Automakers Focus On Made-in-China EVs As Competition Rises

Emissions from gas-guzzling combustion engines have prompted the auto industry to focus more on electric vehicles. Further, government regulations have strengthened the preference for electric vehicles (EVs) over other combustion-engine based vehicles.

China witnesses highest demand for EVs among major automotive markets. Also, with an aim to reduce carbon emissions, the Chinese government is pushing automakers for electric and plug-in hybrids. Further, it is offering subsidies to encourage buyers to opt for more such environment-friendly vehicles. The government wants EVs to contribute to roughly 12% of overall sales in 2020.

Per China Association of Automobile Manufacturers (CAAM), China sold 777,000 units of EVs in 2017, a 53% surge from the year-ago figure. In the overall global sales, the market provided 2.7% of 28,879,000 units sold in 2017.

Growing demand for EVs has prodded a number of bigwig automotive and startup companies in China to manufacture and launch new EVs. Production within the country keeps cost low, thereby enabling domestic firms to competitively price their vehicles. Further, this has boosted the local auto manufacturers to unveil various models on EVs. At the last month’s Beijing Motor Show, 174 new energy vehicles were introduced comprising 124 made by Chinese companies. The heightened activities by the local auto players along with the presence of global biggies have turned the Chinese auto market into an intensely competitive space.

Efforts Made by Foreign Players

With an intention to challenge the dominance of domestic players, many foreign automakers are collaborating with the national companies to offer new energy vehicles in China. Let’s take a glance at the companies, expected to hit the market with their new vehicle editions in the coming years.

Recently, Toyota Motor Corporation (NYSE:TM) announced that in order to meet the spurt in demand for green vehicles, it will sell EVs without its distinctive triple-oval logo. However, the vehicles will carry the label of GAC Motor, its Chinese partner. Further, Toyota plans to start selling GAC Toyota ix4 by the end of 2018. This battery-powered compact SUV is based on GAC’s Trumpchi GS4 and has been under development for the past two years.

Additionally, the Japanese automaker’s plug-in-hybrid versions of Corolla and Levin sedans will hit the showrooms by 2019. Further by 2020, it plans to unpack 10 new electrified vehicles.

Another Japanese automaker Honda Motor Company (NYSE:HMC) has formed a joint-venture (JV) known as GAC Honda Automobile, which will start manufacturing EVs in 2018. The company has another major JV in China with Dongfeng Motor Group, known as Dongfeng Honda Automobile Co Ltd. This JV will begin making EVs for the Chinese market effective 2019.

Meanwhile, Japan-based automaker Nissan Motor Company (OTC:NSANY) is preparing to wheel out its built-in-China electric vehicles by the second half of 2018.

Detroit-based automaker Ford Motor Company (NYSE:F) will invest $756 million to form a joint-venture with China’s Anhui Zotye Automobile. The deal is awaiting regulatory approvals. The new JV will build a manufacturing factory in Zhejiang province and will offer all-electric vehicles under a new Chinese brand.

Meanwhile, U.S.-based Tesla Inc. (NASDAQ:TSLA) and leading European automakers are rooting for both EV production and development in China.

Tesla is a step closer to its aim at producing electric vehicles in China and establishing its first gigafactory outside U.S. shores. Recently, the company has been granted a business license to fulfill the same. Its new registered Hong Kong division’s business scope includes technological development, energy storage facilities and solar panel products to boot.

European automaker BMW AG’s (NYSE:F) first fully-electric SUV iX3 is an electric version of its X3 SUV, featuring the company’s fifth-generation electric drive system with 270 horsepower. To be rolled out by 2020 in the Chinese market, this electric model will be manufactured in China and will be shipped to other markets as well.

By 2021, Volkswagen (DE:VOWG_p) AG (OTC:VLKAY) intends to manufacture EVs at its six plants across China and also has an objective to invest $18 billion by 2022. This investment will be utilized to concentrate more on vehicle electrification, autonomous driving and connected cars.

BMW and Tesla carry a Zacks Rank #2 (Buy) while Toyota, Ford and Volkswagen carry a Zacks Rank #3 (Hold). Nissan has a Zacks Rank #4 (Sell) while Honda has a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term growth rate for BMW, Tesla, Toyota, Ford, Volkswagen and Honda is 4.5%, 25%, 5.5%, 10.7%, 6.2% and 8%, respectively.

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