China’s GAC Group said on Oct. 10 it planned to invest $27 million in self-driving car startup Pony.ai through its wholly-owned subsidiary GAC Capital, a move expected to “create synergies” between the two companies and speed up the development of GAC’s automated driving functions. The investment marks the latest bet by a Chinese automaker to boost their autonomous driving capacity in the hope of catching up with Tesla, which on the same day said it aims to produce its driverless taxi, the Cybercab, in 2026.

GAC and Pony.ai first forged a partnership in 2018, TechNode reported, followed by Pony’s undisclosed investment in GAC’ ride-hailing platform OnTime in April 2022, when the two companies said they would together operate an autonomous ride-hailing fleet. Meanwhile, Pony.ai has been backed by a Toyota investment worth $400 million since 2020, and the two companies, along with GAC, a manufacturing partner of Toyota in China, announced a RMB 1 billion ($139 million) joint venture to make robocars last August.

State-owned GAC has also been a strategic investor in WeRide since late 2021, a self-driving car company with regional headquarters in the southern Chinese city of Guangzhou. Both WeRide and Pony.ai are looking to sell shares in the US and have obtained approval for overseas listings from Chinese regulators. Pony.ai said on Monday its autonomous ride-hailing vehicles have traveled a total of 40 million kilometers (25 million miles), of which around 4 million km were entirely driverless.

More Chinese automakers are following Tesla’s lead with their robocars. Xpeng Motors’ new model for autonomous ride-hailing services is expected to enter production in 2026, chief executive He Xiaopeng posted on Chinese microblogging platform Weibo on Oct. 10. On the same day, Tesla CEO Elon Musk said the company’s long-awaited robotaxi, with two gull-wing doors and no steering wheel or pedals, will eventually cost less than $30,000, Reuters reported.

READ MORE: The Chinese startup battling for robotaxi supremacy

Xpeng Motors is shifting towards a  camera-based sensor system and away from expensive lidar, on Thursday providing a handful of new details on its assisted driving technology. A new electric sedan also made its debut at an event, bringing the company into direct competition with popular models including the Tesla Model 3, BYD’s Han, and the Xiaomi SU7.

Why it matters: The P7+, a completely new model following in the footsteps of its first sedan P7 launched four years ago, is expected to go on sale at a competitive price point and replicate the initial success of its cheaper-than-expected and technologically advanced MONA M03.

• Xpeng reduced the cost of making its vehicles by 25% with this B-class model “through technological advancements,” expecting it to become a top-seller in the second half of this year, chief executive He Xiaopeng told investors during an earnings call in May.

New image sensors: CEO He called Xpeng’s new lidar-less, vision-based approach, “the Eagle Eye,” saying it will be the first in the industry to harness the capabilities of the so-called lateral overflow integration capacitors (LOFIC), which allow its vehicle’s cameras to capture scenes with a large brightness discrepancy.

• Image sensors usually have a limited dynamic range of brightness that can be photographed, creating overexposed or underexposed images in difficult lighting conditions such as nightscapes and backlight. However, those with a LOFIC structure have a wider dynamic range, meaning objects could be captured with a more balanced exposure.
• This makes it possible to avoid blowing out the front vehicle when the cameras on an Xpeng’s car try to recognize it at points of extreme illumination such as at the exit of a tunnel, according to a slide presentation seen on Thursday by TechNode. Xpeng said the P7+ will integrate 26 sensors, mainly cameras, as well as dual NVIDIA’s DRIVE Orin chips, but no lidar units.
• The technology is being adopted in more premium and newer consumer electronics devices due to the sophistication of the circuit’s structure, with Sony and Samsung among the major suppliers, while Chinese firms are making their replacements. Smartphone maker Honor in March announced its Magic 6 Ultimate would feature a main camera using image sensors with a LOFIC structure from Omnivision.

A sporty sedan: The P7+ is a sporty hatchback-style sedan with a gently sloping rear roofline, and a spacious interior with an impressive headroom of 973 millimeters for passengers in the rear row. With a wheelbase of three meters, it has a boot capacity of 725 liters which can rise to 2,221 liters with the rear seats down.

• All the variants come with an electric motor mounted on the rear wheel with 180 kW or 230 kW of peak output. It is powered by an affordable iron-based battery pack featuring 60.7 or 76.3 kilowatt-hour (kWh) capacity, achieving a driving range of 602 kilometers and 710 km, respectively.
• The fives-seater boasts premium comfort for both driver and passengers, as all the seats can be heated and ventilated with massage options as standard. It also provides a folding table and an eight-inch infotainment screen for rear passengers.
• The P7+ competes with rivals’ models such as the Tesla Model 3, Xiaomi’s SU7, and the BYD Han, which are priced from RMB 231,900 ($32,764), RMB 215,900 and RMB 165,800, respectively. Xpeng will reveal the pre-sale price of the car at the Paris Motor Show next Monday. A redesigned P7 went on sale last March at a price range between RMB 249,900 and RMB 339,900.

Context: Xpeng is among the Chinese EV makers pivoting to self-driving technology that uses low-cost cameras, following the lead of Tesla, over the past two years. Its advanced driver assistance system (ADAS) will be able to work on all Chinese roadways in the fourth quarter of this year, providing users with “door-to-door” automated driving across the country, the company said in July.

Chinese automakers are escalating their battle with Tesla for a bigger share in the country’s electric vehicle market. As SAIC and Changan said on Thursday, they have benchmarked their new sports utility vehicles against the US automaker’s Model Y crossover.

Changan’s premium EV brand Avatr launched (in Chinese) its first model with both full battery electric and extended-range hybrid (EREV) options in a move to expand its lineup and improve sales against the backdrop of slowing demand for pure EVs. The EREV version of the Avatr 07 has a starting price of RMB 219,900 ($31,358) and a 38 kilowatt-hour (kWh) battery pack that can charge from 10% to 80% in 15 minutes. Meanwhile, the entry-level, all-electric variant costs RMB 10,000 higher and travels 650 kilometers (404 miles) on a full charge.

Avatr, jointly developed by state-owned Changan, battery maker CATL, and Huawei, offers Huawei’s Advanced Driving System (ADS) and the HarmonyOS, the tech giant’s alternative to Google’s Android operating system, as standard features on the mid-size SUV, as it has done with previous models. The EV maker, a major investor in Huawei’s automotive business unit, delivered only about 36,400 vehicles in the first eight months of this year with two models on offer, the large SUV Avatr 11 and the 12 sedan.

Also on Thursday, IM Motors introduced a redesigned LS6 all-electric crossover, which the SAIC-controlled luxury EV maker said was the first model in its class to feature a four-wheel, steer-by-wire system that produces more exact steering ratios than a traditional mechanical steering system. This technology, something Tesla has been keen on, offers enhanced comfort and driving dynamics. All the LS6 variants feature an advanced driver assistance system (ADAS) that enables functions such as lane switching on city streets without relying on high-definition maps, similar to Tesla’s Full Self-Driving software (FSD).

The cheapest LS6 now costs RMB 216,900, representing a 6% cut from its predecessor, while the driving range has been boosted by 12% to 625 km. The top-end, dual-motor five-seater travels 750 km on a single charge and can sprint from 0 to 100 km/m (62 mph) in 3.5 seconds, with a sticker price of RMB 279,900. IM Motors, a partner to Volkswagen’s Audi brand, has four models on sale and delivered 34,719 vehicles from January to August.

READ MORE: Huawei’s answer to the Tesla Model Y is coming

Huawei is coming after the Tesla Model Y with its second EV model under the Luxeed brand in a partnership with Chinese automaker Chery, featuring its advanced driver assistance system (ADAS), a longer driving range, and a roomier interior, all at a similar price. 

The entry-level Luxeed R7 travels 667 kilometers (415 miles) on a single charge, powered by an 82 kilowatt-hour (kWh) battery pack from Chinese supplier CALB at a price tag of RMB 259,800 ($37,022), which is RMB 9,900 more than Tesla’s Model Y. It drives autonomously on Chinese expressways using the basic version of Huawei’s Advanced Driving System (ADS) without a lidar unit for remote sensing.

The higher-end versions of the compact crossover have a maximum driving range of 802 km and can navigate Chinese urban roads, for a cost of between RMB 299,800 and RMB 339,800. Customers pay RMB 10,000 on top to access the more premium Huawei ADS 3.0 software. By comparison, Tesla sells the top-end Model Y at a sticker price of RMB 348,000 and is looking to roll out its so-called “Full Self-Driving” software in the country in the first quarter of 2025, TechNode reported.

The five-seater vehicle is said to have more head and leg room than the Model Y and a boot capacity of 837 liters which rises to 2,130 liters with the rear seats folded. Still, it faces strong competition not only from the US automaker but also from local rivals, including NIO’s sub-brand Onvo and Geely-controlled Zeekr which launched similar offerings for less money last week. 

Huawei and Chery delivered only 18,091 units of the Luxeed S7 sedan from January to August, compared with more than 254,045 Aito-branded EVs sold by Huawei and partner Seres. Tesla shipped 354,693 Model Y vehicles from its Shanghai Gigafactory over the same period, according to figures released by the China Passenger Car Association, and sales of the world’s top-selling EV model totaled 1.22 million units last year, said market research firm JATO Dynamics.

READ MORE: Huawei, Chery introduce second joint model following setback

China’s Zeekr on Sept. 20 unveiled the 7X, its first family sports utility vehicle with off-road capabilities and enhanced safety features, with a cheaper price tag than Tesla’s Model Y letting it compete against the world’s top-selling model in its home market.

Zeekr said more than 58,000 customers gave refundable deposits to reserve a place in the production line queue following the car’s debut on Aug. 30. The New York-listed electric vehicle maker is ready to deliver at least 3,000 units in the remaining days of September by ramping up manufacturing rates as demand grows, vice president Jason Lin said in an interview with TechNode.

Why it matters: Geely’s stand-alone EV brand has a tough task ahead to ensure the Zeekr 7X is successful in the highly competitive mainstream market. At least four new models from Chinese car brands, including Zeekr, NIO’s Onvo, and Dongfeng’s Voyah, are testing themselves against the benchmark in the class – the Tesla Model Y.

Details: The Zeekr 7X comes in three variants with a number of creature comforts on offer, including heated front seats with massage functions and large, automatic sun blinds on the rear-side windows and car roof.

• All the variants also boast high-tech specs such as NVIDIA chips and a lidar unit for automated driving, a 36.21-inch augmented reality head-up display for navigation, and an 800-volt electrical system that can charge the battery from 10% to 80% in 10.5 minutes.
• The entry-level 7X travels 605 kilometers (376 miles) on a single charge and goes from 0 to 100 km/h (62 mph) in 5.8 seconds at a sticker price of RMB 229,900 ($32,632). The dual-motor version costs RMB 269,900, has a 705 km-plus driving range, and is able to reach 100 km/h in as little as 3.8 seconds.
• Zeekr said the five-seater is great fun to drive off-road, as the standard version has 197 millimeters (7.8 inches) of ground clearance, while its air suspension can raise it another 33 mm for maximum clearance. In the case of an emergency submerging, a car driver can break one of the car’s windows with the press of a hidden button.
• With its raised ground clearance and a high roofline, the compact SUV goes for a traditional SUV shape, which the automaker said gives passengers ample interior headroom. It features an LED strip that can display customized lighting sequences with animation on the front hood, like its sibling, the 007 sedan.

Context: Designed to provide sufficient space and a gutsy performance catering to family occupants, the 7X will expand Zeekr’s portfolio into the Chinese mainstream SUV segment with a price range between RMB 200,000 and 300,000. The EV penetration rate surpassed 46% in this price segment last year, according to figures compiled by Chinese brokerage Guolian Securities.

• Zeekr delivered 121,540 vehicles across four models from January to August, including the 001 shooting brake and the 009 van, representing an 81% growth annually. It aims to deliver 230,000 EVs this year. Tesla shipped 354,693 Model Y vehicles from its Shanghai Gigafactory over the same period, including an undisclosed number for export, according to figures released by the China Passenger Car Association.

NIO on Thursday announced its foray into the Chinese ultra-competitive mainstream vehicle segment with the launch of the first model under its family-oriented lineup Onvo, featuring class-leading utility at nearly half the price of Tesla’s Model Y by leveraging its unique battery leasing program.

The cheapest Onvo L60 crossover costs only RMB 149,500 ($21,154) under the NIO’s Battery-as-a-Service (BaaS) leasing program, which allows customers to buy the EV without ownership of the battery pack, versus RMB 206,900 including the pack. Priced at RMB 100,400 cheaper than a China-made Tesla Model Y, the car aims to be a meaningful competitor not only to the world’s top-selling model, but also to popular gas-powered vehicles such as Volkswagen’s Tiguan L and the Toyota RAV4.

The management is witnessing “a surge” in order intake following the launch, as dozens of millions of Chinese netizens watched the livestream, William Li, founder, chairman, and chief executive, told reporters in the eastern Chinese city of Hefei on Friday (our translation). More than 60% of the customers choosing the Onvo L60 consider battery-swapping technology, part of NIO’s broader BaaS strategy, as the most desirable attribute, according to Li.

BaaS becomes the key

Boasting significant ownership cost savings and fast battery swapping, the Onvo L60 is the first serious contender from NIO to challenge the Tesla Model Y, and could be different from the previous Chinese SUVs trying to win over families from the global EV crown.

Stuffed with an autonomous driving stack of 30 sensors, Qualcomm’s latest processor for infotainment applications, and attractive extras such as a huge, 52-liter car refrigerator, the affordable, functional compact sports utility vehicle offers more than RMB 100,000 worth of specifications than the Model Y. That’s according to Ai Tiecheng, president of the Onvo brand, speaking at the launch event on Thursday.

Moreover, the management expects NIO’s battery swap service, with each time taking around three minutes from an ever-expanding power infrastructure network, to mitigate the range anxiety from Chinese consumers and even remove the real obstacle of insufficient chargers away from EV driving. Onvo owners can replace their empty battery packs for a charged one in over 1,000 NIO battery swap stations nationwide by December, and more than 2,500 such facilities will be available by the end of next year, said Ai.

The standard range version of the L60 went on sale on Thursday with the impressive starting price plus a leasing fee of RMB 599 per month for the use of a 60 kilowatt-hour (kWh) battery pack that offers a 555 kilometer (345 miles) driving range. The long-range version costs the same amount with a monthly rental fee of RMB 899, claiming a driving range of 730 km with an 85 kWh battery pack, versus RMB 235,900 including the pack. A typical Onvo owner would pay an additional RMB 100-200 each month in electricity costs, according to Ai’s estimates.

“Overall it costs you roughly a tank of gas per month,” Ai added (our translation). NIO said the total energy consumption of the car is 12.1 kWh per 100 km, compared with the 12.5 kWh achieved by the Model Y.

A turning point

The success of the L60 is of vital importance to whether or not 10-year-old, loss-making NIO would become a stronger and profitable player in a bruising battle where even some of the bigger rivals are already feeling the heat. Global auto giants from Detroit’s big three to Japan’s leaders have been hurt in China, and NIO is joining an expanding group of local players in bringing their better-equipped EVs at relatively affordable prices into the market.

Against the backdrop of a slowing economy, Onvo’s first model was precisely developed to meet the real demands of Chinese families who take space, safety, comfort, and affordability in the first place, rather than performance features like extra torque or horsepower, according to NIO.

NIO said the five-seater crossover could comfortably accommodate passengers in a carefully designed cabin, providing larger headroom and legroom across both rows than the Tesla Model Y. Owners could also access popular high-tech features such as an AI voice assistant from an in-house developed operating system, as well as perform autonomous driving functions in more than 700 Chinese cities and 2,700 counties, powered by advanced chips and AI algorithms.

Li said the company is now ready for a production ramp-up with parts suppliers, with a timeline of October to make 5,000 units of the car and increase the monthly output to 16,000 in January. Another 20,000-unit milestone could follow next March, Li added, again promising a “decent” gross margin for the model. NIO’s CEO earlier this month had briefed investors about the outlook of delivering 20,000 Onvo EVs sometime next year and setting a 15% margin goal for the Onvo brand in the long term. 

Having not had a distinct hit product in recent years, NIO and peer Xpeng Motors are showing signs of making a turnaround with their multi-brand strategies.

READ MORE: NIO CEO details thinking on first Onvo EV, battery swap alliance

NIO shares rose more than 14% on Thursday after the Chinese electric vehicle maker reported record revenue of RMB 17.5 billion ($2.4 billion) in the second quarter that ended June 30, beating estimates, according to a Bloomberg survey. Its quarterly adjusted net loss shrunk 16.7% to RMB 4.54 billion from a year earlier, and the margin per vehicle sale improved to 12.2% from 6.2% a year earlier and 9.2% a quarter ago, better than analysts’ expectation thanks to cost reduction efforts. NIO’s management expects vehicle margin to grow over the rest of the year as as much as 15% in the fourth quarter, as the company aims for a higher monthly delivery target of between 30,000 and 40,000 units of its namesake luxury brand.

Meanwhile, the first model under its mass market brand, Onvo 60, is set to go on sale in September with monthly deliveries expected to exceed 20,000 units some time next year, chief executive William Li told investors during an earnings call. NIO in May began taking reservations for the compact crossover with a pre-sale price tag of RMB 219,900, cheaper by RMB 30,000 than the entry-level Tesla Model Y. NIO will have three brands in the price segment of RMB 140,000 to RMB 800,000 next year, Li added, as its entry-level lineup, codenamed Firefly, is anticipated to debut at the end of this year.

​US-listed shares of Xpeng Motors climbed 6.5% after the Chinese electric vehicle maker received more than 10,000 non-refundable orders for the first model under its new budget brand MONA in the first hour after it was unveiled on Tuesday. 

The company’s cheapest model, featuring an assisted driving system similar to Tesla’s Full Self-Driving (FSD) software at a price that’s half that of the popular Model 3, is expected to capture market share from top-selling offerings including the BYD Qin and Nissan’s Sylphy.

Camera-based vision: Xpeng eliminated laser sensor units from the MONA M03 in a move to accelerate the adoption of a camera-only approach to vehicle autonomy. Lidar is more often used to capture three-dimensional information for autonomous navigation on more luxurious Chinese EV models priced mostly from RMB 200,000 ($28,060) and above. 

• Instead, the entry-level M03, with a price tag of RMB 119,800 ($16,808), integrates 20 or so more affordable sensors, including a dozen ultrasonic sensors and seven exterior cameras, to enable safety-based driver assistance functions such as lane keeping assist, which enables the EV to follow the preceding vehicle. Xpeng’s Xpilot system would also maneuver the car in and out of challenging situations such as dead-end roads.
• The top-end version of the MONA M03, priced at RMB 155,800 ($21,859), will be able to function by itself on all Chinese roadways using the same hardware stack as well as more complex algorithms next spring when delivery is set to begin. This makes the car the only model available to the market that offers advanced driver assistance capabilities within the RMB 200,000 price range, said chief executive He Xiaopeng. 
• Xpeng also provided more details about its plan to make EVs with highly autonomous capabilities as part of the launch. The XNGP advanced driver assistance system (ADAS), an FSD-style technology, should require drivers to take over the wheel and steer manually less than once per 100 kilometers (62 miles) by the end of next year. The company added its cars could be completely driverless in low-speed traffic scenarios in 2026. 

READ MORE: Chinese companies take on Tesla’s Full Self-Driving with non-lidar approach, end-to-end AI 

Aiming for the youth market: Xpeng on Tuesday reported a better performance than some rivals’ offerings in terms of order intake for the MONA M03, saying the car racked up more than 10,000 pre-orders with non-refundable deposits of RMB 5,000 in roughly the first hour after it was released. 

