawei.

In October 2019, Germany’s spy chief Bruno Kahl said Huawei “can’t fully be trusted” to participate in the country’s 5G network rollout. While German Chancellor Angela Merkel was in September reportedly vehemently opposed to any restrictions that would single out Huawei, she faced a contingent of politicians who sought to effectively ban Huawei from German 5G networks. Later in the month, they appeared to have won.

In July, Reuters reported that the French National Cybersecurity Authority (ANSSI) had granted licenses to some operators that use Huawei gear. But the bulk of the authorizations were for three or five years, whereas most applications for 5G kit from European rivals Ericsson or Nokia received eight-year licenses.

Notably, the ANSSI informed operators during informal conversations, not stated formally in documents, that licenses granted for Huawei equipment would not be renewed once expired, according to the report.

The Huawei issue has been a flash point in escalating tensions between China and the US. For more than a year, the US government has continued to pressure its allies to exclude Huawei equipment. Not doing so, it said, poses the potential risk of Beijing using vulnerabilities in the company’s gear to spy on foreign 5G networks, an allegation Huawei has repeatedly denied. 

A full ban on Huawei equipment would almost certainly be seen by Beijing as choosing sides, and fodder for retaliation. 

Most recently, a UK oversight body said in October that Huawei had failed to adequately solve security flaws including a “vulnerability of national significance” in gear used in the country’s telecom networks despite previous warnings. 

In April 2019, Vodafone told Bloomberg that it found “hidden backdoors” in the software that could have given Huawei unauthorized access to the carrier’s system providing internet service in Italy. The carrier said at the time that the issues had been resolved after it asked Huawei to remove them.

‘A matter of time’

Huawei has not disclosed how much revenue it earns from Europe. According to the company’s annual results, it generated RMB 206 billion (around $31.1 billion) from Europe, the Middle East, and Africa in 2019, or around 24% of its total revenue for the year.

Stryjak of Counterpoint said that there could still be a play for Huawei in the radio access network (RAN) market, the less sensitive area of 5G networks that connect end devices to core networks. However, he said, Huawei’s RAN business in the continent is still subject to the “suspicion that governments and operators now hold.”

“It seems only a matter of time before all of Europe’s core 5G networks are Huawei-free,” Stryjak said.

Shares of Chinese electric vehicle maker Xpeng Motors jumped 33.4% to $44.73 on Thursday after the company recorded positive results for the third quarter following bullish analyst comments. Now perceived as a strong challenger to Tesla, the EV upstart is gearing up for an ambitious goal: setting a benchmark for driver assistance technology in China that rivals will have to beat.

In the first report since its August debut on the New York Stock Exchange, the carmaker said it raked in RMB 1.99 billion ($293.1 million) in the third quarter of 2020, making for a 342% year-on-year surge in revenue, boosted by an uptick in vehicle deliveries. Quarterly deliveries grew 266% year-on-year to 8,578 units. That number included 6,210 P7 sedans—the company’s second mass production model directly targeting Tesla’s Model 3.

Xpeng CEO He Xiaopeng said during the earnings call that the company’s goal is to provide “the most advanced” assisted self-driving system in China. The dedication to in-house research and development on autonomous driving, he added, would be the key to build up core competencies and set it apart from its rivals. More notably, more than 98% of all the P7 vehicles delivered were equipped with hardware that supports software upgrades to the latest version of its advanced driver assistance system (ADAS) Xpilot.

The company’s quarterly losses grew to RMB 1.15 billion from RMB 776 million in 2019 but its gross margin shrunk to 4.6% from -10.1% for the same period. Operating expenses climbed 60% quarter-on-quarter, to RMB 1.8 billion. This is even more than the RMB 1.47 billion in expenses that Nio incurred in the second quarter. The rival Chinese EV maker has gained notoriety for its high cash-burning rate.

Boasting of being one of only two automakers in the world to have developed all core self-driving capabilities in-house, Xpeng is the only Chinese automaker taking the same approach as Tesla. However, the cost has been high and the payoff is uncertain, as it has taken much longer than initially promised by industry players to get mature self-driving technologies ready for the road.

How much of an advantage is Xpeng in targeting Tesla in a self-driving race? Here are some of the notable takeaways gleaned from analysts and Xpeng executives, including Wu Xinzhou, vice president of autonomous driving who recently spoke to TechNode.

Upcoming features

Xpeng is currently on track to release its semi-self-driving function, called Navigation Guide Pilot (NGP), in the beginning of next year. The feature enables a car to self-drive on urban highways, including navigating from a highway on-ramp to off-ramp, changing lanes, and taking exits.

