Daily Times

China is all set to repeat the history it created with the smartphone industry in the global automobile industry. It is no surprise that while China as an economy has shown an unprecedented growth over the past few decades, so has the automobile industry in the country. 2017 marked the year where its automotive industry finally started to move from the high growth to maturity phase of its life cycle, with sales and production skewing towards the new electric vehicles (NEV’S) along with the high tech and functionality cars.

The NEV market signifies a strategic advantage for China, which also poses a serious threat to the US auto industry, currently the No 2 market for automobiles. The progress can be seen in terms of how quickly China rose from being a very small player in the global EV market to be nearly 50 percent of sales in 2017. According to the China Association of Automobile Manufacturers, China’s NEV market grew from producing a volume of 8000 units in 2011 to 507,000 in 2016.

Continuing its global leadership position, the sales of NEVs increased by 53 percent to 777,000 in China, in contrast to the 200,000 NEV sold in the United States. Earlier this year at the Detroit Auto Show in January, Guangzhou Automobile Group (GAG), one of China’s strongest local assemblers, revealed its plan to start selling vehicles in the US in late 2019, an initiative that the company has been researching for some time. It seems only to be a matter of time before the Chinese manufacturers penetrate the US market, even though GAG is receiving some resistance from the Trump Administration due to the discrepancy between the 2.5 percent duty on cars imported into the US and the 25 percent tariff on cars imported to China.

The ambitious attempt of the Chinese automobile makers and investors to dominate the global market can be seen in a recent car launch party in Amsterdam led by Li Shufu’s Geely Group. For the first time in history, a Chinese branded car will be made in Western Europe for sale there, with the ultimate goal of being showcased in the US showrooms

The ambitious attempt of the Chinese automobile makers and investors to dominate the global market can be seen in a recent car launch party in Amsterdam led by Li Shufu’s Geely Group. For the first time in history, a Chinese branded car will be made in Western Europe for sale there, with the ultimate goal of being showcased in the US showrooms. In an interview to Bloomberg, Shufu made the following statement: “I want the whole world to hear the cacophony generated by Geely and other made-in-China. Geely’s dream is to become a globalised company. To do that we must get out of the country.”

Following Shufu’s path, SF Motors Inc, NIO and Byton and few other Chinese cars makers plan to sell their cars in the US by 2019. Moreover, last year in July, Volvo, which is now owned by Geely Automobile Holdings, announced that starting 2019 every new car the company launches will have an electric motor. This is possible because Volvo’s battery-powered cars will be produced in China, which is already the largest market for electric vehicles.

Nevertheless, the question still arises of whether the Chinese automobiles will be able to attract the customers in the American and the western market. It will certainly take some time given the brand loyalty that exists for Ford and the loyalty for Toyota that exist in Japan and rest of the world. In reality, it is likely that the Chinese cars would compete more directly with Japanese and Korean models, rather than the American models. Also, the current trade tensions between the Trump administration in US and China will also create hurdles for the Chinese automakers in the short run.

However, it does not mean that the competition from the Chinese should be taken lightly. The world has already witnessed the remarkable influence Chinese industry has had globally over the last few decades. Thus, China’s open ambition to dominate the global electric vehicle industry by making its automobile sector huge and powerful does not seem like an impossible task.

The writer is an economist and a former lecturer of economics in the UAE

Published in Daily Times, May 27^th 2018.