• Positioned to be “the first car for China’s young generation,” the all-electric compact sedan boasts a large interior space, efficient energy consumption, and yet a relatively simple interior in order to attract the country’s tech-savvy but budget-conscious customers, such as fresh graduates.
• Measuring 4.8 meters in length and spanning a 2,815-millimeter-long wheelbase, the car was designed based on aerodynamic principles with sleek coupe-style body lines. This contributes to a drag coefficient of 0.194 and energy consumption of 11.5 kilowatt-hours per 100 kilometers (7.15 kWh per mile). 
• The single-motor M03 offers a decent range of up to 620 km (385 miles) on a single charge, powered by an affordable lithium iron phosphate (LFP) battery pack from BYD, and can accelerate from 0 to 100 km/h (62 mph) in 7.4 seconds. It also gives an additional 200 km of range after 15 minutes of charge. 
• Still, the car’s well-built but simple interior features may leave some drivers wanting more. An M03 buyer would have to pay an additional RMB 599 to equip their car with a conventional dashboard screen as an add-on component, for example. Xpeng stated that the car would function properly with a 15.6-inch centre screen. 

Context: Xpeng is expecting a strong sales recovery with the launch of the MONA M03 at a lower-than-expected price tag, as CEO He in April said he hoped that the car would sell better than the Xiaomi SU7 in the second half of this year, Reuters reported. The smartphone maker has been delivering more than 10,000 units per month of the $30,000 sports sedan since June. 

• He also anticipated annual sales of the car could reach 100,000 units when Xpeng revealed last year that it would acquire the EV business of ride-hailing giant Didi, including the MONA project, which stands for “Made of New AI.” He added on Tuesday that the two companies spent RMB 4 billion on the project over four years. 
• The gross margin of the M03 could be at a low single-digit level initially, however, as the Volkswagen-backed EV maker ramps up production and looks to keep its price as low as possible, Jefferies analysts wrote in a note on Aug. 20. 
• BYD’s Qin Plus was the top-selling model in the price segment of between RMB 120,000 and RMB 180,000 in China over the past six months with roughly 154,000 units sold, figures compiled by Chinese auto service platform Dongchedi showed.

Chinese action role-playing game (RPG) Black Myth: Wukong has sent shockwaves through the global gaming community and the impact is spreading to the automotive industry, as a Geely-linked firm is testing out new in-car gaming experience with the hit title, TechNode has learned.

Why it matters: Geely’s move shows how software-enabled advanced functionality, from watching video streams on the dashboard screen to letting the car change lanes autonomously, is becoming a decisive factor for vehicle buying in the world’s biggest auto market. Bringing China’s first AAA game to its cars could be a new way for Volvo’s parent to stimulate demand among younger drivers

Details: Ecarx, a Chinese auto tech startup backed by Geely’s chairman Li Shufu, has managed to deliver 2K resolution (2,560 x 1,440 pixels) at nearly 60 frames per second (FPS) when it tested the Black Myth: Wukong on its next-generation digital cockpit computing platform Makalu. That’s according to people familiar with the matter who spoke to 36Kr (in Chinese) on Tuesday.

• The instrument panel, the central information screen, as well as a head-up display (HUD) unit that projects traffic information onto the windshield, were functional while the game was streamed, according to the report. A company spokesperson confirmed to TechNode on Friday that the test is ongoing to improve the gaming performance further. 
• Ecarx announced last March that it had become the second auto firm worldwide to bring in-car entertainment experience with AMD’s laptop graphic chips. The Makalu computing platform consists of AMD’s Ryzen V2000 processors paired with the AMD Radeon RX 6000-series GPUs, providing up to 10.1 teraflops of computing power, more powerful than Qualcomm’s latest-generation Snapdragon 8295 chips.
• For comparison, Tesla has also pursued the offering of in-car games as chief executive Elon Musk reportedly claimed in 2020 that owners would be able to play the adventure title The Witcher 3 in its vehicles. AMD said in 2021 that its Ryzen computers and RDNA2 GPUs are powering the infotainment systems in the new Model S and Model X vehicles. Sony also integrates SoCs (System on Chip) from the US chipmaker into its PlayStation 5 consoles.
• The Makalu platform allows game developers to adapt their games to in-car systems by using Unreal Engine, a real-time, three-dimensional graphics creation software from game company Epic Games, which has been used by China’s Game Science for the production of Black Myth: Wukong. Vehicle occupants could therefore play triple-A high-definition video games via Ecarx’s system, the company said on its website. 
• Geely confirmed that the Lynk & Co Z10 large sedan will be the first model to feature a digital dashboard that integrates Ecarx’s latest computing platform. The first all-electric model under the Geely and Volvo Car joint brand will be launched on Sept. 5 following reservations opening on August 15 at a pre-sale price of RMB 215,800 ($30,234). 

READ MORE: Geely’s Lynk & Co 08 to use in-house car software from Meizu for the first time

Context: Global automakers such as Volkswagen and Mercedes-Benz have been working on mobile technology and artificial intelligence to shape the future of immersive in-car experiences. Meanwhile, NIO and Ji Yue, a Chinese EV brand owned by tech giant Baidu, have enabled users to play the hit racing game Asphalt in their latest models equipped with a Qualcomm semiconductor. 

• Black Myth: Wukong is China’s most successful PC-end game to date after selling around 4.5 million copies across various gaming platforms by far. Inspired by the Chinese literary classic Journey to the West, the action game hosted more than 2.2 million users online concurrently just hours after it was launched on Tuesday, TechNode reported. 

Audi’s new A5 sedan and all-electric Q6 e-tron crossover will be the company’s first models to use Huawei’s advanced driver assistance system (ADAS), enabling the cars to change lanes and overtake autonomously in Chinese cities, local media has reported.

Why it matters: The news marks the latest development in a six-year collaboration between Audi and Huawei. The companies announced in mid-2018 that they had signed an agreement to develop a level 4 autonomous driving system that could take complete control of a vehicle without human intervention in Chinese urban traffic environments.

• Audi had been planning to incorporate Huawei’s autonomous driving technologies in future China-made models scheduled for launch in 2025 and had been asked to buy small stakes in Huawei’s intelligent vehicle software and components firm, Reuters reported in December.

Details: The new A5 sedan, the first model that utilizes Audi’s last new internal-combustion architecture called Premium Platform Combustion (PPC), is expected to make its China debut at this year’s Guangzhou Auto Show in the capital of Guangdong province in November. That’s according to people familiar with the matter who spoke to Chinese media outlet iYiou.

• Sources added that the hatchback-style sedan, which replaces the A4 model in the German firm’s vehicle lineup, will also incorporate Huawei components such as electronic control units, and is intended to be launched at the Auto Shanghai Show 2025 next April. The A5 will be manufactured by Audi and FAW Group, one of its Chinese partners.
• Meanwhile, there has been speculation that the Q6 e-tron, Audi’s first car to use Volkswagen’s advanced premium platform electric (PPE) platform, will also use Huawei’s ADAS. Meanwhile, Audi is working with Chinese self-driving car startup Momenta on automated driving for a separate new series which has been under development with SAIC, the German firm’s other local manufacturing partner, the report said.

Context: Volkswagen’s Audi is not the only international car major open to teaming up with Huawei. Toyota has reportedly agreed to buy Huawei’s autonomous driving stack for its China-made electric vehicles, while a growing number of Chinese car manufacturers are expanding their collaborations with the tech giant. Huawei has estimated that around 500,000 cars equipped with its tech will be on the roads by year-end, Reuters reported.

• Huawei is gaining traction thanks to growing customer demand for intelligent driving functionalities in the world’s largest auto market. One company executive said last week that the latest Advanced Driving System (ADS) offers Chinese users better safety in a point-to-point autonomous experience than Tesla’s Full Self-Driving (FSD) system, as TechNode reported.
• Audi reported sales of more than 320,000 luxury cars in China for the first half of this year, falling slightly by 1.9% from the previous year and lower than the total sales of BMW and Mercedes-Benz. The German luxury carmaker has been planning a series of measures to defend its market share as domestic rivals such as Li Auto and NIO are on the rise, including buying EV technologies from SAIC and designing a new logo for future vehicles, reported Reuters.

China’s CATL on Aug 10 opened its first ever bricks-and-mortar store, with an enormous site in Chengdu showcasing nearly 100 electric vehicle models from dozens of automakers, in a move intended to beef up its brand image as a leading EV battery maker.

Why it matters: Entitled NING Space, the store is the latest brand-building initiative by the world’s largest battery maker by volume, which not only wants its automobile clients to be familiar with its products but hopes to influence end customers’ preferences, as smaller competitors chase market share by cutting prices.

Details: CATL’s first major physical location accounts for approximately 13,800 square meters (148,542 square feet) of Chengdu, the capital of China’s populous southwestern province of Sichuan.

• The facility has nearly 100 EV models on display, including top-sellers such as the Tesla Model 3, Li Auto’s L7, and the Aito M7, all powered by CATL’s lithium-ion batteries.
• It does not serve as a sales location but focuses on brand building and customer education. As Vice President Li Ping emphasized to participants at the site’s opening ceremony, CATL does not make or sell cars, Caixin reported (in Chinese).
• CATL said the NING Space will play an educational role, with its employees there to provide customers with tailored recommendations and to hold regular marketing events to tell users the EV story from a battery-maker’s perspective.
• Meanwhile, the battery giant is establishing an independent after-sales service network to provide personal buyers with maintenance and repairs for EV batteries. It boasts 112 such service centers nationwide, versus more than 600 business-to-business locations.

Context: CATL on July 26 reported mixed results for the first half of this year while its net profit jumped 10.4% from a year earlier to RMB 22.9 billion ($3.2 billion). Yet revenue dropped 11.9% year-on-year to RMB 167 billion over the same period, which the company attributed to a significant drop in the cost of raw materials needed to produce EVs.

• The battery supplier, headquartered in the eastern Chinese city of Ningde, remains the world’s top player in the industry, recording 137.7 gigawatt-hours (GWh) worth of batteries and securing a market share of 37.8% from January to June, according to figures published by South Korean market research agency SNE Research.
• The company has been launching advertising campaigns and attending marketing events over the past year to share its founder’s vision for green energy and showcase its signature products such as the Shenxing battery.
  

Correction: An earlier version of the article miscalculated the floor area of CATL’s first store which is 13,800 square meters (148,542 square feet), rather than 13,800 square kilometers (5,328 square miles) as mentioned.

Huawei on Tuesday released the latest version of its advanced driver assistance system (ADAS), saying  it would enable vehicles to carry out most driving functions automatically from garage to garage while delivering a better safety performance than Tesla’s most advanced Full Self-Driving (FSD) system.

The Chinese technology giant also launched the Stelato S9, the first model under its new luxury brand with manufacturing partner BAIC, at a lower-than-expected price range of RMB 399,800 to RMB 449,800 ($55,664-$62,625). The five-meter-long full-size luxury sedan is targeted at consumers of premium offerings such as the Mercedes-Benz S-Class and BMW’s 7 Series.

Huawei’s self-driving approach: Huawei’s latest Advanced Driving System (ADS) now allows cars to navigate complex urban environments nationwide automatically, with features such as lane switching, said Richard Yu, chairman of the board of directors of Huawei’s Intelligent Automotive Solution business unit, at a press conference in Beijing. Yu added that the ADAS will enable drivers to pass toll gates on Chinese expressways and at public parking lots without manual engagement. 

• In a demonstration video, Huawei boasts of a point-to-point autonomous experience with no human input at all, as the Stelato S9 navigates from one garage to another, autonomously piloting itself on Chinese city streets, and through a series of roundabouts and intersections. The female driver in the video is shown drinking a coffee and applying make-up behind the wheel as the car drives into and out of the garages.
• Huawei said it is transitioning to an “end-to-end” autonomous driving method, defined by Tesla’s Elon Musk as a state whereby each functionality of the ADAS is carried out by a single gigantic neural network rather than by predefined, explicitly coded rules. However, Huawei’s slides showed that the company uses separate neural networks for multiple tasks such as visual perception and path planning, in a move similar to that of rivals Li Auto and Xpeng.
• Yu said users would see an improvement in decision-making speed and more human-like behavior from the ADS 3.0 version, as well as a more agile automatic emergency braking feature in a joint effort with the company’s unnamed German supplier. Huawei claimed the system would even apply brakes automatically when a collision was imminent with a lead or rear vehicle, as well as if the system detects that drivers intend to jam the brakes but mistakenly slam on the accelerator.
• In addition, Yu spoke publicly about Tesla’s FSD after his employer tested the rival’s system in multiple cities in the US and Canada, saying the smartphone maker has a better strategy for dealing with rare or complex road scenarios, known as corner cases. “Tesla has made big progress with its FSD, but it has to raise the lower limit of the system’s performance as we encountered several incidents where a Tesla almost crashed into stationary objects such as trucks,” Yu added (our translation).

Stelato’s first model: Huawei on Tuesday stepped up its offensive against international luxury carmakers as the first Stelato model went on sale at a starting price of RMB 398,000, roughly RMB 50,000 lower than the pre-sale price and below market expectations. Yu said the S9 executive sedan was “fully ahead of” rivals’ offerings, such as the Mercedes-Benz S450L and Maybach S480, with a more efficient interior space, improved aerodynamic properties, a longer driving range, and faster acceleration.

• The first full-size luxury sedan under Huawei’s Harmony Intelligent Mobility Alliance (HIMA), a joint EV effort between Huawei and its multiple manufacturing partners, is powered by a 100 kilowatt-hour (kWh) battery pack for a driving range of up to 816 kilometers (507 miles). The battery, jointly made by CATL and Huawei, also adds 200 km on a five minute charge, when the car is used with an 800-volt capable fast charger.
• The Stelato S9 boasts a faster acceleration to 100km/h (62 mph) than existing offerings – in 3.9 seconds – as well as a drag coefficient (Cd) of 0.193, said to be the lowest among production sedans in its segment. It also integrates a lidar unit to measure and map the surrounding environment, in addition to cameras and radar, which the tech giant believes could provide extra input to its ADAS system, compared with Tesla’s pure-vision approach.
• Delivery is scheduled to begin immediately on Wednesday, demonstrating BAIC’s pledge to ”go all-in“ in its partnership with Huawei and treat the new model as its “top priority,” as chairman Zhang Jianyong told the conference. A major partner of Mercedes-Benz in China, BAIC recently established a new plant capable of making 120,000 EVs annually with Huawei and plans to expand that capacity to 300,000 EVs, Zhang confirmed on Tuesday.

READ MORE: Chinese companies take on Tesla’s Full Self-Driving with non-lidar approach, end-to-end AI

NIO on July 26 gave updates on some of its most important technological developments, including the world’s first five-nanometer chip for automated driving, its in-house developed operating system for vehicles, and a voice assistant powered by its large language model.

Why it matters: NIO’s fullest disclosure yet of its technological roadmap reflects how the Chinese electric vehicle maker spends its research and development money, and how it has made a strategic bet on artificial intelligence, hoping to redesign all aspects of its vehicles including self-driving and the so-called digital cockpit.

Details: Speaking at the firm’s annual Tech Day event in Shanghai, NIO founder and chief executive William Li unveiled new details of what he called the world’s first five-nanometer (5nm) processor for autonomous driving, said to offer cameras with top-notch image signal processing (ISP) functions.

• The Shenji NX9031 system on chip (SoC) delivers high pixel throughputs of 6.25 Gigapixels per second, which NIO said makes it capable of capturing pictures with higher quality resolution in minimally lit environments, compared with flagship offerings from leading chipmakers.
• Li confirmed that the company had completed the tape-out for its self-designed autonomous driving semiconductor, which marks the end of the design phase and the beginning of production, without revealing which company has been contracted to produce it. 
• Meanwhile, NIO is on track to release its advanced driver assistance system, the Navigate on Pilot Plus (NOP+) 2.0, in the second half of the year. The Shanghai-headquartered EV maker is one of the Chinese players looking to harness the power of AI to provide cars with point-to-point navigation on Chinese highways, city streets, and parking spaces in a race led by Tesla.
• NIO also announced the launch of its proprietary operating system, the Sky OS, with which the company said it would have central control of all vehicle domains, allowing it to provide more advanced user experiences. An alternative to the open-sourced Linux OS and Blackberry’s QNX, the Sky OS forms the basis of the entire car all the way from vehicle control through to intelligent driving and infotainment, NIO said.
• This will enable a NIO vehicle to have a used battery pack exchanged for a new one fully automatically at one of the company’s nationwide recharging facilities, allowing the user to leave the car to get a coffee, according to vice president Wang Qiyan.
• The Chinese EV maker will also release its Banyan 3.0 in-car user interface through over-the-air updates in late August, featuring an enhanced version of its NOMI conversational assistant, powered by generative AI large language models (LLMs), for more human-like voice interactions. NIO owners will be able to request a chauffeur to drive them via voice commands, the company said.

Context: Only a few global chip powerhouses, such as Qualcomm and Ambarella, have announced the production of their chips using a 5nm process node with manufacturing partners such as Samsung. Tesla reportedly plans to produce its next-generation full self-driving (FSD) computer on 4/5nm processes with TSMC.

• NIO previously implied that its sophisticated chip could handle more than 1,000 trillion operations per second (TOPS), comparable to the combined total of four NVIDIA DRIVE Orin chips on 7nm, and is scheduled for mass delivery with the company’s ET9 executive sedan in early 2025.
• NIO’s research and development expenditures grew 23.9% annually to RMB 13.4 billion ($1.89 billion) last year. CEO Li told the event that the company has more than 11,000 R&D personnel, adding that its years-long efforts on in-house chip development will be “of great significance” to the industry of self-driving cars (our translation).

READ MORE: Chinese EV makers Nio, Xpeng, and Li Auto expand bets on self-produced chips: report

Autotech startup Nullmax said on Tuesday that its latest generation of autonomous driving hardware and software package, allowing cars to navigate complex urban environments autonomously with features such as lane changing, will cost users as little as “several thousand RMB.” 

Why it matters: Shanghai and Fremont-based Nullmax is among the few players in the self-driving vehicle space claiming that cars will be able to function by themselves in urban scenarios without maps and lidar. Instead, the company said artificial intelligence models can be used to enable cars to navigate from points A to B.

• This makes its system even more cost-competitive on the Chinese market compared with Tesla’s Full Self-Driving (FSD) software, chief executive Xu Lei told reporters in Shanghai. Tesla has reportedly partnered with Baidu to leverage the latter’s lane-level navigation and standard definition mapping services, as part of its push to localize its most advanced driver-assistance software (ADAS) in the country.

Details: Xu told a press conference that his company is advocating a “pure vision” and “end-to-end” approach, as Tesla has been doing and many are following its lead, which involves deep neural networks, using cameras only to perform autonomous driving functions (our translation).

• The car could complete the highway on-ramp to off-ramp maneuver and drive through a construction zone in Chinese urban areas with affordable hardware of 7-11 cameras and a computing platform that can handle roughly 100 trillion operations per second (or TOPS), according to Nullmax.
• Xu expects some car models equipped with the technology to come to market in 2025, without saying more. Nullmax, with roughly 300 scientists and engineers, has been developing more safety-based ADAS functions for domestic automakers SAIC, and Chery, among others, TechNode has learned.
• Cars powered by Nullmax’s tech have traveled a combined 10 million kilometers (6.2 million miles). Xu added more actual driving data is required to provide cars with point-to-point navigation on city streets, while the company is training the ADAS system via simulation with AI-generated data.

