No. of Recommendations: 9
Worth reading in full:
https://www.reuters.com/investigations/china-is-se...Years of subsidies and other government policies have aimed to make China a global automotive power and the world’s electric-vehicle leader. Domestic automakers have achieved those goals and more – and that’s the problem.
China has more domestic brands making more cars than the world’s biggest car market can absorb because the industry is striving to hit production targets influenced by government policy, instead of consumer demand, a Reuters examination has found. That makes turning a profit nearly impossible for almost all automakers here, industry executives say. Chinese electric vehicles start at less than $10,000; in the U.S., automakers offer just a few under $35,000.
Most Chinese dealers can’t make money, either, according to an industry survey published last month, because their lots are jammed with excess inventory. Dealers have responded by slashing prices. Some retailers register and insure unsold cars in bulk, a maneuver that allows automakers to record them as sold while helping dealers to qualify for factory rebates and bonuses from manufacturers.
Unwanted vehicles get dumped onto gray-market traders like Zcar. Some surface on TikTok-style social-media sites in fire sales. Others are rebranded as "used" – even though their odometers show no mileage – and shipped overseas. Some wind up abandoned in weedy car graveyards.
Jeff
No. of Recommendations: 3
To me the broad picture is that China is seeking to dominate another industry at the cost of considerable domestic shakeout, just as the article alludes regarding solar panels near the start. Considering how successful this approach has been with regard to most of the underpinnings of the electrification industry - panels, batteries, motors, etc. - it should be of considerable concern to other countries.
N.b. while purely ancedotal, I've found it interesting that since arriving in Lisboa, I have seen a fair number of European car makes, a much smaller number of American makes (Tesla being the only one present in more than minute numbers), and a predominant number of Chinese makes, most of which I had never heard of before.
No. of Recommendations: 3
underpinnings of the electrification industry - panels, batteries, motors, etc. -
I think you will need to break it down by region, or even specific countries. IMO, the market worldwide is too diversified/non-standard regarding uniformity between countries. Some markets are fairly simple, others are not. Large markets can be entered via acquisition, others not. Mass-produced items could be produced in China, if they are able to realize significant cost savings. Larger, more specialized items, will likely not be mass produced, so no significant savings might be realized. However, China may be able to have lower prices due to lower labor costs and a willingness to get into a new area of business by underbidding competitors.
Specialty items, such as substation transformers, may--or may not--be an entry point if they can be produced at scale to really reduce price AND delivery lead time. I mention this item because it does fail, and when it does, it takes out power for a significantly large area. Substations can have ten (more/less) transformers, and they are not produced locally or even produced well in advance because each transformer is sort-of specialized. Mid-90s, the substation transformer for my area failed. We were without power for 7-10 days. The area without power was mostly residential in the city--about 2-3 city blocks wide and 2+miles long. Of course, the substation was two miles away with many transformers. I think only one or two transformers went out (no idea why), but the other one was quickly repaired or the damage was not catastrophic. Utilities will pay for getting a needed transformer in days, not a week or more (PR reasons and unhappy politicians). Transformers are somewhat heavy, but fit on a truck for hauling. Can't say if one will fit in a container (20'). Length not an issue, it is the width. I see China does already make this item in a variety of capacities (to US spec) and exports to the US, so they may already be at the "expand their share of the market" phase. No idea. OrmontUS might have more insight into this market.
No. of Recommendations: 3
I think you will need to break it down by region, or even specific countries.While the distribution varies in different countries, we can just observe the dominant and growing Chinese position in EV batteries, storage batteries, solar panels and precursor materials like polysilicon, and other aspects of electrification. For one view, see
https://www.iea.org/reports/solar-pv-global-supply... .
Trying to retain a profitable position with specialty, high-margin items while the mass market gets more and more capable and eats your specialty market from underneath is probably a poor strategy. I got the standard line when I joined Silicon Graphics in 1997 - "Yes, PC graphics companies like NVIDIA sell a lot more units, but they are slow and limited and can't begin to compete with our $50K+ workstations. We will continue to own most of the profits with our high-end products while they struggle for margin with commodity products".
Cut to 9 years later, SGI down to about 15% of its headcount in 1997, declaring bankruptcy and shutting down its graphics division after utter failure to keep up with commodity GPUs.