The NGP technology is expected to handle real-world scenarios on the busy Chinese urban highways, taking a burden off the drivers, enabling users to remain engaged in driving but without their hands on the steering wheel all the time. NGP is similar to Tesla’s Navigate on Autopilot (NOA), that carmaker’s most advanced driver-assisted offering. Nio launched a similar feature in late September.

The company has set a goal to achieve “a single-digit number” of times per 1,000 kilometers (621 miles) on highways that drivers are required to take control of the vehicles, according to Wu.

On city roads, human intervention will still often be needed, as the company’s current ADAS features are unable to recognize traffic lights and handle requests such as lane merging. Still, a “future-proof” hardware and software architecture would allow the company to push forward more advanced features, Wu said.

Long-term benefits

In reply to an analyst during the earnings call, the CEO said the company plans to launch more driver-assistance features beginning in the second half of 2021. One of these features, called “autonomous following,” will be specifically designed for the complex traffic conditions in major Chinese cities. It will enable drivers to closely follow the cars in front of them to make sure that they are not left behind.

“ADAS is not going to be a major boost to overall sales in the short term. Most consumers are not overly focused on those functions if it’s not standard or part of a luxury package,” said Daniel J. Kollar, head of Automotive & Mobility Practice at consultancy Intralink Group, on Thursday. However, he said the internal focus on self-driving development likely would have long-term benefits as the industry moves towards commercialization of semi- and above-vehicle autonomy.

“China market consolidation will likely favor Tesla and a few surviving EV upstarts,” according to a Thursday report from Chinese online firm Tiger Brokers. The report noted, though, that the release of NGP and continuous roll-out of ADAS functions could “bring a high-margin software revenue stream throughout 2021.”

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China was once unrivaled in electric vehicle (EV) sales. Now, Europe threatens its dominance.
 
It has been five years since China surpassed the US to become the world’s biggest EV market. Growth in China’s EV market was swift thanks to heavy government support in the form of subsidies. But this year Europe is set to dethrone China as the global EV sales leader, picking up critical momentum despite widespread disruption from the global Covid-19 pandemic.

China, a global manufacturing hub for automobiles, has historically produced entry level, low-priced cars, lagging behind the West in cutting-edge vehicle technologies. Now, facing a battle on two fronts, Chinese EV makers are attempting to shake this image as they gear up to expand abroad. There’s a lot at stake. They’ve already been beaten by overseas auto giants in their home market—or joined forces with them, casting a shadow on Beijing’s ambitions to create homegrown EV leaders.

Analysts expect growth in China’s EV market to recover in the next few years, although only marginally—high price tags and a lack of charging facilities remain key roadblocks to EV adoption. Still, as Europe collectively accelerates its transition towards low-carbon transport, it raises a number of questions. What do China and Europe’s EV markets look like? Will China’s head start in EV technology give it an edge? Can China really fulfill its goal of developing its own EV leaders?

EV sales forecast

In a big hit to Beijing’s EV ambitions, Europe overtook China as the world’s largest EV market earlier this year. Bolstered by generous cash incentives, Europe reported a massive surge in EV sales in the first half of 2020. Meanwhile, China was trapped in a downward spiral thanks to Beijing’s EV subsidy cuts last year and the economic fallout from Covid-19.

The sudden increase in European EV sales has triggered general unease among some of the biggest companies in China’s EV industry. One of the most outspoken figures is Zeng Yuqun, chairman of battery giant CATL.

Zeng said recently that China could lose its leading position if Europe continues beating China in EV investments over the next several years. Beijing’s investment into its own EV industry was about 30% of that of the EU last year, Chinese media reported (in Chinese) citing Zeng.

The EU’s lead is likely only temporary, say veteran industry observers. “Whatever short term sales advantage might take place in Europe, I don’t see that persisting. I expect China to gain the lead in terms of EV sales over the long run,” Stephen Dyer, managing director of global consultancy AlixPartners said last month during TechNode’s Emerge 2020 conference.

Although EVs only made up 3% of total car sales last year, the continent has aimed high and is forecast to increase that number to 20% by 2030 by German automotive research center, the Chemnitz Automotive Institute (CATI).

Experts see tremendous growth potential in China not only because it remains the world’s biggest auto market, but also because EV adoption is still in the early stages. Last year, only 1.2 million EVs were sold in China compared with the 25.8 million total vehicles sold—still lower than the penetration rate of EVs in Europe. The country also has a far wider offering of EV models ranging from entry level to luxury.