Context: Chinese EV startups led by NIO, Xpeng Motors, and Li Auto have been ramping up efforts to transition from “rule-based” designs to an “end-to-end” autonomous driving method. Meanwhile, traditional car manufacturers are tapping into the power of AI by working with tech giants such as Huawei and NVIDIA, as well as startup unicorns like Horizon Robotics and Momenta.

• “What we see in the future is that the (AI-defined) AV stack will become an end-to-end model and will be trained in the cloud with massive data. More importantly, it will be validated in the cloud with simulation capabilities as well,” said Wu Xinzhou, NVIDIA’s vice president of automotive at its annual developer conference GTC in March.
• The US chipmaker in late 2021 released a system called “Omniverse Replicator” to facilitate the training of autonomous vehicles in the virtual world, Reuters reported. Chinese major EV makers, including BYD and NIO, are building their ADAS upon its DRIVE Orin computers, each of which offers 254 TOPS of performance.
• Nullmax was co-founded in 2016 by Xu Lei and Justin Song, both of whom spent time at Tesla. Xu worked on Tesla’s Autopilot computer vision team in 2015 and 2016, after leaving a senior engineering role at Qualcomm, while Song was responsible for engineering the Tesla Autopilot and car infotainment system from 2012 to 2015, according to their LinkedIn profiles.

READ MORE: Former Tesla engineer shares thoughts on end-to-end autonomous driving at WAIC 2024

Editor’s note: ‘Landing AI’ is a series of special reports focusing on the field of Artificial Intelligence curated by TechNode. By investigating the development of AI landing in China and the behind-the-scenes stories of the industry, we’re going to dive deeper into everything that’s possible under the new wave of AI.

The Chinese government on July 12 announced it had given Xiaomi a production license to independently assemble electric vehicles, meaning the smartphone maker has cleared the official hurdles required to scale up its production independently, without needing its traditional car manufacturer ally BAIC.

Why it matters: The green light from Chinese regulators will pave the way for a smooth production ramp-up for Xiaomi, which has raised its delivery target to 120,000 from 72,000 units for this year and hopes to reach a wider customer group with upcoming models.

Details: Xiaomi is now on the list of “all-electric passenger car manufacturers,” according to the registration filings released for public review by China’s Ministry of Industry and Information Technology (MIIT) on July 12 (our translation).

• Xiaomi also updated the filing for registration of its first consumer car, the SU7, to the country’s top industry regulator, with the model carrying the “Xiaomi” name on its rear, rather than “Beijing Xiaomi” as previously shown, the photos revealed by MIIT show.
• The popular sedan has always been manufactured at Xiaomi’s factory in the Beijing Economic and Technological Development Zone, but its production application had earlier been filed in the name of a subsidiary of state-owned automaker BAIC, TechNode reported.
• The company had been waiting for final approval from MIIT after getting the nod from China’s state planner to manufacture EVs, Reuters first reported last August, while reportedly looking for a partner to produce its second model. Its Beijing plant can turn out 150,000 cars a year.

Context: Xiaomi reached the 10,000-unit milestone in June, its third delivery month, bringing the year-to-date delivery volume of its answer to Tesla’s Model 3 to nearly 26,000 units.

• President Lu Weibing told investors in May that the company is aiming to deliver 120,000 cars this year. This is far higher than the firm’s original target of 72,000 units revealed by chief executive Lei Jun at Xiaomi’s annual investor day in April, CNBC reported.
• Priced from RMB 215,900 ($29,881) with styling similar to the Porsche Taycan, the all-electric Xiaomi SU7 has become a success in China, securing 88,898 pre-orders in the 24 hours following its launch on March 28. The company has since been under pressure to ensure timely delivery.
• The tech giant is also rushing to introduce its second car, an all-electric sports utility vehicle, in the first half of next year, while a third model is said (in Chinese) to be an extended-range hybrid (EREV) targeting Chinese families, and is scheduled for release in 2026.

READ MORE: “China’s Apple” Xiaomi takes aim at Tesla with debut EV launch, as millions watch online

A former Tesla engineer, now head of autonomous driving at China’s Chery, on July 4 shared her outlook on Chinese automakers’ future capacity to scale autonomous driving technology, as Tesla leads the way with its mass data and sophisticated artificial intelligence models.

Domestic companies are roughly 1.5 to 2 years behind Tesla in developing “end-to-end neural network” technology for autonomous driving. The recent release of Tesla’s Full Self-Driving (FSD) software v12 marked “a great leap forward” in applicability and user experience (our translation) according to Gu Junli, chief executive of Chery-affiliated ZDrive.ai, and a former senior staff machine learning engineer at Tesla, speaking at this year’s World Artificial Intelligence Conference (WAIC) in Shanghai.

Gu said she expects Chinese players to partially replace modules of advanced driver assistance systems (ADAS) with data-driven, rather than rule-based, neural networks by 2025. This shift comes as car companies ramp up efforts to collect fresh, multiformat data to improve models with more computing power. However, there would not be a single large neural net, where the core capability of Tesla’s latest software is built, for production cars until 2026-2027 in China, Gu added. Tesla in April announced its FSD users had traveled a cumulative 1.2 billion miles.

Recent figures from the community-run FSD Community tracker show Tesla’s remarkable progress in refining its autonomous driving features. The latest FSD v12.3.6 version can drive 372 miles (599 kilometers) between critical disengagements, compared with just a few miles it reportedly achieved two years ago, according to crowdsourced data released by the website in May. Tesla chief executive Elon Musk later forecasted on X “a major improvement in MPI (miles per intervention)” with the release of the FSD v12.5 in late June.

“This means the system has met the requirements for most users on normal daily commutes,” said Gu.

Several Chinese early movers are working to achieve a partial end-to-end pipeline for enabling their advanced driving features, hoping to gradually transition to fully end-to-end algorithms. On July 5, Li Auto revealed details about what it called “China’s first single one model” behind its Navigation on ADAS (NOA) functions. The Chinese electric vehicle startup claimed this model would use raw sensor input to generate vehicle motion plans. However, unlike Tesla’s solution of “basically photons in and controls out,” as described by Musk, it still relies on pre-defined, explicitly coded rules to produce control actions as output.

Meanwhile, other peers, such as Xpeng Motors and Huawei, have been taking partial end-to-end approaches, using separate neural networks for multiple tasks such as perception, planning, and action, while many are still struggling to improve results. According to a recent survey compiled by China’s Gaogong Industry Institute, Chinese users typically take the controls at least 1-2 times per 100 kilometers (62 miles) as their cars’ ADAS functions do not react appropriately in urban scenarios. Tesla may find issues in localizing its ADAS software due to China’s complicated traffic conditions, said Xpeng’s head of autonomous driving, TechNode reported.

Gu mentioned Chery’s plan to launch the advanced city NOA function for some premium models in the first quarter of next year, while its single deep learning network could go live in 2026. The Chinese auto major, which sold nearly 1.9 million cars last year, plans to integrate Level 2 ADAS systems into as many as 500,000 new cars sold this year, including 150,000 units for overseas markets. Based in the eastern Chinese city of Wuhu, Chery had a relatively late start in autonomous driving, with ZDrive.ai being set up early last year.  

Despite Tesla’s leading position with its training wheels finally taken off, Gu envisioned that Chinese companies would contribute to a wider and more personalized adoption of self-driving technology worldwide. State-owned Chery in April reached a joint venture deal with Spain’s EV Motors to produce cars at a former Nissan plant in Barcelona later this year, Reuters reported. Meanwhile, customers from some overseas markets could access Xpeng’s XNGP ADAS capabilities as early as next year, president Brian Gu told investors during an earnings call in May.

READ MORE: Chinese companies take on Tesla’s Full Self-Driving with non-lidar approach, end-to-end AI

Chinese carmakers Geely, NIO, and Huawei-backed Aito on Monday reported record deliveries of electric vehicles for June as the country’s EV segment recovery gathers momentum. Meanwhile, Huawei and Li Auto are emerging as the leaders among the newer players, despite BYD and Tesla still enjoying a near-duopoly position in the world’s largest EV market.

Why it matters: The rally, which contrasts with overall flat sales in the market, comes amid a temporary cooling-off period for the industry-wide price war on electric autos in the country. It also reflects companies’ sprints to make deliveries by the end of the first half of 2024. A new wave of consolidation and some reshuffling is also speeding up within the sector, with fewer smaller players staying in the game and some legacy giants falling behind.

Details: Li Auto topped the ranking among young EV makers by delivering 47,774 cars to customers in June, up 36.4% from a month earlier, as sales of its most affordable extended-range hybrid crossover the L6 started to ramp up after its April launch. Chief executive Li Xiang also attributed the sales recovery to improved efficiency, as the company restructured its sales and delivery teams recently following a failed launch of its first all-electric model, the Mega, in March.

• Huawei continues to put pressure on Li Auto despite delivering 1,633 fewer vehicles than the Nasdaq-listed EV startup in June. The Chinese technology giant said its Harmony Intelligent Mobility Alliance (HIMA), which for now includes Aito and Luxeed brands only, delivered 194,207 vehicles from January to June, which is more than the 188,981 units posted by Li Auto. Huawei will launch a new premium brand called Stelato with partner BAIC next month after it began taking orders for the first model, the S9, on May 31.
• Among traditional competitors, Geely set a new record for EV sales of 65,959 units in June. In particular, deliveries of its mainstream luxury brand Zeekr surpassed the threshold of 20,000 units for the first time since its inception. Geely management on Tuesday announced it was raising this year’s sales goal by 5% to 2 million units, while Zeekr’s annual outlook of selling 230,000 units remains on track. Lynk & Co sold 24,439 cars last month, 62% of which were EVs, a record high percentage for the Geely-Volvo joint brand.
• Changan’s EV sales rose 61% year-on-year and 14.7% month-on-month last month to roughly ​​64,000 units, of which 16,659 were Deepal-branded EVs. The automaker said it received more than 15,000 refundable orders for its first off-road sports utility vehicle, the Deepal G318, priced from RMB 175,900 ($24,186), five days after it was launched on June 13. Chery’s EV sales surged 181.5% to 180,947 units during the first half of this year, thanks to strong overseas demand for its budget cars, such as the QQ Ice Cream and Little Ant.
• Both NIO and Leapmotor reached the 20,000-unit milestone in June. NIO has sustained the growth momentum that it’s seen since April and is demonstrating the potential to deliver 30,000 cars a month once its first mainstream car goes on sale in September. Leapmotor reached the milestone for the first time last month, as the Hong Kong-listed firm now positions itself as a cheaper alternative to Li Auto. Smartphone giant Xiaomi handed over more than 10,000 SU7 sedans to customers in its third delivery month.
• Meanwhile, Tesla is feeling the heat. Sales of its China-made vehicles declined 10.5% year-on-year to 426,623 units during the first half of this year, including exports, according to figures released by the China Passenger Car Association (CPCA). The US automaker said on Tuesday it delivered 443,956 vehicles in the three months to June 30, a smaller-than-expected 5% drop from a year earlier and up 14.8% from the previous quarter, sending shares up more than 10%, Reuters reported.

Context: China’s retail passenger EV sales volume is expected to reach 864,000 units in June, representing a 30% growth from the same month last year and a 6% rise from May, while overall car sales declined 8% year-on-year, the CPCA estimated on Wednesday.

READ MORE: China’s EV sales recovery picks up pace in May, helped by promotions

As Tesla’s most advanced driver assistance software (ADAS) is becoming an immediate threat due to its impending arrival in China, major Chinese electric vehicle makers and auto tech companies are hurrying to pivot their strategies towards a more pragmatic yet challenging approach to developing similar offerings. Although Tesla’s rivals have for years been looking to cut out expensive components and master the newest artificial intelligence models, the game seems to be different this time.

Both NIO and Xpeng Motors are now embracing the so-called computer vision approach, championed by Tesla, hoping their upcoming models will achieve human-like downtown driving in cities via the use of fitted cameras and radar, rather than more expensive laser sensor units. Sinpro.ai, a supplier to NIO of ultra-high-resolution four-dimensional (4D) imaging radar, said it is prepared for delivery later this year with an annual capacity of 800,000 units. Tesla has reportedly replaced radar sensors on some models after years of attempting to remove them.

“It will be a difficult task for Tesla’s Full Self-Driving (FSD) software to deal with scenarios in China where it is common that a large number of electric scooters are usually ahead in the same lane with motor vehicles,” Li Liyun, vice president of autonomous driving at Xpeng, wrote on June 27 on Chinese Twitter-like microblogging platform Weibo. Xpeng is planning to remove lidar from its upcoming sedan, scheduled for launch later this year, local media has reported.

Xpeng and NIO are also following Tesla’s suit by transitioning to an “end-to-end” autonomous driving method after using modular-based neural networks that are heavily reliant on explicit coding. Meanwhile, more traditional automakers are turning to domestic tech companies for help, such as Huawei and DJI, to catch up with the latest AI trend. Despite big challenges pressuring the industry, some early movers have the potential to compete with the US pioneer, Liu Guanghao, partner at Shanghai-based venture capital firm Befor Capital, told TechNode.

READ MORE: China opens door wider to Tesla as local giants disrupt the EV sector with AI-defined vehicles

Vision-based approach

A break from previous strategies of using expensive chips and sensors to enable ADAS capabilities, the latest approach centers on reducing the cost of components in hopes of making more room for further price cuts. Many now have their eyes on the use of radar, ditched by Tesla in 2021 due to limitations in identifying stationary objects with low image resolution, as some parts makers now said it is coming close to lidar in terms of performance – but at a lower price tag.

“There is more overlap between lidar and our sixth-generation radar systems as we significantly improve the resolution,” Juergen Brandl, Head of Market China, Business Area Autonomous Mobility at Continental Group, told TechNode. “Radar could soon see through [objects] but lidar has some problems with the distance especially in difficult situations like fog and rain.” The German firm’s newest front-facing radar boasts a detection distance of 280 and 140 meters (174 and 87 miles) for vehicles and slow-walking pedestrians, respectively.

Advanced radar solutions like this also create three-dimensional point cloud datasets like lidars, helping automakers and developers move towards fully end-to-end models with raw data collection from multiple sensors to train their self-driving systems. “We can play a big role in the development of Level 2 plus ADAS systems in China,” Brandl said, adding that the company’s product is below the price of a lidar unit with “very good“ output in terms of point cloud data.

Some disagree however, saying the technology is still at an early stage. Production of Continental’s latest-gen radar started early this year and the company began delivering the world’s first 4D radar in 2021, which detects an object’s vertical information in addition to distance, direction, and relative velocity, generating more dense point clouds than a contentional radar. Meanwhile, major Chinese lidar makers have consistently enhanced the performance of their products and lowered the prices to just over RMB 1,000 ($137.6) per unit in recent years.

The key is whether 3D/4D radar could prove to be a more “cost competitive” option compared with lidar, said Liu. “I believe both [radar and lidar] have their special advantages and disadvantages,” Brandl said. ”I think time or the market will tell whether we need both of them or one solution only.”

Either way, prospects for early players are bright. Momenta, a self-driving car company backed by General Motors and Toyota, expects the bill of materials, or total cost of components, for the City NOA (Navigation on ADAS) function to be slashed to RMB 4,000-5,000 from the current RMB 7,000-10,000 in the next two years. The intent is to survive an unprecedented price war in China that has been ongoing for more than a year.

End-to-end AI

Chinese carmakers used to brag about their coverage of cities where their assisted driving software is said to enable cars to handle on-ramp to off-ramp driving, automatic highway lane changing, and congested streets. However, many are now pivoting their focus to provide a more human-like driving experience and a full end-to-end AI model is now seen as key to winning the battle.

Described by Tesla chief executive Elon Musk as “basically photons in and controls out,” such end-to-end neural networks play an integral role in a vehicle’s decision-making process, taking raw sensor data as input and producing control actions as output. This contrasts with the conventional approaches that see each functionality, from perception to planning and action, developed individually using rule-based designs, which are often inadequate  in addressing the vast number of scenarios that occur on the road, a team of researchers said in a recent report.

The result is that people still feel their cars pilot themselves inhumanly even when kitted out with some of the most cutting-edge ADAS on the market, partly because human driving behavior tends to be consistent rather than discrete. It is very difficult for the current AV (autonomous vehicle) stack to make coherent, long-term decisions, said Wu Xinzhou, Nvidia’s vice president of automotive at its annual developer conference GTC in March.

Recent surveys have shown automakers that customers are generally dissatisfied with existing ADAS functions. Nearly half of respondents take the controls 1-2 times per 100 kilometers (62 miles) as the city NOA functions do not react appropriately, while others make more frequent interventions, according to a recent survey compiled by China’s Gaogong Industry Institute. “When the driver has to interfere pretty often, then you cannot say this is autonomous driving,” said Brandl.

Xpeng is aiming for less than one intervention per 1,000 kilometers in major traffic areas in China, CEO He Xiaopeng announced early this year, without giving a timeframe. This was followed by a new software update for its XNGP ADAS in May enhanced by the first end-to-end AI model for production vehicles in China, according to the EV maker. NIO reshuffled its autonomous driving department recently, rolling up its perception as well as planning and control teams into a single group with a focus on new AI models, Chinese media outlet LatePost reported on June 19.

It requires huge amounts of data, for example, millions of video clips, to train AI systems, as well as deep pockets and access to AI chips. Musk told investors in April that his company will increase the number of Nvidia’s flagship AI processors it uses from 35,000 to 85,000 by the end of this year. He wrote in a post on X earlier that month that the investment in training computers, gigantic data pipelines, and video storage will be well over $10 billion cumulatively this year.

Such major investment and effort is not something all companies can handle however. “It would be so hard for most traditional automakers to do this by themselves. The best way is to pick a supplier,” Liu said.

The entry of Tesla’s FSD into China may feel like a new challenge therefore, but it may also coincide with a new era of partnerships around self-driving technologies.

Chinese automaker Dongfeng Motor will introduce the first global model from its premium electric vehicle brand Voyah as early as the third quarter of this year, in what will be a direct challenge to Tesla’s best-selling crossover the Model Y, local media has reported.

The 100% electric compact sports utility vehicle (SUV) will feature Huawei’s vision-based approach to automated driving functions on urban streets. It will also be produced in a joint plant set up with Nissan, as fierce competition has put downward pressure on the Japanese firm, a regulatory filing has shown.

Why it matters: Stellantis and Nissan’s Chinese manufacturing partner expects the model to appeal to young families and drive sales in the country’s already crowded mainstream luxury EV segment, company sources told National Business Daily (in Chinese) on Tuesday.

Details: Sources added only full-electric variants will be on offer for the Zhiyin (知音), which loosely translates as “bosom buddies” in Chinese. This is in line with a filing that was published last month by China’s top industry regulator, which shows the car has six variants with battery options using two types of cathodes – more energy-dense nickel cobalt manganese (NCM) and cheaper lithium iron phosphate (LFP).

• The five-seater SUV measures 4.7 meters in length and 1.6 meters in height with a wheelbase of 2.9 meters, according to the registration filings released by China’s Ministry of Industry and Information Technology (MIIT). This is roughly the same size as the Tesla Model Y and smaller than the first model under the Voyah brand, the Free SUV.
• The all-wheel drive version will have a dual electric motor setup with both motors providing a power output of 160 kW, while other variants will be offered with either a 215 kW or 230 kW electric motor. All the variants have no lidar components, which are normally packaged on the car roof or near the bumpers to help the vehicle sense and interpret its surroundings.
• This means the new car will utilize the so-called “pure vision” approach, a strategy championed by Tesla, relying on cameras and artificial intelligence, rather than the more visible but more expensive laser sensor units, to achieve automated driving. Voyah announced in April at this year’s Beijing Auto Show its first global model would feature Huawei’s intelligent driving software and operating system HarmonyOS.
• Dongfeng will manufacture the car at its latest joint plant with Nissan, which opened last year in the central Chinese city of Wuhan with an annual capacity of 300,000 units. Nissan has been making several electric models including the Ariya with Dongfeng at this plant to date, although it sold less than 2,000 units of its second EV-only model in the country over the past six months, figures compiled by auto service platform Dongchedi showed.

