The Wuling Mini EV is a small, nifty $4500 city car currently on sale in China. It is manufactured by SAIC-GM-Wuling, a joint venture between the American firm General Motors (GM) and two Chinese firms, SAIC and Wuling Motors. It saw record sales in 2020, surpassing all competitors in unit sales in the Chinese market except the Tesla Model 3.
This electric car has somewhat of an odd but likeable look (it looks like it has been compressed from back to front), and it represents a very successful foray for the quintessential American firm GM into the Chinese market. Apart from its significant stake in Wuling Motors, GM also has a significant stake in Baojun, another Chinese auto brand that has its own EV models.
Thus, when I read that GM plans to transition to all-electric vehicles by 2035, it struck me as a strategic move that sought to take advantage of growing global interest in EVs, at the same time as drawing on its established links with its EV subsidiaries in China. In fact, the data shows that a significant proportion of their current EV sales are going to China. It seems that in the future they will be looking to take advantage of the growing Chinese market and expand its market share there.
GM is not the only automaker committing to all-electric vehicles. Jaguar has announced recently that they will be an all-electric brand by 2025. These announcements are perhaps motivated by a recent surge in EV automaker’s stocks, suggesting that they are designed to ride the current wave of EV optimism.
Tesla remains the global leading automaker in EVs with the highest profile. It saw a huge rise in its stock price in 2020, increasing nearly ten times, making Elon Musk the richest man in the world.
However, there are also huge hopes being placed in China EV market and automakers. China currently has the largest EV market in the world, with nearly half of the global stock of EVs and twice the market of the US. Its current percentage of EVs on the road is around 5%, higher than the US’s 2%. Although the Tesla Model 3 remains the favourite EV model there, Tesla faces stiff competition from local Chinese automakers.
These companies have also seen a huge rise in their stock price in the past year. In terms of market-capitalisation, while Tesla takes the number one spot, Chinese automakers Nio (7th) and BYD (5th) are in the top ten. In particular, Nio, an EV-only manufacturer, has seen its stock rise so much that it now surpasses the market value of more well-known brands like BMW and Volvo.
Nio’s high share price cannot be justified by its number of global units sold, only selling around 44000 units, compared with BMW’s 2.3 million units. It can only be explained by the very high hopes currently being placed in China’s EV future, and in the future earnings of these Chinese EV firms.
It remains to be seen if Nio’s share price is a bubble waiting to burst, but there are some indicators that China will continue to lead the world in the major transition into EVs in the future. I experienced it first-hand when I went to Fuzhou, China in 2019, where I was surprised to find that most of their public buses in the city were all-electric buses. I was impressed by the quietness of the journey and also by their swift acceleration.
China’s EV Future: Misplaced Optimism?
One reason for worldwide optimism of China’s EV future is the enthusiasm and support from the Chinese government for EVs. The Chinese government has implemented a huge range of policies including EV quotas for vehicle manufacturers and importers, tax exemptions and subsidies, government procurement, and promoting the development of EV charging infrastructure. This sets the stage for even more widespread adoption of EVs in China. In particular, its infrastructure implementation has been particularly impressive. As of 2019, 82% of global fast chargers were located in China.
One gets the feeling that the Chinese government will have the resources and will to implement the necessary investment and policies for the long-haul transition to EVs. As Liu Jing, a professor at the Cheung Kong Graduate School of Business in Beijing says, “[when it comes to the car industry] the most important thing is what the government does”. In the US, there are some promising signs with Biden pledging to turn the federal fleet to all-electric vehicles, but the future remains uncertain depending on the stance of subsequent elected governments.
China’s automakers are poised to take advantage of a rise in demand. The country has the industrial production capacity suited for a huge rollout of EVs, as it is currently the leading maker of big battery packs for EVs and the leading producer of electric motors. China also has control over the world’s production of key raw materials needed for EVs including the rare earth metals lithium and cobalt. So, China has all the necessary ingredients to become the world’s largest EV automaker in the future.
In addition, Chinese firms are competing with Tesla to be the foremost innovators in EV technology. Battery swapping technology, where instead of charging the battery, the depleted battery is swapped with a fully charged identical one in a booth, has recently seen significant uptake in China. Tesla first showcased its own battery swapping technology back in 2013 but so far has failed in the US due to a lack of customer demand. Nio, on the other hand, have built their own battery-swapping stations around China and now offers battery swapping services to all those that buy its cars. It remains to be seen if this can become the mainstream service for battery replenishing.
How do the EV industry prospects of the US (home to GM) compare with China? In my opinion, out of the two markets, China has bigger growth prospects. Their government is, on the whole, more committed to the EV transition and they have promising start-ups. I forecast that China’s EV market will continue to lead global demand and there will be a rise of Chinese automakers.
Can General Motors Compete?
Where does this leave GM, in its move to become an all-electric car company by 2035? Since GM has joint ventures in China, it will certainly be able to carve out some market share there. However, GM is the home to iconic car brands like GMC (Hummer) and Cadillac. Will these all be put aside in favour of foreign offerings such as the Wuling Mini EV?
The recent unveiling of the Hummer EV would suggest not. In fact, when I first heard of the Hummer EV, I immediately dismissed it, saying that surely macho fans of the original Hummer would not be welcoming of a quiet non-revving electric car. However, on seeing the press release video, I warmed to it. To me, the Hummer EV is coolness personified. It has the look of a car from the future (in a different way to the Tesla Cybertruck), but at the same time keeps the character of the original Hummer. Its features such as the crabwalk, which allows its wheels to move diagonally add punch to the whole package.
Where I see firms like GM being able to compete with Chinese automakers is not in the realm of cost or technology. Chinese firms, with their access to their efficient production facilities, have an edge on cost, and they are swiftly catching up to the US in technology. Firms like GM have to compete in terms of design and branding. This is why Tesla still remains the most popular EV today even in China, due to its iconic brand name.
However, it is not certain whether offerings like the Hummer EV will achieve significant sales in either the US or China due to its large price tag (starting at $112,595). The profitability of an all-EV line-up is still in question. Nonetheless, the Hummer EV is a positive affirmation that GM will stay true to its iconic brand in the future. In doing so, there is hope that domestic consumers will warm to EVs along with being attractive to the foreign Chinese market.
Image Credit: David290 via Wikimedia and Creative Commons.