While experts forecast China will regain its position as the world’s largest EV market, sales could be headed for a prolonged period of slow growth until battery technology matures. One of the most obvious signs of a slowdown is that Beijing recently lowered its NEV sales goal to 20% from 25% of total car sales by 2025, as Reuters reported. 

Internal fight

After a prolonged market slump which lasted an entire year, China’s NEV sector has managed a U-shaped recovery, reporting double-digit growth since July. Now, the market is dominated by two US automakers: Tesla and General Motors (GM).

Tesla’s locally-built Model 3 and GM’s Wuling-branded mini-EV recently became China’s best-selling EVs, outperforming a slew of China’s biggest automakers. Each dominated one end of the market: the post-subsidy price of standard-range Model 3 starts at RMB 271,550 ($41,195), while a tiny Wuling EV costs only a tenth of a Tesla.

Meanwhile, young, China-founded EV makers such as Nio and Li Auto reported better-than-average deliveries, outperforming traditional auto companies, although their sales made up only a fraction of the total EVs sold.
 
That’s not what China wants. In an industry development plan released last week, Beijing promised to become a global auto powerhouse, with Chinese car brands becoming “a major competitive force worldwide” in the next 15 years (our translation).

“There’s no way that the Chinese government is going to let foreign automakers lead the EV sector for a long period of time,” said Tu Le, founder and managing director of business intelligence firm Sino Auto Insights in an interview with S&P Global.

Chinese EV makers

Despite Tesla’s lead, China’s young EV makers are becoming an important emerging power. Nio, a major challenger to Tesla in China, this month surpassed GM in market capitalization as the world’s 7th most valuable automaker. Chinese original equipment manufacturers (OEMs)—companies that make cars or car parts for other brands—are now preparing for a big electric push, while more international carmakers are jumping into the fray.

• SAIC, China’s biggest automaker, is reportedly planning to launch a new brand to compete with Tesla. Codenamed “L,” the secretive project is poised to establish a benchmark for the next generation of smart cars. Sources boasted to Chinese media that the way SAIC will use artificial intelligence technologies in these vehicles will be far ahead of its rivals. Rumors claim the project is led by the company’s top brass and an independent subsidiary will be formed to drive innovation.
• Meanwhile, Peugeot Société Anonyme’s (PSA) Chinese manufacturing partner Dongfeng, in July launched a new high-end brand called Voyah. The company said it will begin mass producing its first EV under the new brand next year. The Hong Kong-listed automaker is currently seeking to raise a RMB 21 billion ($3.2 billion) war chest in a secondary listing on the Shenzhen stock market to ramp up vehicle development and production, reported Chinese media.
• GAC is reportedly following suit, with rumors spreading that Toyota’s Chinese partner intends to spin off its EV unit for an IPO on China’s Nasdaq-style STAR market later this month.

German auto giants

Chinese automakers excel at making entry level vehicles, but competition for the lower tier market is heating up as German car manufacturers—known for leading engineering and technical innovations—begin experimenting with small, affordable EVs. Local manufacturing partners are gearing them up for entry into China’s low-cost EV segment.

• A joint facility run by BMW and Great Wall Motors broke ground in China’s eastern Jiangsu province in June. Work on the factory comes two years after the companies laid out plans to launch an EV brand called “Spotlight” in 2023. Analysts expect the sub-RMB 100,000 model to share its components and manufacturing platform with Great Wall’s Ora-branded mini-EVs.
• Mercedes-Benz early this year forged an alliance with Chinese auto giant Geely, planning to produce tiny, two-person mini-EVs in China under the Smart brand. The China-made Smart EVs are scheduled to go on sale worldwide in 2022.
• Volkswagen has promised to invest €15 billion ($17.8 billion) to fund its ambitious plan to produce 15 new EV models with Chinese partners in the next five years, as it seeks to dominate EV sales in China. The German automaker earlier this month launched its made-in-China ID.4 crossover. The vehicle is the company’s first China-made EV based on its mass-produced modular electric vehicle platform The ID.4 starts at around RMB 250,000 after subsidies, according to a Reuters report.

Despite an early lead by Tesla and its Chinese peers, experts caution that it is too early to predict whether a domestic or foreign automaker will take pole position next year, given the complexity of the landscape. Still, as the market splits between growth in the entry-level and premium EV markets, whoever wins the customer experience will have a leg up over all the other players, Dyer added.