Context: Nissan’s China joint venture with state-owned Dongfeng reported sales of 723,139 cars in the country last year, representing a 21.5% plunge from a year ago. The companies last November announced plans to export vehicles from China in 2025. The Japanese carmaker was also reportedly considering a 30% cut of its annual car output in China, along with peer Honda.

• Dongfeng’s Voyah in January announced a collaboration with Huawei to develop smart EVs. The brand has three models on sale and delivered 24,869 EVs, including all-electrics and plug-in hybrids, from January to May. The automaker’s off-road vehicle lineup Mengshi also works with Huawei.

The first electric vehicle model of NIO’s lower-priced, family-oriented sub-brand Onvo finally made its debut in Shanghai on Wednesday, the International Day of Families, after three years of development. The coupe-style sports utility vehicle was surrounded at its unveiling by not only hundreds of journalists but also Chinese parents who took their children to the event, and who the company hopes will form the very first owners of the long-anticipated car.

The Chinese EV maker on Wednesday began taking reservations for the Onvo L60 at a pre-sale price tag of RMB 219,900 ($30,471), cheaper by RMB 30,000 than the entry-level Tesla Model Y but with a longer driving range and a roomier interior space, among other advantages. The SUV, scheduled for launch in September, is expected to be priced at under RMB 200,000, and come with NIO’s Battery-as-a-Service (BaaS) program, in which customers buy a car and pay for a battery rental service, similar to the company’s scheme for NIO branded cars.

Confident in the strong competitiveness of its offering and a large customer base in China, NIO management said it has “high expectations” for Onvo, which is short for “on voyage” in English. Its Chinese name Ledao translates as “path to happiness.” Speaking to reporters after the debut on Thursday, William Li, founder, chairman, and chief executive of NIO, shared additional details about NIO’s ongoing partnerships for battery swapping with some of China’s most established car manufacturers, including Geely, Changan, and GAC. 

First Onvo EV

NIO’s first mainstream crossover, with a similar shape to its more premium siblings, competes with Tesla’s Model Y, the world’s top-selling electric SUV, from nearly every perspective. The entry-level L60 comes with a driving range of 555 kilometers (345 miles), a bit longer than that of the rear-wheel-drive Model Y (554 km), while the other two variants travel more than 730 km and 1,000 km on a single charge, respectively. 

The company also said that the L60’s outstanding wind resistance, measured by a drag coefficient of 0.229, increases its effective range, while a 900-volt electrical system reduces energy loss to heat, giving it a longer range. The total energy consumption of the car is 12.1 kilowatt-hours (kWh) per 100 kilometers, compared with the 12.5 kWh achieved by the Model Y, according to NIO. 

Li said that NIO will make a “pretty decent” gross margin from the L60, by focusing on core values that matter to Chinese families, rather than producing a vehicle with a dazzling array of unnecessary specs, a move that keeps the car’s overall costs under control. Cost savings also come from NIO and Onvo sharing research and development costs, among other synergies.

The Onvo L60 embraces the vision-based approach advocated by Tesla, which uses cameras and artificial intelligence and gets rid of lidar sensors for autonomous driving. It also uses a smaller and more affordable lithium iron phosphate (LFP) battery pack from BYD, according to Reuters.

Battery swaps

NIO also provided details about its extensive power infrastructure network, which is claimed to be the largest of its kind in China with more than 2,415 battery swapping stations as of Wednesday. It has long been a loss-making effort for the company but is now emerging as an attractive option for charging availability and cost reduction for a growing list of Chinese auto giants. 

Onvo owners will only be able to use the company’s newer swap stations (the third- and fourth-generation ones) and will share the facilities with NIO’s partners. Each of the newer swap stations, which can hold more than 20 battery packs of different sizes, can offer more than 400 swaps per day, with each pack being used roughly up to 20 times. Li mentioned the company’s plan to charge partners a service fee of roughly RMB 20-30 per swap. NIO itself completed nearly 70,000 battery swaps per day as of May 8. 

Meanwhile, NIO owners can “refuel” their vehicles at any swap shop, giving them more charging availability and a premium user experience. The company said it is on track to build 1,000 battery swap facilities on its own this year and expand the network for NIO and Onvo from the 2,316 stations available as of the end of last year, while its partners are also set to provide additional resources. 

Li added that he envisaged there being six to seven EV battery sizes at most over the long term, with partners set to use batteries of the same kind as Onvo. NIO currently uses batteries in four sizes with an energy density ranging from 70 to 150 kWh.

READ MORE: Drive I/O | Big bets on battery swaps

Tesla claimed on its Chinese app on Monday that it would be rolling out its full self-driving (FSD) system “very soon” rather than the previously stated “a bit later” (our translation). The development comes as the US automaker reportedly received tentative approval from Chinese authorities to deploy its advanced driver assistance systems (ADAS) in the world’s most competitive electric vehicle market following a surprise visit to Beijing by chief executive Elon Musk. 

Local customers have expressed mixed views about the potentially game-changing technology finally coming to their country, although many Tesla owners and loyal fans welcomed the long-overdue launch on social media. The technology may not yet work well in Chinese urban driving scenarios, despite costing RMB 64,000 ($8,838); most competitors such as Xiaomi promise to offer similar functions free of charge, Li Yang, a Model 3 owner in Shanghai, told TechNode on Tuesday.

Major Chinese EV players Huawei and Xpeng Motors, who specialize in autonomous driving, have responded in a relaxed way to what is seen by many as a major win for their US rival. 

“We are confident that Huawei’s intelligent driving system is the best in the world,” Richard Yu, Chief Executive of Huawei’s Consumer Business Group, said at a press event last week as the company introduced the redesigned Aito M5 crossover. Aware of Tesla’s release last month of the no-longer-in-beta FSD software, Yu said the company has closely studied its competitor’s technology by taking test rides in San Francisco, among other US cities. 

A long-awaited battle: Experts told TechNode that the US and China have been in a neck-and-neck race to develop “end-to-end neural network” technology, seen by experts as the biggest difference between Tesla’s FSD v12 software and earlier versions.

• Tesla chief executive Elon Musk stated publicly in November that its most updated, end-to-end FSD uses machine learning rather than rules crafted by programmers to absorb driving behaviors from large datasets. The approach reduces the carmaker’s reliance on coding, expensive sensors, and high-precision maps for exact road information.
• “It is more of a 1,000 flowers blooming type of situation here in China, while the US market is guarded by a sole player,” Paul Gong, head of China autos research at UBS, told reporters on Monday in Beijing, referencing a Chinese idiom. Both the US and China are at the forefront of the technological trend, followed by Europe and the rest of Asia, Gong added.
• Although Tesla has huge amounts of data, Chinese firms have the potential to quickly catch up by ramping up their test fleets, according to Song Chaozhong, CEO of Chinese self-driving car startup eCHIEV. Song cautioned that real, “human-like” autonomous cars are still far away, despite the technology likely being a positive driver for vehicle sales. 

A booming segment: Analysts expect Tesla’s imminent launch of the FSD software in China to not only help restore Beijing’s image among foreign investors in general, but also help China extend its lead in the adoption of driver-assist technologies worldwide, and enhance its reputation as a rising powerhouse of next generation cars. 

• China has become a source of innovative engineering for global automakers, as they are now leveraging the capabilities of Chinese companies to design global vehicle offerings, Gong said when asked his view of this year’s Beijing Auto Show. He added China’s push to open its industries to greater foreign investment and competition has been “underestimated.”
• Tech-literate Chinese EV makers are poised for explosive growth thanks to growing interest from Chinese consumers in intelligent driving features, as Elon Musk earlier predicted a “ChatGPT moment” was coming for his company. Huawei on April 24 estimated that more than 500,000 cars on Chinese roads will feature its advanced driving system by year-end. 
• Xpeng is scheduled to launch its affordable brand MONA in June with the first model expected to feature an autonomous driving system without the integration of lidar and aiming for annual sales of 100,000 units. Global shipments of vehicles with ADAS features, known as Level 2 plus autonomy, could more than double to 4.5 million units this year, with China leading the game, research firm Canalys wrote in December.

Context: Tesla’s China breakthrough comes after US Secretary of State Anthony Blinken on April 25 called on China to provide a level playing field for American businesses during his second visit to China in less than a year, Reuters reported. 

• The US automaker has reached a deal with Baidu to localize its driver assistance solution with map and geographical information from the Chinese tech giant, according to Bloomberg.

Global carmakers from Volkswagen to Toyota are introducing new models at the Beijing Auto Show 2024 with the help of Chinese tech companies in an effort to defend market share amid a major shift to electric vehicles led by local car giants. 

The biannual trade event, which on Thursday witnessed a return to pre-pandemic attendance levels after a brief pause in 2022, also represents another landmark moment for the Chinese EV sector where domestic players are once again on the offensive with an array of new models. A similar event in Shanghai a year ago reportedly prompted the industry’s legacy players to either increase their efforts or rethink their brands in order to adapt to the changes.

Below, TechNode provides a summary of some of the biggest releases from both international and Chinese automakers, including BYD, GAC, Geely, Honda, Toyota, and Volkswagen. There are also some notable updates from younger players such as Xiaomi, NIO, and Xpeng, which might give a clue as to where the most competitive EV market in the world is heading. 

BYD

China’s biggest EV maker on Thursday unveiled a higher-end variant of its Qin vehicle, the top-selling compact sedan in the country last year. The new car is scheduled for launch in the second quarter with an expected price tag of RMB 120,000 ($16,560). The Qin L measures 4.8 meters in length and spans a 2,790-millimeter-long wheelbase, placing it between the Qin Plus and the Han in terms of size. It features the company’s next-generation plug-in hybrid platform DM-i 5.0, which could suggest an improvement in range and fuel efficiency. The company also introduced the Seal 06, a plug-in hybrid EV under the Ocean lineup which is about the same size as the Qin L but loaded with more stylish design language to attract younger customers. 

GAC

Aion, the third best-selling EV brand in China last year after BYD and Tesla, showcased its first global model, replete with modern technologies and angular styling, as its state-owned parent beefs up its strategy to woo customers worldwide. GAC said its all-new Aion V, scheduled for launch in July, will maintain a driving range of over 750 kilometers (466 miles) even when the mercury dips to -30 degrees Celsius, and offers a large interior space comparable to the likes of the BMW X5. The all-electric sports utility vehicle, which incorporates traditional Chinese dragons into its design, can navigate varied urban environments worldwide with features such as lane switching by utilizing advanced artificial intelligence algorithms to process sensor data instead of high-precision maps, the company said.

Geely

Volvo’s parent showed its ambition to become a disruptive force in the global automotive industry with the debut of what it described as the world’s first production model with two sliding doors and front swivel seats. Geely has taken a radical approach to how EVs are put together, giving the 4.7 meter-long Zeekr Mix an extended wheelbase of three meters achieved through a more compact electric motor, shorter front overhangs, and repositioning of the air conditioning system, among other components. This, along with the front seats that can rotate 270 degrees, would allow kids to play or families to dine together in a 1.5 square meter interior flat space. The five-seater multi-purpose vehicle, offering a 1.5 meter width opening area for passengers, targets three-generation Chinese families, especially those with elders and pregnant mothers.

Honda

Japan’s Honda on Thursday began selling its second all-electric model with time-limited discounts in China in the company’s latest effort to boost sales. The move comes after entrenched rivals such as BYD and Tesla recently rolled out more price cuts amid slowing growth. The e:NP2 SUV has a driving range of 545 km at a price tag of RMB 159,800, providing buyers with a RMB 30,000 reduction compared to its original plan, according to Li Jin, a deputy general manager of Honda’s China joint venture with GAC. Honda also debuted the Ye, a new series of all-electrics with technologies sourced from Huawei and iFlyTek among other Chinese tech firms, as part of its plan to sell only EVs in China by 2035.

Toyota

Toyota said on Thursday it will integrate lidar sensors into its two upcoming models under the “Beyond Zero” (bZ) all-electric series, as the world’s top-selling automaker looks to provide consumers with the same level of assisted driving technology as Huawei and Xiaomi. The bZ3x and the bZ3c compact crossovers will be able to automatically change lanes, and enter and exit Chinese highways when they go on sale within the next 12 months. Toyota also announced it is exploring the uses of generative AI in collaboration with Tencent, as Chinese consumers expect their future vehicles to be more capable and personalized. This follows reports that the Japanese giant is using Huawei components to enable autonomous driving functions on its China-made EVs. 

Volkswagen 

Germany’s biggest carmaker participated in Auto Beijing 2024 with major global debuts including the ID.Code concept – which offers a glimpse into its upcoming, China-specific all-electric lineup ID.UX – as well as the Audi Q6L e-tron, the first production model based on its PPE electric platform. The coupe-styled ID.Code will be equipped for highly autonomous driving and come with a sophisticated AI assistant with contributions from local designers, as Volkswagen plans to introduce the first model under the new series later this year. In addition to partnerships with Xpeng and Horizon Robotics, the automaker confirmed it is working with Chinese tech giants including DJI, as its latest Tiguan L SUV now features an advanced driver assistance system (ADAS) sourced from the drone maker.  

Xiaomi, NIO, and Xpeng

Xiaomi was the center of attention on Thursday when the Chinese smartphone giant said it had secured 75,723 reservations with non-refundable deposits for the SU7, its first EV, with a competitive price range between RMB 215,900 and RMB 299,900. Chief executive Lei Jun expects monthly delivery to exceed 10,000 units in June and the company is set to reach a milestone with 100,000 EV deliveries by this year, which would be a record speed for any Chinese EV brand. The 55-year-old entrepreneur is an icon in the Chinese tech and auto industries, with his visits to rivals’ booths becoming one of the hottest topics at this year’s Beijing Auto show.

Xpeng Motors could take on its major frenemy with the mainstream brand MONA, short for ‘Made of New AI,’ CEO He Xiaopeng told reporters during a press conference. 

Meanwhile, one of NIO‘s new affordable brands, called ONVO, is scheduled for launch in the second quarter of this year. The luxury EV maker on Thursday launched a redesigned version of its ET7 sedan with a starting price of RMB 428,000, which is RMB 20,000 lower than its original version launched three years ago.

READ MORE: Huawei, Xiaomi, and Geely’s new EVs have details leaked on Chinese government site

Chinese electric vehicle brand Zeekr has grabbed the spotlight again after unveiling one of the finest luxury vans Chinese consumers can buy. The company says it is seeking to end the dominance of multinationals in the Chinese market, where dealers charge significant markups for similar offerings.

“This is among our top missions,” said Andy An, chairman of Geely Auto Group and chief executive of Zeekr, at a press event on April 19, calling the status quo “irrational” (our translation). An added that Chinese car brands now offer best-in-class luxury and safety as the market makes a transition to smart EVs. Dubbed “a royal suite” on wheels and a fully-electric answer to the Rolls-Royce Cullinan, the Zeekr 009 Grand costs only a fraction of the models that comprise BMW’s luxury lineup and costs less than the Toyota Alphard, one of its key competitors, at a price tag of only RMB 789,000 ($108,961).

The launch comes as Geely’s EV unit sees strong and continuous demand for its products on its home turf and is set to embark on a major push into global markets. The latest sales figures show that the Zeekr 001 has overtaken Tesla’s Model 3 as the best-selling battery-powered sedan in the Chinese premium car segment, as the company maintains its annual delivery target of 230,000 units for this year.

China’s answer to the Rolls-Royce Cullinan

The Zeekr 009 Grand boasts a combination of sophisticated craftsmanship and cutting-edge technologies and is geared towards the demands of Chinese celebrities and business leaders. Among the mesmerizing features include “curtain” glass that presents as pitch-black in less than two seconds and a single-click mode that deletes users’ travel history and contact data, designed to provide security and privacy. 

Zeekr is also upgrading its “giga-casting” technology, a technical term from Tesla that describes a process to diecast almost all vehicle underbody parts as one to improve car body stiffness. With the two rear seats coupled with die-cast vehicle frames in a C-shape formation, safety tests have concluded that the van’s interior remains intact following a rear-end collision by a 2.3-ton trailer at 50 kilometers per hour (31 mph), according to a video clip presented by the company. 

With only one variant, the 009 Grand has a driving range of 702 kilometers (436 miles) based on City Light Test Cycle (CLTC) standards, despite having more powerful motors than its original version.

The Chinese automaker says its four-seater outperforms the Rolls-Royce Cullinan in on-road performance with the adoption of artificial intelligence algorithms and adaptive dampers and air springs to smooth the ride, technology also embraced by BYD and Huawei. While Chinese carmakers from Li Auto to Great Wall Motor are carving out this increasingly important niche market, Zeekr said its special-edition 009 is winning customers over with its craftsmanship and quality materials, rather than with a more superficial luxurious design. 

Quest for growth amid slower EV uptake

Zeekr is emerging as one of the few Chinese EV makers bucking the trend of turning to plug-in hybrids in the middle of a bumpy transition to new energy vehicles (NEV), while aiming for strong growth despite an overall sluggish EV demand sentiment. The company just delivered more than 4,900 Zeekr 001 shooting brakes in the first two weeks of April, compared with roughly 2,100 units of Tesla’s Model 3 during the same period, according to figures compiled by Sun Shaojun, founder of Chinese consumer behavior research agency CarFans. 

Earlier figures also indicated sustained growth momentum as the revamped 001 pocketed roughly 30,000 non-refundable orders within 30 days of its launch on Feb. 27. BYD, Huawei-backed Aito, and Zeekr outperformed other brands in terms of new orders in the last week of March, Jefferies analysts said in an April 9 note. The companies have benefited from a spillover effect, as Xiaomi’s Porsche-alike sedan becomes a phenomenon, garnering huge attention for the smartphone giant as well as more established rivals. 

An told reporters during an interview that the long-term picture of the ongoing EV transition remains positive, with Zeekr maintaining a delivery target of 230,000 vehicles for 2024, almost double the nearly 119,000 units it achieved last year. It plans to enter dozens of countries in the Middle East, Latin America, and Southeast Asia this year, having started exports to Europe, the Gulf Bay area, and parts of Asia late last year. “In our view, Geely is at full steam for the EV race and overseas expansion with competitive NEV product offerings and an established global footprint,” Jefferies analysts said on March 27.

READ MORE:Interview: Zeekr executives on the 001 FR supercar, autonomous driving, and overseas plans

Major Chinese car manufacturers, including SAIC and BAIC, saw double-digit declines in annual profits as the industry was hurt by slowing growth in new fossil fuel car sales and aggressive price cuts for their electric vehicles amid rising competition from the likes of BYD and Tesla. 

Why it matters: The latest financial results coincide with the rising momentum of plug-in hybrid electric vehicle (PHEV) sales in China. BYD, Geely, and Li Auto, all with a broad PHEV lineup, are among the few that reported both revenue growth and margin improvements, while traditional automakers and battery electric vehicle startups have been put under pressure to sacrifice profits for growth. 

• The figures also signaled potential growing challenges for international carmakers as Chinese EV manufacturers take a stronger position at home. The market share of their joint venture brands with Chinese partners will fall from 40% to 10% over the next three to five years, BYD chairman Wang Chuanfu forecast at an investor meeting on March 27, reported Reuters. 

Details: China’s biggest car manufacturer SAIC reported revenue of RMB 744.7 billion ($102.9 billion) in 2023, an increase of just 0.1% from the same period last year, with net profit declining 12.5% year-over-year. Sales of its joint ventures with Volkswagen and General Motors last year fell 8% and 14.5% to roughly 1.2 million and 1 million units, respectively. 

• BAIC Motor, a Hong Kong-listed unit of BAIC Group, also disappointed investors with a slower pace of revenue growth of just 3.9% in 2023, marking a slowdown from the brisk 8.3% rate notched a year earlier. Mercedes-Benz Group kept China sales flat with its joint venture partner last year, having slashed car prices by as much as a third over the last three months of 2023. 
• Revenue of GAC Group grew at a solid clip last year partly thanks to strong sales of its Aion EVs. However, Toyota and Honda’s main China partner revealed a 45.1% nosedive in net profit to RMB 4.4 billion, which it blamed on an RMB 2.9 billion one-time loss due to charges tied to restructuring, as well as shrinking revenue at its joint venture with Mitsubishi.
• Great Wall Motor’s annual results also offered a mixed picture as it struggles to ramp up EV sales profitably. Revenue grew a more robust 26.1% year-on-year to RMB 173.2 billion, but its profits fell 15.1% to RMB 7 billion. Some of its PHEV models such as Lanshan and Gaoshan fell short of expectations, Bernstein analysts wrote in a March 28 note. 
• Dongfeng Motor Group posted a loss of nearly RMB 4 billion for 2023, compared with a profit of almost RMB 10.3 billion, marking its first annual loss in nearly two decades since going public in Hong Kong in 2005. Sales of its two joint ventures with Nissan plunged 21.5% and 10.2%, while deliveries of its proprietary passenger EVs declined 5.1% to roughly 303,900 units.

Context: Beijing is planning to unveil new measures to boost the performance of FAW, Dongfeng, and Changan, three automakers directly under the leadership of China’s State-owned Assets Supervision and Administration Commission (SASAC), by giving them more leeway and independence in EV operations. Local government-owned businesses, including SAIC, BAIC, and GAC, are also expected to benefit from the policy in the coming months.

READ MORE: Chinese officials reaffirm commitment to EV ambitions and promise raft of support measures amid industry doubts

Major Chinese automakers, including Geely and Changan, have strategically introduced big discounts to their car prices or new variants of existing models despite posting a pickup in March deliveries, in a defensive move after Xiaomi’s first car reached nearly 90,000 pre-orders in just 24 hours. 

Xiaomi’s smash hit: The initial success of Xiaomi’s first EV, rolled out on March 28 with a lower-than-expected price tag, is having a knock-on effect on most other automakers which are being forced to take immediate action in order to hold on to their market shares. 

• The reservation-to-order conversion rate of the electronics brand’s SU7 has currently reached more than 35%, according to Sun Shaojun, founder of consumer behavior research agency CarFans. 
• Around 40% of Xiaomi customers canceled their pre-orders partly due to an expected long waiting time for vehicle delivery, Sun said in a Tuesday post on WeChat. Some were also frustrated by awkward sales-service interactions at overcrowded Xiaomi stores in major cities, Sun added, as the Chinese smartphone giant is gradually expanding its sales network for car retail. 
• Nevertheless, this is equal to a volume of at least 31,000 non-refundable orders in just four days, still an impressive performance for a new entrant and one that sees it surpass the early sales figures of Aito, a rising player launched by Xiaomi’s long-time rival Huawei.

March sales, discounts: Sales of Geely’s new energy vehicles (NEVs) rose 65% year-on-year and 34% month-on-month to 44,791 units in March, of which roughly 13,000 were Zeekr-branded battery EVs, partly driven by the strong sales of its refreshed 001 sports wagons, delivery of which began on March 1. 

• Geely on Monday launched a new rear-drive Zeekr 007 sedan, turning a bundle of add-ons into standard features including a large head-up display unit and heated and ventilated seats, at a price tag that is RMB 6,000 ($829) cheaper than Xiaomi’s SU7. 
• This comes after a similar move by Changan which two days earlier introduced a new entry-level variant of its Avatr 12, lowering the starting price of the premium sedan by 12% to RMB 265,800. Avatr’s deliveries more than doubled to 5,016 units last month. 
• Meanwhile, Huawei-backed Aito, which sells both battery EVs (BEVs) and plug-in hybrid EVs (PHEVs), edged out rival Li Auto for a third month in March with 31,727 deliveries compared to Li Auto’s 28,984, buoyed by strong demand for both the M7 and M9 crossover. 
• Aito claimed the M9 was the top-seller in the RMB 500,000-plus price segment in China last month, a title Li Auto had previously aimed for (and failed to reach) with its Mega van. Still, the EV brand, co-launched by Huawei and Seres, on Monday slashed the starting price of its best-selling five-seater by 8% to RMB 229,800. 
• NIO and Xpeng Motors deliveries also jumped significantly through March, and yet both are either slashing prices or using other promotions to lure customers. NIO’s ET5 and Xpeng’s P7i sedans compete in the same price segment as the Xiaomi SU7. 
• NIO said on Monday it will offer a reduction of RMB 10,000 for those who replaced their gasoline cars with a new EV. Xpeng’s G9 crossover now costs RMB 20,000 cheaper than its original list price, following a more than RMB 10,000 price reduction across its lineups a month earlier. 

READ MORE: Explainer: How a new round of price cuts are reshaping China’s EV market

Context: The March sales figures – which showed a rebound from the annual Chinese New Year holiday slump – also indicated a stronger growth momentum for PHEVs than BEVs with a growing number of carmakers pivoting to more affordable PHEVs as they look to expand NEV sales in China’s vast majority of underdeveloped regions.

• PHEVs accounted for more than half of BYD’s sales and enjoyed a higher growth rate than BEVs over the first three months of this year, according to a regulatory filing posted on Monday (in Chinese). The country’s biggest EV maker was followed by the likes of Geely, Aito, and Li Auto, all preferring a broader product portfolio to purely BEVs.
• Ouyang Minggao, an academic at the Chinese Academy of Science, said last month that PHEVs could grab substantial market share from internal combustion engine cars in the coming years, especially in the entry-level price segment, and expected more widespread adoption of BEVs over the next decade.
• EV adoption in China’s lower-tier cities and rural regions is slower than in the country’s more developed areas. A growing number of EV owners from lower-tier cities said they will go back to conventional automobiles for their next purchase due to a lack of charging infrastructure, according to an annual report by consultancy McKinsey released on March 12. 

READ MORE: Chinese officials reaffirm commitment to EV ambitions and promise raft of support measures amid industry doubts

Hundreds of people flocked to a Xiaomi store in the southern Chinese city of Guangzhou in the late hours of Thursday evening to be among the first to take a look at what many deem to be the electronics brand’s more affordable alternative to a Porsche, as the brand announced a lower than expected starting price for its debut electric vehicle. That’s what TechNode observed during a livestream broadcast by a Chinese electric car blogger on social media app WeChat that attracted more than 200,000 viewers within an hour. 

Xiaomi has already enjoyed a debut win after securing a record 50,000 pre-orders in just a few minutes following its SU7 EV launch event. The official livestream racked up nearly 43 million views on microblogging platform Weibo, underscoring the overwhelming interest among tech-savvy Chinese consumers in the company’s first car. Those making a reservation were asked to pay a RMB 5,000 ($692) deposit as part of the process, with the tech giant expressing its thanks to customers who did so in a brief statement on the microblogging platform Weibo (in Chinese). 

The all-electric sports sedan is selling at a lower than expected starting price of RMB 215,900 ($29,881), roughly $4,100 cheaper than the popular Tesla Model 3, while touting better performance from driving range to acceleration. The dual-motor all-wheel drive version competes with the Porsche Taycan with a top speed of 265 kilometers (165 miles) per hour at a price tag of only RMB 299,900.

Xiaomi’s car launch contrasts markedly with Apple’s surprise retreat from the EV landscape, after the iPhone maker reportedly scrapped its decade-long effort to make a car recently. “We will provide every user, including those with Apple devices, a smart and connected life experience everywhere, creating seamless integration in their homes, cars, and beyond,” Xiaomi chief executive Lei Jun said during the press conference (our translation). 

“A trump card”

Lei, the 55-year-old serial entrepreneur dubbed “China’s Steve Jobs”, tried to lure users away from traditional carmakers during the two-hour event by showcasing how Xiaomi’s ecosystem would provide universal connection and integration between different devices, including phones, cars, and gadgets at home. 

Xiaomi essentially promised potential buyers that their devices would be all tied together with a click, swipe, or a simple voice command. The car’s air conditioning will cool the interior down on a hot summer’s day once the owner tells a home speaker what temperature they want before even leaving the house, according to one example given. In another, the car’s dashboard could become a centralized command station for home accessories which will be activated as the driver approaches home. 

Although rival Huawei has touted similar efforts with its EV partners, Xiaomi claimed last November that more than 655 million devices have been connected to its IoT (Internet of Things) platform, from televisions to fitness bands, making it the biggest network of its kind worldwide. “This is a trump card from Xiaomi,” said Lei when discussing the linking of the brand’s new EV with its IoT network. 

“Better than Tesla”

Meanwhile, Lei mentioned Xiaomi’s plans to be “among the top-tier players” in autonomous driving, a field where Tesla already stands out as a pioneer globally and Huawei is establishing its name at home. The company said its EVs are already capable of traveling more than 300 km on average autonomously on Chinese highways before human drivers take over and will be able to complete most trips by themselves on urban streets across China by August. 

Xiaomi is moving towards two distinct approaches by working on both a camera-based computer vision system and another advanced driver assistance system (ADAS) that relies on more sensors including lidar. The company said it will exclusively employ Nvidia’s cutting-edge chips for both systems and bring the software development completely in-house to ensure timely over-the-air updates across all its car variants. 

“In China, Tesla vehicles will not be as good as the SU7 when it comes to intelligent driving capabilities,” said Lei, adding that customers who placed their orders before the end of this year will get the software free of charge. Tesla currently charges Chinese buyers RMB 64,000 for future access to its full self-driving (FSD) package, despite it remaining unavailable in the country. Still, it is faced with competitors from BYD to Geely which also look to offer customers highly automated features with their premium EVs.

READ MORE: Key takeaways from Xiaomi’s EV pre-launch: A top offering facing a tough test

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).

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.

A Tesla car owner who protested against the company during the Auto Shanghai show in early 2021 has been forced to apologize for damaging the US car company’s reputation by alleging that Tesla sold defective cars, Chinese media outlets reported on Wednesday. 

Why it matters: The verdict marks the latest victory for Tesla in China after it faced mounting numbers of car owner complaints over various quality issues including unintended acceleration and brake failure in the past two years. 

• Among infamous cases are the woman who climbed onto the top of one of Tesla’s electric vehicles at the Auto Shanghai show in April 2021, and an accident resulting in two deaths and three injuries in southern China last November.

Details: A local court on Nov. 9 ordered a woman surnamed Li from the northwestern city of Xi’an to apologize to Tesla and pay the company RMB 2,000 in damages in addition to bearing the cost of vehicle appraisal totaling RMB 20,000 ($2,800). The public apology should remain on social media platform Weibo for at least 15 days, the court ruled.

• The female owner alleged faulty brakes caused an incident in March 2021 when her China-made Model 3 crashed into a car coming the other way in the capital of Shaanxi province. Tesla has denied the claim. 
• Li took part in a protest at the Tesla booth during that year’s Auto Shanghai show when she wore a white T-shirt with the words “brake failure” above a Tesla logo. Another female car owner surnamed Zhang then clambered atop a Tesla to express her anger. 
• The Chinese court required a third-party appraiser to conduct systematic inspections of the vehicle after Tesla filed a lawsuit against Li for defamation. The result showed no proof that any mechanical failure had contributed to the accident. 
• A company representative confirmed the news to Caixin on Wednesday, saying the automaker was attempting to appeal for higher compensation. It is also suing Zhang for damaging its reputation without taking further steps, as she rejected a third-party investigation of her car. 

Context: Tesla in May launched a recall involving over 1.1 million EVs in China following an investigation by Chinese regulators that showed Tesla owners could hit the accelerator pedal rather than the brake by mistake when its regenerative braking system was switched on by default. Beijing said the recall was intended to reduce the chance of accidents. 

• The US carmaker shipped 771,171 vehicles from its Shanghai gigafactory during the first ten months of this year, of which 462,355 were for domestic sales, a growth of 37.9% from a year earlier, according to figures from the China Passenger Car Association. Retail sales of new energy vehicles in China, mostly battery EVs and plug-in hybrids, increased 34.2% year-on-year to more than 5.9 million units over the same period, the CPCA figures showed. 

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

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 automaker Geely on Oct. 27 unveiled its biggest bet ever on intelligent vehicles with the launch of the first Jiyue-branded model, which the company says is capable of driving itself on busy urban streets in partnership with search engine Baidu. 

The automaker stated its vehicle relies heavily on a camera-based approach to capture detailed visual information and then respond appropriately, removing expensive laser sensors from its hardware suite to keep costs down. Tesla is reportedly a rare advocate for using the so-called vision-only approach, while most other brands opt for multiple sensors to mitigate safety concerns of their self-driving technologies. 

“I believe we provide users a better self-driving experience [than existing players] in most major Chinese cities,” Luo Gang, Jiyue’s chief operating officer, told reporters during an interview, adding that the Jiyue 01 outperforms Tesla’s offerings in digital services such as its AI assistant (our translation). Tesla’s full self-driving (FSD) function is currently unavailable in China. 

The Jiyue 01, a battery sports utility vehicle, comes in two versions with a price range between RMB 249,900 and RMB 339,900 ($34,148-$46,446), slightly lower than its pre-sale price and differing based on acceleration, driving range, and number of electric motors, among other specifications. Customers are also encouraged to pay RMB 19,900, a 60% cut from its sticker price, for all the premium functions of its self-driving software. 

Here are some of the news and highlights from the launch event held in Shanghai by Jiyue, formerly known as Jidu before Geely and Baidu set up a new venture in August. 

Self-driving tech: Jiyue said its advanced driver-assistance system, the Robo Drive Max, is already available to drivers in Shanghai, Hangzhou, and Shenzhen, meaning the cars can navigate complex urban streets in the three big cities with autonomous features such as overtaking, lane changing, and on-ramp/off-ramp driving. The firm is targeting nationwide availability for the software by 2024, which would mean it matched rival Xpeng. 

• Chief executive Joe Xia claimed the car could drive itself from point to point without many user interventions by using less costly high-definition maps and training multiple neural networks such as occupancy networks in big data sets, rather than relying on lidar. Rival Xpeng is also removing two radar sensors for its upcoming MPV model but retaining lidar technology for enhanced safety, TechNode has reported.
• The five-seater Jiyue 01 is equipped with 11 cameras and 17 ultrasonic sensors and radars. The company believes it is building public confidence in autonomous car safety, as Baidu has tested its autonomous car fleets without accidents for more than 70 million kilometers (43.5 million miles). Baidu has been handling various corner cases over the past decade, which greatly improves the safety of the system, said Luo. 

Smart cabin: The Jiyue 01 also boasts the most advanced voice recognition software on the market for in-car services, which can respond intelligently in milliseconds without losing its connection, as the company deploys artificial intelligence models and moves data analytics from cloud computers to the vehicle. The system is also set to evolve and become more alert to the needs of its owners, powered by Baidu’s ChatGPT-like chatbot, Ernie Bot. 

• Notably, the automaker is bringing voice activation outside the car, saying it is the world’s first model that allows autonomous valet parking via just a spoken command without the driver sitting in the car, from as far as two kilometers away, according to an announcement. A company employee demonstrated the feature with several reporters joined by TechNode in an indoor parking lot on the sidelines of the event. 
• Xia added that the vehicle’s in-car system is powered by Qualcomm’s most advanced smart cockpit computing platform, the SA8295, which provides a processing power of over 60 trillion operations per second (TOPS), compatible with that of flagship smartphones available on the market. This would allow users to play the hit racing game Asphalt with a 35.6-inch display across the dashboard, as would NIO owners do with their handsets and a smaller screen. 

READ MORE: Baidu’s EV firm Jidu aims to take on Tesla

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.

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

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.

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.

Chinese EV maker Zeekr made a splash on Sept. 1 when it launched its first high-performance, track-focused vehicle – one which it hopes will establish new benchmarks in the field and compete with established brands such as Porsche and Tesla.

The 001 FR, which Zeekr is calling the world’s best-performance electric vehicle, uses four silicon-carbine motors for sophisticated torque vectoring, producing a powerful 1,265 brake horsepower, compared with 887 hp of the Porsche 918 Spyder.

The high-performance brake, completely redesigned from the original 001, can, the company claims, accelerate from 0-100 km/h (0-62 mph) in 2.07 seconds, faster than the 2.1-second acceleration to 60 mph of the Tesla Model S Plaid. The new model promises to be an everyday supercar, with a rapid battery charge from 10% to 80% in 15 minutes.

The debut comes at a time when Chinese manufacturers are rushing to launch premium offerings with eye-catching performance specs in a quest to upscale and compete in the global luxury EV segment. 

Zeekr has not released pricing details for the 001 FR, but has said the car will be made available in limited supply of up to 99 units a month from October. This will bring it into competition with another high-end rival, as BYD begins deliveries of its RMB 1 million ($150,000) electric SUV later this month. 

“Global luxury brands have ruled the performance car segment throughout the era of internal combustion engines … but Chinese electric vehicles are now capable of competing head-to-head against European top-tier supercars,” Andy An, chairman of Geely Auto Group and CEO of Zeekr told reporters in an interview after the launch. 

TechNode also spoke to Chen Qi, vice president of Zeekr and a former Huawei executive, about the company’s approach to autonomous driving as it looks to expand overseas. Geely’s premium EV subsidiary is establishing its footprint in Europe as part of its goal to deliver 140,000 units this year while looking to sell shares publicly in the US. 

Below are highlights from a group interview after the launch, which have been translated, condensed, and edited for clarity:

On limited production of the 001 FR 

An: The Zeekr 001 FR comes with a comprehensive list of high-performance equipment among which are extremely rare parts mostly needed and reserved for professional race cars. 

For example, more than 70% of Brembo’s carbon-ceramic brake systems are provided to today’s top-tier race cars, with less than 20,000 units available for road cars annually. We are individually crafting the 001 FR to ensure the highest standards of quality are attained, which together with other factors restricts the sports car’s output capacity to less than 100 units a month. 

Our customers have reacted remarkably well: the first 99 units of the 001 FR were sold out in 15 seconds after reservations opened [on Sept. 1] and the number exceeded our annual production capacity 20 minutes after that. I think this is because the 001 FR represents the state of the art as a sports wagon, which could improve sales and help establish Zeekr’s image as a technology-driven company. 

On Zeekr’s self-driving roadmap 

Chen: Zeekr has pursued a dual strategy of initiating in-house development as well as outsourcing to catch up with rivals in self-driving technologies. We are pushing forward a new program to bring autonomous driving for urban scenarios with future models using Nvidia’s semiconductor chips.

Meanwhile, it requires a relatively long period of testing and validation for existing Zeekr models to navigate Chinese urban roads with Mobileye’s advanced driver-assist technology. Mobileye has been an early mover in creating its digital maps to enable self-driving cars and we will use its assisted driving systems mainly in the European market. 

Automakers are deploying assisted driving technology on a city-by-city basis because more effort is needed to enhance the neural network’s generalization ability in various practical driving scenarios. [Editor’s note: Transformer is a new deep neural network architecture first mentioned in a 2017 Google paper and later used by Tesla to convert location data gathered by cameras into three-dimensional space for motion planning and control. Many assisted driving software have since been written using the transformer algorithm.]

We are accelerating efforts to roll out driver assistance software, first applicable on major Chinese highways, and we will then let our cars navigate complex urban streets automatically. 

On Zeekr’s US listing plan  

An: Zeekr will venture into the capital markets. But it is not the top priority for our management at the moment. There is no update on Zeekr’s listing plan following approval from the Chinese regulator. We will keep an eye on investor sentiment before taking a chance to go public. 

Zeekr has set an annual delivery target of 650,000 units by 2025 as one of the top three luxury EV makers worldwide since its inception and remains confident under pressure. We’ve made significant progress in a comprehensive way, including building a substantial cost advantage over competitors other than Tesla, and will reach the goal with the launch of a new model later this year, followed by two all-new ones in 2024 and 2025. 

On global expansion 

An: Zeekr started exports to Europe with 500 Zeekr 001 cars last month and will begin vehicle delivery first in Sweden and the Netherlands as early as September and in several other European countries next year. We are also preparing to enter regional markets including Southeast Asia, the Middle East, and Latin America, but will keep our focus on Europe at the moment. 

We expect to see a significant contribution to sales from overseas markets in the future. Chinese electric vehicles are gaining momentum in the global auto industry and we will make use of this to go upscale and expand globally.

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

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

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.

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 EV maker Xpeng on Thursday revealed the prices of its G6 sports utility vehicles at a competitive starting price of RMB 209,900 ($28,956), more than 20% cheaper than Tesla’s Model Y in China. The automaker is under growing pressure from investors to drive up sales with the new model after the months-long slump.

Why it matters: Speaking to reporters during an interview on Thursday, Xpeng’s CEO He Xiaopeng said that the G6, which has a similar size and appearance to Tesla’s Model Y, has the potential to achieve monthly deliveries of over 10,000 units.

•  He voiced confidence in a “positive” conversion ratio of its backlog reservations to orders following Thursday’s launch, adding that the company has received more than 35,000 pre-orders for the G6 as of Wednesday after reservations opened on June 9.

Details: The long-anticipated G6 five-seater is almost the same size as the Model Y. The new model measures around 4.75 meters in length, and 1.92 meters in width, and spans a 2.89-meter-long wheelbase.

• The higher-end version is powered by dual electric motors combining an output of 358 kW and maximum torque of 660 Nm, a bit higher than the respective 357 kW and 659Nm of the Model Y.
• The G6 accelerates from 0 to 100 km/h (62 mph) in 3.9 seconds, a bit slower than the Model Y’s 3.7 seconds, yet the crossover has a maximum driving range of 755 kilometers (469 miles), compared with the Model Y’s 660 km.
• Xpeng’s CEO also boasts a faster charging time for the G6, allowing additional travel of 300km on a 10-minute charge and greater powertrain efficiency than peers’ offerings, empowered by an 800-volt silicon carbide power module.
• The charging rate could be more than twice as fast as existing offerings with a 400V charging system, according to a Thursday statement from the company. Xpeng has operated more than 1,000 proprietary charging stations as of Friday and has had plans to add 500 ultra-fast charging stations this year.
• He added that Xpeng owners will be able to access the company’s automotive driver assistance system (ADAS), called the XNGP, for urban traffic roads without the utilization of high-precision maps in 50 major domestic cities during the second half of this year.
• Additionally, Xpeng will begin offering a so-called “AI Valet Driver” function to all XNGP users from the fourth quarter of 2023, allowing its vehicles to navigate on some fixed routes like an “experienced” human driver, according to the company. Rival Li Auto shared similar plans earlier this month.
• The G6 has a price range of between RMB 209,900 and RMB 276,900 ($28,956-$38,134), with the starting price being 7% lower than its previously announced tag of RMB 225,000. By comparison, the China-made Model Y currently costs from RMB 263,900 to RMB 363,900.

Context: Xpeng reported year-to-date deliveries of 32,815 vehicles as of May, a nearly 40% reduction from the same period a year earlier.

• President Brian Gu on May 24 told investors that it expected monthly deliveries to reach 15,000 units starting September when the G6 is scheduled for mass delivery.
• Xpeng’s shares rose 6.85% in Nasdaq during before-hours trading as of writing on Friday, although its shares have fallen 80% since the beginning of 2022.

US electric vehicle startup Fisker is planning to enter the Chinese market. The company has announced plans to establish its first regional delivery center in Shanghai, with deliveries scheduled to begin in early 2024, its China board member Daniel Foa told Chinese media outlet Yicai on Tuesday.

Why it matters: EV newcomer Fisker is trying to enter China at a time when some traditional global auto majors are struggling to maintain their market share in the country due to their slow transition to EVs. The move also highlights Fisker’s ambition to succeed in the world’s biggest auto market, following in the tracks of its US peer Tesla.

Details: Foa declined to comment on whether Fisker would deploy a direct sales model in China, as it has been doing in the US and Europe, or sell its vehicles through franchised dealers when interviewed by local media outlet Yicai.

• The report added that Fisker’s CEO Henrik Fisker held talks with Lingang Group during his recent visit to China earlier this month. Lingang Group is a state-owned industrial park developer that facilitated the establishment of Tesla’s Gigafactory Shanghai back in 2019 in the city’s Lingang New Area.
• Meanwhile, Fisker on June 9 revealed its plans to build a manufacturing plant in China with an annual capacity of 75,000 units as early as 2024.
• “We expect China to be an important growth market for EVs in the future and believe our vehicles will be very appealing,” said Fisker in a statement.
• China’s premium and affordable luxury segment is growing faster than general segments, Foa told investors on June 6, “This presents a vast opportunity for Fisker in China.”

Context: Fisker currently has two models on sale, the Ocean and the Pear crossovers, with starting prices of $37,499 and $29,900, respectively. It started making the Ocean sports utility vehicles with contract manufacturer Magna Steyr in Austria late last year and began delivery in Denmark in May, while rushing to hand the model over to US customers on Friday.

• Another US EV maker Lucid is also exploring a foray into China. The company hired Izzy Zhu, a former vice president at Nio and Baidu’s EV arm Jidu, to oversee its China business development. It has been recruiting for roles including supply chain and charging infrastructure management based in Shanghai since late last year.
• Chinese auto majors led by BYD are extending their lead over traditional foreign counterparts as a growing number of local customers favor EVs over gas-powered cars. Sales of FAW-Volkswagen and GAC-Toyota shrank 4.3% and 12.2% year-on-year in May, according to figures from the China Passenger Car Association.

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.

Tesla is considering a massive expansion of its global production capacity for its long-rumored entry-level compact car, with its Shanghai factory potentially being lined up to deliver 1 million units of the new model annually, Chinese media outlet 36Kr reported.

Why it matters: Unofficially dubbed the “Model 2” or “Model Q” by Tesla observers online, the new car is expected to be priced as low as RMB 150,000 ($21,800) and is aiming to take more shares of the Chinese electric vehicle market.

Details: Citing several industry insiders, 36Kr reported on Tuesday that Tesla is targeting an annual capacity of 4 million units worldwide for the new budget model, adding that the plan is still in its early stages.

• The company’s planned factory in Mexico will mainly be responsible for a yearly output of 2 million units in North America, while its assembly plants in Shanghai and Berlin will share the rest evenly.
• Mass production of the new model can’t happen until next year at the earliest, as Tesla has to ensure that the supply chain ramp-up is synced to the output expansion, the report said.
• Tesla did not respond to TechNode’s request for comment.

Context: Tesla on Wednesday revealed the latest part of its overall company plan, which included details for an unnamed compact vehicle model to come with a 53 kilowatt-hour (kWh) battery pack. The company said there would be a goal of selling 42 million units of the new model globally, without giving a timeframe.

• In September 2020, chief executive Elon Musk said the company aims to eventually make 20 million EVs per year by the end of this decade, the Wall Street Journal reported.
• Tesla shipped nearly 230,000 China-made EVs during the first three months of this year, according to figures from the China Passenger Car Association, with its Shanghai Gigafactory having the capacity of making 1.1 million EVs annually.
• The US automaker will be able to cut the cost of its next-generation vehicles by half from those of its existing offerings, chief engineer Lars Moravy told investors on March 1, Reuters reported.
• Tesla has been selling its popular Model 3 sedans at a starting price of RMB 229,900 and Model Y crossovers from RMB 261,900 in China after announcing an overnight price cut of up to 13.5% on Jan. 6.

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

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.

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.

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.

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.

Nio will expand its charging network by building at least 400 battery swap stations across China this year, alleviating a major concern among potential buyers that cars have insufficient driving range to travel between charging points, its president said on Monday.

Riding the wave of China’s speedy EV adoption, the electric vehicle maker also launched a special service campaign for owners during this year’s Lunar New Year holiday season, including unlimited free battery swapping and personalized customer service.

Why it matters: Nio’s recent moves to shore up its charging network and customer service capability are expected to further enhance its place in the Chinese luxury car segment, according to president Qin Lihong, who spoke to reporters in Beijing on Monday.

Charging infrastructure: In what Qin described as “a stress test” to check how Nio could “provide users with seamless services that were beyond their expectations” (our translation), Nio swapped nearly 1.25 million EV battery packs between Jan. 13 and Feb. 5 in China. For comparison, the company completed just over 800,000 swaps with a chain of 143 service stations between May 2018, when its first swap facility began operations, and mid-August 2020.

• Nio ran a network of 1,305 battery swap stations around China for a user base of nearly 290,000 drivers as of last year and will build more swap facilities than its previous estimate of 400 this year, Qin said, without giving a new number. The EV maker initially planned to expand its charging network to 1,700 swap stations in 2023, chief executive William Li said on Dec. 24 at Nio’s annual press conference.
• The eight-year-old company also claimed to be carmakers’ biggest EV-charging provider, with a network of 13,629 charging piles in China as of December. During the Lunar New Year holiday season, 76% of the charging sessions using Nio’s charging piles came from non-Nio cars, of which 17.6% were from BYD, 15.8% from Tesla, and 4.1% from Xpeng models. Official figures showed that China had nearly 1.8 million public charging piles as of December.
• Senior vice president Shen Fei said that Nio would scale up its charging operations at a pace that is in line with the increase in its sales volume. This not only refers to the build-up of swap stations but also applies to hybrid locations that include swap facilities and charging piles, which the company believes will better serve clients at peak times.
• Qin added that the seasonal campaign will not significantly impact Nio’s financial results but rather enhance its reputation for premium service and experience, as the company reduced advertising spend accordingly to keep its gross margin flat. Nio began offering owners six free swaps a month in late 2020, but maintains its policy of unlimited free battery swaps for an undisclosed number of early owners.

Unexpected services: In addition to existing, regular on-call valet charging and parking services it offers to car owners whose vehicles are running out of power, Nio provided a wide range of personalized, value-added services during the recent Lunar New Year holiday season.

• This ranged from family photoshoots at the company’s clubhouse-style flagship stores to the feeding of pets at the homes of Nio owners who were traveling, which a Shanghai-based Nio owner surnamed Dai described as “trivial but touching” when contacted by TechNode on Monday.
• Shen clarified by saying that these service options did not put pressure on its business, as most of them were provided unofficially by frontline employees who were simply working hard to fulfill customers’ needs.

Industry outlook: Nio remains optimistic that this year’s sale figures will exceed the roughly 184,000 units Lexus sold in 2022 in China. The auto upstart expects solid growth momentum for the country’s EV market despite a recent slump as China dropped its COVID-19 prevention measures.

• Qin added that intelligent, electrified, and high-end vehicles will continue to gain traction in the world’s biggest auto market, citing the average sale price of passenger vehicles in China, which is RMB 30,000 ($4,422) more in 2022 than in 2019.
• Industry observers expect rising competition and waning profits for Chinese automakers this year amid Beijing’s phase-out of EV purchase subsidies and a slow post-pandemic recovery. The China Passenger Car Association estimated passenger EV sales will reach 8.5 million units in 2023, representing an increase of around 50% from a year ago.

READ MORE: China’s EV battle 2022: why BYD is leaving Tesla and Xpeng in the dust

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.

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

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.

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.

Jidu Auto, the electric vehicle arm of Chinese search engine giant Baidu, is joining a long list of Chinese companies to take on Tesla by positioning the brand in the premium segment and highlighting its strength in autonomous driving tech.

In recent media appearances, Xia Yiping, chief executive of Jidu, stated that the new automaker can compete with Tesla by leveraging the data and algorithm prowess from its parent company.

A former tech lead of in-car connectivity at Fiat Chrysler, Xia noted that he believes the race among automakers to build intelligent vehicles has only just begun in China.

On Oct. 27, Jidu showcased a special version of its first consumer car Robo-01 that it made in partnership with Chinese automaker Geely. The company plans to launch the standard version next April, which Xia told TechNode could be “very competitive” on price (our translation). He also noted a short-term target of selling at least 10,000 vehicles monthly.

Below is the highlights from a group interview at the car launch event, which have been translated, condensed, and edited for clarity:

Is it too late for Jidu to enter the Chinese EV game as a new competitor?

The EV offerings from our competitors are far less diversified, especially regarding the intelligent and connected capabilities they can offer. The competition has just begun, which I believe will be more about the deployment of semiconductors, algorithms, and computing power rather than vehicle manufacturing, as time goes on, and that’s where our capabilities lie.

We are looking to be a serious player in the medium-to-high-end EV segment, especially in the price range of RMB 250,000 ($34,370) and above, and where in-car intelligent technology has been a major selling point. Our core users are young, educated, tech-savvy, and upper-middle class, and in that sense, there is a big competitive overlap between Jidu and Tesla.

If you compare Jidu’s Robo-01 with Tesla’s Model Y, I would say our vehicle provides a roomier and more luxurious interior, as well as a longer driving range. 

Several competitors have already begun releasing advanced driver assistance systems (ADAS) for city environments. What is your advantage and how do you ensure the reliability of vehicle software?

(Note: Rival Xpeng Motors on Sept. 19 released its so-called City Navigation Guided Pilot, a feature similar to Tesla’s Full Self-Driving that allows vehicles to navigate on both highways and city streets. Huawei’s partner Arcfox closely followed with the release of its Navigation Cruise Assist (NCA) software a week later.)

Jidu’s advanced driver assistance capabilities, including those for highways and urban streets, will be fully ready once we begin vehicle delivery to customers later next year. All the variants of Robo-01 will be equipped with lidar sensors and applicable to all Jidu’s intelligent functionality.

We are developing the most advanced electrical and electronic architecture, where we must ensure the complexity of future vehicle systems and fulfill the higher demand for network bandwidth and functional safety. We run algorithms on Baidu’s supercomputers, and I think that’s one of our advantages.

Auto intelligence is not just about software engineering. You need to fully understand when it comes to where the semiconductor industry is headed and how sensors can better enable autonomous driving, among other fields. Not everyone can do that, but that’s in our DNA.

Jidu will begin delivery of Robo-01 later next year. Can you share insights on production plans, retail networks, and charging infrastructure?

Robo-01 is built based on Geely’s SEA (Sustainable Experience Architecture) platform. In early October, we aligned the production plan of Robo-01 for next year with our manufacturing partner and made reservations for many key components ahead of time.

(Note: In September 2020, Geely launched a modular, open-source vehicle platform for EVs called the Sustainable Experience Architecture (SEA), which has been used to build its own EV sub-brands like Lynk & Co, Zeekr, and Polestar.)

We plan to sell our cars via a direct sales model in the early stages so that we can maintain control over our brand image. Jidu’s first flagship store is about to open in Shanghai and we plan to enter 46 domestic cities by 2023.

When it comes to charging networks, we are building a number of charging points along with our showrooms and service centers, but we will also collaborate with public EV charge point providers to expand our footprint.

BYD and Chinese state-owned carmaker GAC reported strong growth in revenue and profits in the third quarter, further expanding their lead among Chinese peers. Other Chinese automakers — state-owned SAIC, and Huawei partners Seres and Changan — have reported mixed results with slowing growth or stagnated earnings. Rising material costs and intense competition are among the factors contributing to the companies’ woes.

Why it matters: BYD reported significantly stronger profitability than its peers with a gross margin of 22.75% in the third quarter, followed by Changan’s 17.4%, SAIC’s 9.6%, and GAC’s 4.6%, while Huawei-backed Seres is still losing money.

• BYD and GAC are showing their advantages as their EV models consistently top sales chart. Other automakers’ disappointing third-quarter results came against the backdrop of soaring lithium prices, an ongoing price war between major automakers, and the looming phase-out of EV purchase subsidies by the government by year-end. Experts anticipate that many automakers will reduce prices in exchange for market share, which could further impact their profitability in the short term.
• The spot prices of lithium carbonate in China exceeded the RMB 500,000 ($68,776) threshold on Sept. 13, a nearly 80% increase from the beginning of this year, according to figures from the metal research institute Shanghai Metals Market.

BYD: The Shenzhen-based manufacturer reached an average of around RMB 10,000 profit per unit sold from July to September, a significant increase from RMB 6,400 in the previous quarter, according to estimates from Jefferies Financial Group. Net profits reached RMB 5.7 billion, a gain of 350% from the same quarter in 2021.

• Analysts listed both an increase in average selling price and better economy of scale as contributing factors. Yet, BYD’s profitability is still much weaker than rival Tesla’s, which made $3.3 billion in net income in the same quarter.
• Shares of BYD jumped 6% in Hong Kong on Monday after the EV giant on Friday posted sales of RMB 117 billion ($16.1 billion) for the third quarter, up 116% from the same period in the previous year. 

GAC: State-owned GAC also reported strong third-quarter results, with revenue up 51.6% year-on-year to RMB 31.5 billion and profit growth of 144%. Toyota’s Chinese partner is aiming for a delivery target of 250,000 Aion-branded EVs this year and has sold around 182,000 units as of September.  

SAIC: On the opposite end of the spectrum was SAIC, which has seen its stock price fall 30% since 2022. Sales from China’s biggest automaker grew 12.9% year-on-year to RMB 205.2 billion in the third quarter, but profit fell 18.4% annually to RMB 5.74 billion.

• The results also revealed that SAIC’s manufacturing partner Volkswagen is under big pressure as it struggles to catch up with pure-player EV makers. The German automaker saw the overall market share of its venture SAIC-VW slide to 5.8% from 8.2% two years ago.

Huawei partners: Results from Huawei’s EV partners were also less impressive. Seres saw losses widen 57.3% from a year earlier in the third quarter to RMB 947 million, partly due to rising costs of raw materials, having recorded a sharp growth in sales of its Aito-branded EVs.

• Changan’s revenue rose 28.4% but profits fell 17.5% in the quarter. Avatr, the automaker’s EV subsidiary, will begin selling vehicles via Huawei’s retail stores as early as December, China Securities Journal reported Friday, citing a company spokesperson.

Context: Early this year, more than a dozen Chinese automakers raised EV prices to offset the rising cost of electronic components and battery materials used in vehicles. However, Tesla went the other way by slashing as much as 9% of its car prices last week, with Huawei-backed Seres quickly following suit. Analysts from China Merchants Bank International expected general car sales to slow into 2023 in China, while EV makers are also facing growing competition given a challenging macro environment, according to an Oct. 24 report by Reuters.

China’s electric vehicle market continued to trend upwards in September, with year-to-date sales already surpassing last year’s total of 3 million, according to the latest figures compiled by the China Passenger Car Association (CPCA). However, the growth rate of overall car sales in China hit its lowest point in the last two decades owing to an economic slowdown, the industry group said.

Why it matters: The industry-wide sales figures released Tuesday further indicate a broader recognition among Chinese consumers of locally-made EVs, as well as a rising trend of Chinese automakers growing their international business.

• Retail sales of new energy passenger vehicles, mostly all-electrics and plug-in hybrids, soared by 82.9% in a year to around 611,000 units in September, bringing the total sales number for this year to nearly 3.9 million units as of last month, according to CPCA.
• Meanwhile, the overall industry reported a monthly growth of only 2.8% in new passenger car sales in September, reaching its lowest level since 2002, as the pandemic hit some of the most populous provinces, such as Sichuan, weakening demand.

Details: Last month, domestic auto majors, such as BYD and Geely, enjoyed a 67% share collectively in the passenger car market, up 9.2% from a year earlier, while those numbers for both younger EV startups and Tesla declined to 14.6% and 12.7%, respectively. The share of the market for traditional overseas carmakers further narrowed by 3.3% from a year ago to only 5.7%, CPCA figures showed.

• BYD ranked top with an annual growth of 144.3% to reach more than 191,000 EVs last month, taking nearly 10% of China’s auto market. It was followed by FAW-Volkswagen and SAIC-Volkswagen (two joint ventures of the German carmaker) at 165,000 and 122,000 automobiles, respectively.
• Geely reported its September retail sales of passenger cars increased by 24.4%  from last year to around 109,000 units, followed by Changan at roughly 107,000 units. Zeekr, a premium EV unit of Volvo’s parent company, delivered 8,276 vehicles last month, up from 7,166 units a month earlier. Changan is set to begin delivery of its first car model under the Avatr marque with partner Huawei in December.
• Meanwhile, Tesla China achieved a new record by selling 83,135 vehicles, of which 5,522 were overseas exports, bringing the year-to-date number to 483,074. The US automaker has an annual capacity of over 750,000 vehicles at its Shanghai facility, according to its second-quarter financial report.
• Chinese EV startup Li Auto delivered 11,531 plug-in hybrid crossovers last month as production of its second model, the L9, began to ramp up. Nio recorded a monthly delivery of 10,878 vehicles, with its new crossover ES7 making it to customers since late August.
• However, the numbers for Xpeng Motors declined 18.7% year-on-year and 11.6% month-on-month to 8,468 units, as the EV maker faces stiff competition from bigger names such as BYD in the mainstream EV segment. The company also reduced the prices of its first premium crossover, the G9, just two days after launch.

Context: The CPCA has maintained its sales projection of 6.5 million new energy vehicles (NEV) this year, with EVs expected to make up 28% of the country’s new car sales. The central government previously set a sales target of 25% of all new car sales to be NEVs by 2025.

• Nearly 14.9 million passenger cars, including internal combustion engine vehicles and EVs, were handed over to customers from January to September, a bit higher than the 14.5 million units during the same period of last year.
• Speaking to reporters on Tuesday, Cui Dongshu, secretary general of the CPCA, said he expected China’s general car market to recover with “explosive growth” over the last two months of this year, buoyed by easing Covid restrictions and tax breaks for vehicle purchases.

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

Tesla and Chinese automaker SAIC are turning to the Shanghai government to help with new supply chain disruptions after Sichuan province cut down power supply for six days to cope with severe heatwaves, Chinese media outlets reported on Friday. The southwest province of Sichuan is home to many auto parts makers. 

The power restrictions in Sichuan and Chongqing have also forced Tesla, Nio, and Xpeng to temporarily close multiple charging and swapping stations in the region, Chinese media outlet Jiemian reported, citing feedback from car owners.

Why it matters: Automakers in China were already reeling from an industry-wide chip shortage and surging battery material prices exacerbated by the country’s Covid restrictions and the Russia-Ukraine conflict. The worsening situation in auto parts’ supply chain could force them to scale back further production in the country, a major growth market for electric vehicles.

Details: In a widely circulated letter to Sichuan provincial government, Shanghai authorities asked Sichuan to ensure basic electricity demand to 16 local parts makers. On Monday, the provincial government of Sichuan began rationing electricity supply and asked factories to shut down for six days as unprecedented hot summer weather surged the region’s electricity demand.

• A government representative confirmed the Shanghai authority’s letter to the Chinese financial media outlet Caixin on Thursday. According to the letter, Tesla and SAIC said they are facing challenges in getting enough supply of car components, as some of their suppliers in Sichuan have reduced production due to the power cut. 
• Only one auto supplier, Chengdu Yinli Car Parts, was named in the letter. The supplier makes aluminum wheel and vehicle body components for automakers such as SAIC-GM, a joint venture between the state-owned manufacturer and General Motors.
• State-owned automaker Changan and Seres, a small automaker and partner of Chinese tech giant Huawei, are also being hit by the sudden cut. The two companies have halted production at their facilities in the southwestern municipality of Chongqing, which borders Sichuan.
• On Tuesday, Changchun Engley Automobile, a Shanghai-listed car body panel manufacturer, told investors that its Chengdu factory had received notice of the power cut by Sichuan regulators. According to its website, the company’s clients include Volkswagen, BMW, Nio, and Xpeng Motors.
•  Toyota and Chinese EV battery giant CATL have suspended operations in the province.

BYD has started supplying electric vehicle batteries to Tesla’s factory in Germany, Chinese media outlet Sina Tech reported on Wednesday.

Why it matters: This is the latest development in the partnership between Tesla and BYD, two of the world’s biggest EV makers. It comes two months after a BYD executive confirmed to state broadcaster CGTN that the Chinese manufacturer would supply batteries to Tesla “very soon.”

Details: For the first time, BYD begins supplying its “blade battery” to Tesla’s gigafactory in Berlin, with the first batch of Model Y vehicles with BYD batteries expected to roll off assembly lines by early September, Sina Tech reported, citing people familiar with the matter.

• It is unknown whether Tesla plans to equip its EVs with BYD batteries at its Shanghai facility, the sources said. Tesla and BYD did not respond to TechNode’s request for comment.
• BYD’s blade battery comes with a lithium-ion phosphate (LFP) makeup and boasts better thermal stability and stronger resistance to collisions than lithium-ion batteries that use cobalt or nickel and which enable longer range but at a higher cost.

Context: A growing number of Chinese automakers are preferring LFP battery chemistry to traditional cobalt- and nickel-based batteries due to lower costs, better safety, and improving energy density, a trend analysts expect to accelerate globally.

• During an online media briefing on Wednesday, UBS analyst Paul Gong said that the Swiss investment bank expects LFP batteries to capture more than 40% of the global EV battery market by 2030, an increase from its previous estimate of 25%.
• The blade battery cells cost $136 per kilowatt-hour (kWh), at the same level as that of Panasonic’s lithium-ion cells with nickel-cobalt-aluminum (NCA) cathode chemistry and lower than the $142 kWh of the cobalt-based batteries sourced from LG Energy Solution, according to Gong.
• However, CATL’s LFP battery cells for Tesla’s Model 3 are currently more competitive cost-wise than its rivals’ offerings at $131 per kWh, Gong added, as per the recent teardown results of CATL and BYD battery packs presented by UBS.
• Tesla has been sourcing nickel-manganese-cobalt (NMC) batteries from CATL for its China-made vehicles to date, while Panasonic and LG Energy Solution are major battery suppliers to Tesla globally.
• BYD sold the equivalent of 7.9 gigawatt-hours (GWh) of batteries in the first half of this year, surging 206% year-on-year and taking an 11.8% share of the global EV battery market, according to figures compiled by the South Korean industry tracker SNE Research. CATL is the dominant player with a 34.8% market share, followed by LG’s 14.4%.

A Tesla service center in the eastern Chinese city of Suzhou was temporarily shut down after a fire broke out on-site, resulting in multiple vehicles being damaged, state media publication The Paper reported on Tuesday.

Why it matters: Damage from the incident was captured in a video that was widely shared on Chinese social media and will likely intensify concerns about the safety of electric vehicles, one of the existing barriers to wider EV adoption.  

Details: Footage of the fire posted by multiple Chinese online users showed that a Tesla in-house body repair center in Suzhou, a neighboring city of Shanghai, was engulfed by flame and thick clouds of smoke on July 8.

• There were no reported deaths or injuries, though several Tesla vehicles were damaged by fire and heat. The cause of the fire is under investigation, local officials said. 
• A crashed Tesla car with a damaged battery pack was involved in the incident, Sun Shaojun, a Chinese auto journalist, said on the Twitter-like platform Weibo.
• A Tesla service representative confirmed the incident to state media outlet The Paper on Tuesday, saying that the company has temporarily closed the location without providing a timeline for when it will reopen.

Context: Tesla is not alone when it comes to such accidents. Last month, the Chinese Ministry of Emergency Management reported 640 fire incidents involving EVs in the first quarter of 2022, a 32% increase from a year earlier. Battery damage, collision, and hot weather conditions are some of the leading causes.  

• A fire was also reported at a BYD repair shop in the southern city of Nanning on July 9, which the automaker said was due to a “short circuit.”
• Last month, a Voyah-branded electric crossover, produced by state-owned automaker Dongfeng, burst into flames on the street in the central Hubei province. No people were injured in the fire, which occurred on June 27.

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.

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.

Local Chinese governments are releasing economic stimulus packages to boost consumption, including measures targeted at boosting car sales, as Shanghai gradually emerges from a two-month Covid-19 lockdown. 

Why it matters: The latest government measures, ranging from voucher programs to new quotas, could be a sign of recovery in China’s auto sector, which has seen production halted and raw material prices surged amid a spate of recent Covid-19 outbreaks across the country.

Details: Many Chinese cities have released a host of measures to help boost demand for cars as part of their economic stimulus package. The Shanghai municipal government on May 29 unveiled (in Chinese) 50 stimulus measures, which included giving out 40,000 new car plates and handing out cash incentives for gas car owners trading in for EVs. 

• Consumers will also receive rebates of RMB 10,000 ($1,503) per car for any trade-in of gasoline vehicles for new electric vehicles (EVs) for the rest of the year, as stated on the notice of the municipal government’s official WeChat account.
• Cui Dongshu, Secretary General of the China Passenger Car Association, on Monday told Jiemian News (in Chinese) that he expects Shanghai’s stimulus package to increase sales of passenger vehicles by around 150,000 units, of which two-thirds could be new energy vehicles, which includes all-electric vehicles and plug-in hybrids.
• On Monday, a Nio spokesperson told Chinese media The Paper on Monday that the company expects the stimulus measures to accelerate EV adoption, adding that orders for its models in the city have increased “significantly” in May (our translation).
• A number of local authorities also released similar cash subsidies for people to buy cars. Shenzhen on Thursday announced (in Chinese) plans to lift its limits on the number of new vehicles allowed on the city’s roads by allocating 20,000 new license plates to quotas and providing incentives of up to RMB 20,000 for new car purchases.
• Both the central Chinese city of Zhengzhou and Shenyang, the capital city of the northeastern Liaoning province, announced new voucher programs of RMB 100 million to boost vehicle buying earlier this month. Meanwhile, car buyers in the central city of Wuhan could receive a subsidy of RMB 8,000 or RMB 3,000 for each trade-in of new energy vehicles or combustion engine vehicles, respectively.  

Context: China’s central government has pledged to strengthen the current state subsidy to EV makers to encourage auto sales, as the latest wave of Covid-19 cases has disrupted auto parts supply chains and forced carmakers to drop their outlooks for the year.

• During a State Council executive meeting on May 23, Beijing unveiled dozens of new stimulus measures, including cutting car purchase taxes by RMB 60 billion, in the hope of helping the industry withstand the impact of the pandemic, SCMP reported.
• China’s auto sales dropped by nearly half to 1.18 million units in April compared to the same time a year earlier, according to official figures. Major automakers such as Tesla were hit hard by supply-chain constraints and a month-long production shutdown.
• Local EV upstarts Xpeng and Li Auto earlier this month issued a gloomy outlook for the second quarter of this year, after reporting record declines in vehicle deliveries for April.

Nio is building a new battery research and development center near its headquarters in Shanghai, intending to develop and use new types of battery cells in its electric vehicles (EVs), a Shanghai government filing showed on Monday.

Why it matters: Nio’s move is part of a growing trend among automakers attempting to develop their own batteries to secure an advantage in China’s fast-growing EV segment, which has been hit by supply chain bottlenecks in recent months.

Details: The facility will be approximately 22,090 square meters (roughly 237,775 square feet), and located in the city’s northwestern Jiading district. It will involve an investment of around RMB 219 million ($32.8 million), according to a filing (in Chinese) by the environmental assessment firm conducting a feasibility study for the project.

• The new facility will encompass 31 laboratories, one trial production line for lithium-ion battery cells, and one assembly line for battery packs made from lithium-ion cells, which could pave the way for Nio to make new batteries with improved performance capability and better safety measures at scale, the filing said.
• Slated for construction as early as August this year, the center will operate 250 days per year and employ about 400 staff, the EV maker said in the filing, but it did not reveal when the facility will start operations.
• Nio did not respond to TechNode’s requests for comment.

Context: Nio has been sourcing cells manufactured by Chinese battery supplier CATL and assembling them into battery packs at one of its factories in the eastern city of Nanjing since mid-2019, in addition to undertaking in-house production of electric motors.

• Leapmotor, another local EV startup, revealed (in Chinese) its so-called “cell-to-chassis” technology last month, which skips the need for battery packs and integrates modules directly into the vehicle body. Typically, battery cells must first be fixed into a battery module when being added to an EV.
• Tesla has been producing battery packs with cells from its partner Panasonic at a factory in Nevada since 2016. Chinese EV giant BYD is currently the world’s third-biggest battery maker with a market share of 11.1% as of March 31, Bloomberg reported on May 2, citing figures from South Korean research firm SNE Research.

READ MORE: Nio, Xpeng, Li Auto see dismal April deliveries as coronavirus lockdowns disrupt production

Top automakers such as Tesla and SAIC (Volkswagen’s partner in China) are slowly rolling towards a restart after weeks of shutdowns of their plants in Shanghai, China’s worst coronavirus outbreak site, in two years. Baidu and self-driving unicorn Pony.ai received permits to offer fully autonomous rides to the Beijing public in late April, the first service of its kind in the country. Domestic battery suppliers saw profits plunge in the first quarter amid rising raw material costs, thanks to a strong demand for electric vehicles (EVs) that utterly outstrips supply.

Shanghai’s Covid outbreak continues to weigh on auto production through May

As Tesla and Volkswagen’s plants in Shanghai slowly resume production, China’s auto industry is struggling to regain the momentum lost during a citywide lockdown that has dealt a significant blow to local businesses over the past two months. Government officials said on May 13 that employees from 95% of the companies on a whitelist of 666 firms prioritized for business resumption are now getting back to work, with automakers and suppliers accounting for more than a third of the total.

China’s biggest automaker SAIC said on May 13 that its joint facilities with Volkswagen and General Motors have restarted production in mid-April in a single shift rather than their usual two shifts, with each plant assembling at least 2,000 vehicles every day. As a result, Tesla shipped out another 4,000 locally-made vehicles to Europe on May 15, four days after its first shipment of 4,767 cars set sail from the Port of Shanghai – the first to do so since the start of the sweeping lockdowns in the city, Chinese media reported.

Supply chain hurdles: Disruption related to labor and supply chains continues to impact auto firms, as many workers can’t return to their workplaces due to inflexible Covid-19 control restrictions in many parts of the city. Tesla’s Shanghai facility reportedly idled most of its production lines for a few days earlier this month due to insufficient supplies, when Aptiv, one of its key parts suppliers, halted shipments of some parts due to new Covid cases at its local plant.

Auto supplier giant Bosch has only experienced a partial recovery with output at around 30%-75% of its pre-pandemic levels at several manufacturing sites, a result of worker shortage and supply chain crunch, its China president Chen Yudong said at a May 11 press conference, while also calling for the easing of Covid restrictions. 

The auto firms that have resumed operations represent only a fraction of the 20,000 parts suppliers, big and small, located in Shanghai and nearby regions, state-owned media outlet China Newsweek reported on May 11, citing several experts.

Weak Q2 guidance: Analysts expect output to slightly recover in May but believe a full recovery is still some way off, as the industry struggles with massive uncertainty caused by Covid lockdowns. Li Auto, which has a production base in the eastern city of Changzhou, was among the automakers hit hard by the lockdown, releasing poor second-quarter revenue guidance on May 11 due to a likely disruption to parts supplies.

And yet, there is still a chance to make up for lost sales in China during the rest of the year if automakers can ramp up car output, given that a growing number of consumers feel safer traveling alone than taking public transport, experts say. In April, Tesla maintained its forecast of at least 50% annual growth for vehicle deliveries this year, despite saying that production volume could take a hit of 8% in the second quarter due to a month-long production halt at its Shanghai facility. The China Passenger Car Association predicted that total passenger vehicle sales may face zero growth to remain at 20.1 million units this year, compared with 2021’s growth rate of 4.4%.

Driverless cars get a push from China’s capital

In a rare step, Beijing authorities announced on April 28 that Baidu and Pony.ai have been authorized to participate in the country’s first pilot program to provide driverless rides to the public in test vehicles. Following the move, Baidu and Pony.ai began by operating 10 and four autonomous vehicles, respectively. The vehicles operate without safety drivers on public roads in an area of 23 square miles in the city’s southeast Yizhuang district. However, each vehicle has a company employee overseeing the journey in a passenger seat, and the firms are not allowed to charge a fee for now.

Chinese self-driving car companies have faced a long and arduous reality check since a wave of early hype and hopes of scaling the technology. Now, regulators are giving the industry a boost by permitting the offering of autonomous services to the public in the country’s capital city – with no human safety driver at the wheel. Concurrently, the race to prove robotaxis are a viable business is intensifying among the top contenders.

AVs undergo reality check: Despite the milestone in Beijing, few of China’s self-driving car startups are making any money, and venture capitalists have been cooling on the companies over the past year, particularly those with little to show commercial prospects. Total investment activity for robotaxi companies fell by 22% annually to $8.4 billion in much of 2021, data compiled by startup data platform PitchBook and obtained by Reuters showed.

Major players are working hard to live up to their promises. WeRide became China’s first self-driving company by testing completely driverless cars in the southern Chinese city of Guangzhou in July 2020. In January of this year, its fleet of 300 autonomous vehicles had logged 10 million kilometers after four years of testing. For Baidu, that number is more than double, and the tech giant said that it provided more than 320,000 autonomous rides in eight domestic cities as of last year, with plans to expand the service to 65 cities by 2025. 

Chinese battery makers’ profits slump amid supply chain issues

Drops in Q1 profit: Despite being buoyed by strong demand for electric vehicles in the country, Chinese battery makers are facing a profit squeeze as the global supply chain continues to buckle under the pressure of rising costs, limited raw materials, and manufacturing disruption. On April 29, CATL reported a year-on-year profit tumble of 41% to RMB 977 million for the three months that ended in March, which came in far below expectations of a RMB 5 billion profit from multiple analysts. It was CATL’s first quarterly decline in net profit since 2020. Meanwhile, profits of the Volkswagen-backed Gotion declined 33%, while Sunwoda, a lesser-known supplier invested in by EV maker Li Auto, also saw a 26% decline in profits despite double-digit revenue growth.

Q2 easing expected: Margins for battery makers have been dragged down by surging raw material costs made worse by the Russia-Ukraine conflict and a global pandemic. An index for battery-grade lithium prices increased by 127% in the first quarter of this year, after a 280% surge in 2021, according to data provider Benchmark Mineral Intelligence. The costs of nickel and cobalt also exploded during the first three months of this year, which hit battery suppliers hard since many of them had negotiated quarterly price terms with automakers for the period up to last December.

Analysts estimate that the supply shortage of raw materials will slightly ease starting in the second quarter of 2022 as battery suppliers step up efforts to secure minerals and expand production capacity. Margins are also expected to improve as most battery makers increased the prices of their products in March by at least 15% for the second quarter, China Securities Journal reported on April 28, citing company sources. This rally in material costs has been reflected in the recent price increases for EVs, ranging from RMB 2,000 to RMB 30,000, although analysts expect that EV sales will maintain their growth momentum this year, boosted by inflated oil prices.

Despite being hit by China’s latest wave of Covid-19 cases and struggling to ramp up production amid the country’s related lockdowns, Bosch continues to view China as a hugely important market and remains committed to the country in the long term, the company’s China president said on Tuesday.

Covid-19 lockdowns have “had no impact” (our translation) when it comes to business development decision-making for the Chinese market, Chen Yudong, the president of Bosch China, told reporters during a virtual conference. Chen added that the company plans to extend its hiring spree by opening up 4,000 positions in China this year, as part of its long-term efforts to meet strong local demand and drive innovation in key technologies.

Bosch China has been running its local manufacturing sites using the so-called closed-loop system where workers eat and sleep on-site at its facilities, as government and industry groups work hard to help businesses return to normal. However, the German group has so far only achieved a partial output recovery to around 30-75% of its pre-pandemic level, with that number varying among Bosch’s different products and factories, as a result of a shortage of workers and disrupted supply chains, according to Chen.

The world’s biggest auto parts supplier is now seeing “positive signs of recovery” as the pandemic begins to ease in China, although production will take time to fully recover, according to Chen. He called for more government measures to lift restrictions on auto firms in light of a long supply chain that requires collaboration and coordination across the industry.

China’s auto industry has been dealt a major blow over the past month, as operations in some of its most important locations have ground to a halt due to restriction measures aimed at curbing a nationwide Omicron outbreak. Total passenger vehicle output in April fell 41.1% to around 969,000 units compared to the same time last year, according to figures published by the China Passenger Car Association (CPCA) on Tuesday. Sales of SAIC, China’s biggest auto manufacturer, were down 60% year-on-year to 166,600 units last month, while Tesla sold just 1,512 locally-made vehicles over the same period, down from 65,814 cars sold in March.

Some foreign businesses have scaled back plans to increase investment in China and have lowered their business forecasts for this year because of the country’s strict Covid-19 measures, CNBC reported on May 10, citing a survey released by the American Chamber of Commerce in China. Chen expected Bosch China to reach a “small” annual growth rate of less than 10% in sales for 2022 (our translation). The company reported revenue of RMB 128.6 billion ($19.1 billion) in China in 2021, up 9.6% from 2020.

Two of Bosch’s manufacturing facilities in Shanghai and the northeastern city of Changchun were temporarily closed early last month, according to a Reuters report. Production restarted a few days later, as the German parts maker was featured on an April 17 “whitelist” of 666 companies that were prioritized to resume operations by the Chinese government. Both SAIC and Tesla were also on that list, although the US electric vehicle giant was reportedly forced to suspend production for a second time as it was unable to secure enough components.

READ MORE: Automakers in China still face many hurdles as some resume production

Nio and Li Auto’s vehicle deliveries halved in April compared to the previous month, while Xpeng saw a nearly 41% drop. These Chinese EV upstarts have cut production as China fights a new wave of widespread coronavirus outbreaks with frequent lockdown measures since late March.

Why it matters: The massive drop comes as a wave of omicron cases and strict lockdown measures have led to severe supply chain and logistical disruptions to automakers and parts suppliers in Shanghai and surrounding areas, a major auto manufacturing hub for the country.

Details: Li Auto took the biggest hit among the main Chinese electric vehicle (EV) makers, reporting a 62% monthly drop to 4,167 vehicle deliveries for April. Nio saw vehicle deliveries plunge nearly 50% to 5,074 units in April from a month earlier, while Xpeng’s volume dropped 41.6% to 9,002 over the same period.

• Li Auto’s vehicle assemblies in Changzhou, a neighboring city to Shanghai in the eastern Jiangsu province, sat idle after stockpiles of components became depleted during the past month. Over 80% of the company’s parts suppliers are located within the region and many were hit by factory disclosures and logistics difficulties over the period, president Shen Yanan said in an announcement.
• With a factory in the eastern city of Hefei and its global headquarters in Shanghai, Nio was also forced to halt operations for a few days early last month before parts of its business resumed operations beginning April 14. Xpeng was less affected due to its operations being primarily based in the southern city of Guangzhou, saying that it is navigating the pandemic-driven disruption.
• Some traditional auto majors with southern bases weathered the storm better, with Shenzhen-based BYD selling (in Chinese) 106,042 vehicles to customers in April, up 313% from a year ago and 1% up a month earlier. State-owned GAC, also with manufacturing bases in the southern Guangdong province, said that deliveries of its Aion-branded EVs increased 23% year-on-year to around 10,200 last month.
• The ongoing lockdowns have also had minor effects on smaller players such as Leapmotor and Hozon, which reported decreases of 9.7% and 26.7%, respectively, in April deliveries month-on-month. Leapmotor delivered 9,087 vehicles last month, followed by Hozon’s 8,813, local media reported.

Context: The China Passenger Car Association projected total passenger vehicle sales in China in April will plunge to 1.1 million units, a 31.9% drop compared to the same period last year, as the auto industry needs time to recover from the effects of the pandemic.

• Some automakers like Tesla and Volkswagen are gradually resuming production at their factories in Shanghai and the surrounding areas, which have been shut down for weeks due to the lockdowns but still face various hurdles such as parts shortages and a limited workforce.

The Shanghai factories of Tesla and SAIC started producing again on Tuesday following weeks of lockdown due to a wave of omicron infections that have put the country’s auto production in a deep freeze. However, further halts loom large, as many other auto parts makers struggle with getting government permits to restart operations.

Why it matters: China’s auto industry is still far from getting back to total production. This week’s resumption is limited, and the wider industry faces various challenges, such as supply chain shortages and a limited workforce.

• Shanghai and its neighboring regions are a key hub for China’s auto industry.

Short-staffing: Although Tesla and Volkswagen partner SAIC got their employees back to work earlier this week, smaller auto parts makers on the government’s whitelist for business resumption are facing challenges in putting their workers on assembly lines.

• “We basically failed to call back our employees today even though we had government permission for resuming production,” Ye Chunlei, a director of Daimay Automotive Interior, a supplier to auto majors such as Tesla and Volkswagen, told Chinese media 36Kr on Thursday.  
• Ye estimated that only 40% of the company’s employees were eligible to return to the factory, adding that the resumption order had not been communicated to lower-level government departments, such as the local neighborhood committees responsible for managing the lockdown in the apartment complexes across Shanghai. 
• Tesla only has enough inventory of spare parts and materials for about one week of production, sources told Chinese media Caixin on Thursday. The US EV giant said on Wednesday in its earnings report that “limited production has recently restarted,” and the company continues to “monitor the situation closely” without revealing further details.

Logistics disruption: Despite easing restrictions from Shanghai authorities, automakers are having trouble getting parts and materials as new lockdowns across the country continue to hit the auto supply chain.

• Freight carriers around Shanghai are finding it challenging to secure vehicle passes that allow them to deliver goods to China’s largest metropolis. Further complicating matters, the requirements for vehicle passes vary among different regions, Chinese media Caixin reported on April 15, citing a local carrier from the eastern city of Wuxi.
• Truck drivers are also required to submit multiple documents to prove that they are Covid-free, including negative tests from within the previous 48 hours and health codes that show they have not been in any known high-risk environment. 
• The volume of highway traffic in Shanghai and the nearby provinces of Jiangsu, Zhejiang, and Anhui plunged by 65% on April 18 compared with a year ago, according to numbers released by the Ministry of Transport. The volume of highway traffic nationally in China is also down by 40%, according to the same statistics.

New rules to resume production: Shanghai released a new guideline on April 16 to help companies prepare for resuming production. 

• More than 250 auto firms in Shanghai are now mandated to implement strict health and safety rules at their plants to qualify for resuming production, including running in a “closed-loop” production system where workers live on-site.
• Other measures include daily testing of employees, restrictions on group dining, and limiting movement, according to guidelines (in Chinese).
• The rules state that workers should wear face masks at all times, except when eating or drinking, and that all visitors are required to take an antigen test on-site and have proof of a negative covid test result within 48 hours before their arrival.

Shanghai and Changchun, two of China’s major auto hubs, have been swamped by the highly contagious omicron variant of the coronavirus. The outbreaks, coupled with China’s strict epidemic control measures, have resulted in a huge blow to April auto sales. Now auto executives and analysts say that the impact could cripple the whole industry if the lockdowns remain unchanged.

“All Chinese car manufacturers will have to stop production in May, if there is no way for those in Shanghai and suppliers nearby to restart operations and production,” He Xiaopeng, chief executive of Xpeng Motors, said Thursday on his Weibo microblog (our translation).  

The Xpeng leader is not the only boss to express deep concerns about the consequences of China’s current wave of lockdowns. Richard Yu, chief executive of Huawei’s consumer business group and smart car solution unit, said on Friday that technology and manufacturing businesses linked to suppliers in Shanghai could “stop altogether” in May if a solution is not found soon. “This is especially the case for the auto industry, and the economic loss could be huge,” Yu wrote on his WeChat Moments feed, according to a report by Chinese media Sina Tech (our translation). 

Auto giants are already feeling the pain of lockdowns that began in Changchun early in March and were extended later that month to Shanghai. Auto sales in Shanghai and Changchun, the capital city of northeastern Jilin province, have ground to a halt. The Shanghai outbreak could lead to a sharp 20% drop in vehicle sales, the China Passenger Car Association said earlier this week.

Meanwhile, Volkswagen’s auto sales in China tumbled 23.9% year-on-year to 754,000 units for the first quarter, which the company’s China CEO Stephan Wöllenstein on Thursday attributed to lockdown measures and chip shortages.

Tesla has been forced to halt assembly lines in its Shanghai factory since late March. General Motors is eking out some limited output with partner SAIC in Shanghai by asking workers to sleep on factory floors, while multiple major auto suppliers such as Bosch and Aptiv have suspended production, Reuters reported. 

China’s auto industry is now enveloped in a “perfect storm” with lockdowns added to the existing problems like semiconductor chip shortages and raw material disruptions due to the Russia-Ukraine war, said Stephen Dyer, a managing director at consulting firm AlixPartners. 

“The bottom line is that unless China can stamp out COVID completely, this uncertainty will hover over the entire sector like a dark cloud,” said Tu Le, managing director of consultancy Sino Auto Insights.

Both Dyer and Le expressed confidence that the industry can be on a path toward recovery if lockdown measures loosen soon, but the industry will see major losses if lockdowns continue in the long run.   

He Xiaopeng’s Thursday Weibo post noted that some of the related government officials are now “working hard to coordinate” reopening activities. Nio on Thursday also said that it is restarting operations in its plant in the eastern city of Hefei as the supply of key components improves slightly, without revealing details.

“The silver lining is that it is still only April so any lost production from late March can be made up via overtime in the rest of the year,” said Le from Sino Auto Insights. A similar sentiment is being expressed by AlixPartners’ Dyer, “If production halts are relatively short, it is possible for vehicle production and sales to quickly make up for production stoppages so that annual sales are less affected, as was the case in 2020.”

In addition, auto companies are now doing everything in their power to minimize damage and prepare for a rebound. SAIC-Volkswagen is reportedly (in Chinese) working 24 hours a day to track their shipments of components and is in contact with more than 500 suppliers to ensure supply. Volvo’s parent Geely has been assigning its employees to guard the highway junctions to transport goods from Shanghai with its own fleet, according to an April 11 report by Chinese media Caixin.

The immediate focus is on business recovery rather than profit. “Profit margins will be squeezed but their priorities right now should be to get production back online the second they get that thumbs up,” Le said.

Top automakers Nio, Tesla, and Volkswagen, are temporarily closing their plants in China as a new omicron-led coronavirus outbreak spreads through the country. Following China’s covid zero policy, cities rush to implement lockdowns, creating broken links in the local supply chain.

Why it matters: The spread of the highly transmissible omicron variant is the latest hit to automakers in China after struggling for months to cope with raw material and parts shortages resulting from continued high demand and now worsened by the Russia-Ukraine war.

Details: Nio, Tesla, and Volkswagen have closed their assembly plants in China – without providing a targeted return-to-work date.

• Nio said on April 10 that it had temporarily stopped production lines at its plant in the eastern city of Hefei, after parts suppliers suspended operations earlier in “multiple” regions including Shanghai, the eastern Jiangsu province, and the northeastern Jilin province. Vehicle delivery is also delayed, according to an announcement (in Chinese).
• Tesla on March 28 closed its Shanghai Gigafactory for four days as the local government enacted citywide lockdown measures. The shutdown has since been extended indefinitely due to a severe lack of staff and components, news website Electrek reported on April 6, estimating a potential production loss of at least 24,000 vehicles. The US EV giant delivered 65,814 vehicles last month, an 85% increase from a year earlier, according to CPCA.
• Volkswagen announced on April 1 that its Shanghai plant, operated as a joint venture with China’s SAIC Motor, was due to be closed for five days, a few days after a 48-hour suspension during mid-March. The production suspension is still ongoing, however, according to a Monday report by Chinese media Caixin. Previously, the German automaker’s joint venture plants with FAW Group in Changchun (the capital city of Jilin province) also shut down on March 13. FAW on Monday announced that it had begun reopening facilities, local media reported.

Context: China’s overall car production volume could slump by 20% with the current omicron outbreak, Cui Dongshu, Secretary General of the China Passenger Car Association (CPCA), said on Monday during an online conference, without giving a timeframe.

• In March, China’s passenger vehicle output fell slightly by 0.3% to 1.82 million units from a year earlier, with the luxury segment the hardest hit as production volume declined 31% on an annual basis, according to the latest figures published by the CPCA.
• Last month, the passenger electric vehicle (EV) sector saw strong growth with retail sales up 137.6% from a year ago to 445,000 vehicles last month. The CPCA did not provide an estimate on auto sales for 2022 since the situation remains fluid, but maintained its estimate of passenger EV sales at 5.5 million units for 2022, Cui said.

Since last week, more than 10 Chinese electric car makers have raised prices for their EV models, prompted by the significant increase in raw material costs. Analysts say that the price hikes will not hurt vehicle sales in the short term due to an already high order backlog, but also predict that companies will change prices more often in the future to meet their sales targets.

Some of the biggest names in the EV market have led the price hike. In March, Tesla raised prices for two premium versions of its China-made Model Y electric crossover twice in less than a week. Chinese EV giant BYD on March 15 announced it was lifting prices for most of its vehicle lineups, after it upped prices two month previously to address government EV subsidy cuts. Among the 11 carmakers that raised their prices in recent weeks, EV startup Leapmotor enacted the biggest hike, increasing its list prices by as much as 15%, or RMB 30,000 ($4,710), while state-owned automaker SAIC introduced the lowest price rises on average, with a 1.2% hike, or RMB 2,000, according to data compiled by TechNode. 

Why the price hikes?

A major reason behind the rise in EV prices is the “very strong” growth in the Chinese market, making it harder for raw material suppliers to keep up with demand, Peter Li, a Credit Suisse analyst, said on Tuesday during the company’s Asian Investment Conference.

EV battery makers have been scrambling to secure supplies of key ingredients, such as lithium. In mid-January, the cost of battery-grade lithium carbonate was 569% higher compared to two years ago, according to figures from Benchmark Mineral Intelligence. Lead battery maker CATL raised its price by RMB 20,000, Chinese media Yicai reported Monday. 

Major battery suppliers have now directly linked their pricing mechanisms to raw material price changes rather than adjusting their rates on an annual basis, due to the volatile commodity market. “That’s why we are seeing further battery price hikes in the second quarter,” Li said, adding that the trend will continue in the next two years, pushing potential price surges throughout the industry value chain from material suppliers to battery makers to car manufacturers.

Credit Suisse expect the lithium supply deficit to be expanded from 37,000 tonnes in 2021 to 101,000 tonnes this year, around 18% of global demand, and commodities prices to remain high at least until 2024, due to EVs’ growing popularity in China. Sales of new energy vehicle sales (NEVs) in China, mainly EVs and plug-in hybrids, skyrocketed 154% year on year to 3.52 million units in 2021, according to official figures. 

Does the future hold more frequent price changes?

Analysts anticipate the price hike won’t have a major impact on automakers’ deliveries in the short term, thanks to major players enjoying massive backlogs of orders in the market.

The waiting time for new orders of Tesla’s locally-made Model 3 sedan is now 20 to 24 weeks, compared with only six weeks last April, while the waiting time for Xpeng’s P7 is at least 12 weeks. BYD chairman Wang Chuanfu said in November that the company’s orders for its various models had reached an all-time high of 200,000 and it had to spend four months on average to deliver a vehicle, Chinese media reported.

In the longer term, Chinese EV makers could implement more flexible pricing strategies, lowering prices at the cost of their margins to ensure growth, if the current high demand for EVs slows down later this year. Some automakers are already preparing for more pricing adjustments, which means they could provide promotions or discounts to maintain their volume targets if demand starts to weaken during the second half of this year, Wang Bin, a Credit Suisse analyst, said at the investment conference.

EV makers could also change prices more frequently to attract new buyers, as the industry is transitioning towards a revenue model based on software subscription services rather than car sales, said Lu Shengyun, an independent adviser to entrepreneurs and CEOs. Passenger EV sales could grow by 84% year on year to 5.5 million vehicles this year, industry group the China Passenger Car Association said in January.

Electric vehicles “is a strategically important direction for automakers. They will sacrifice margin to offset the impact from rising material cost,” Wang added.

Ward Zhou contributed to the reporting of this story.

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.

Space travel will only be “a game for rich people” if its cost can not be reduced, said a founder at a Chinese rocket launch startup on Friday.

“If every trip to space costs $1 million, it won’t be a commercial market,” Cheng Wei, founder of Chinese space company Rocket Pi said at the Beyond Expo event held in Macau on Friday. (our translation).

Cheng said that the first step for the commercial exploration of the universe would be sending animals into space.

“We first have to develop the ability to send lifeforms other than humans, like cells or primates, to travel in space to gather data before human exploration can be fully achieved,” said Cheng.

Companies in the emerging market also have to consider regulatory challenges, the entrepreneur said. “This is a long march and we still have a lot of hurdles to overcome,” he added.

Co-founded by Zhuang Fengyuan, an academic at the International Academy of Astronautics, Rocket Pi is among the early movers in the private space exploration sector in China, developing and operating space launch systems for in-orbit experiments for biopharmaceutical studies.

The company is currently on track to launch a biological payload carried by a satellite, called Sparkle-1, later this month, and put several more into orbit next year, Cheng told TechNode. It has set a long-term goal of building a space lab to enable human space travel after 2025.

China has just started constructing its own space station and the country’s research in space life sciences is still at an early stage, Cheng said. He added that there is significant work to be done in helping commercial space travel become a reality, such as reducing the acceleration load for less experienced space travellers so that they can have a safer, smoother ride.

In April, China began building its first permanent space station, Tiangong-1. SpaceX, the aerospace company founded by Elon Musk, made history in September by successfully launching the first orbital flight with four amateur space travelers, marking the first time that an all-civilian crew reached space.

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.

Tesla said on Saturday it will recall more than 285,000 vehicles in China to address safety concerns in its autopilot system, marking the automaker’s largest recall in the country. Tesla told local news the decision is not linked to previous safety incidents.

Why it matters: The recall raises questions over the carmaker’s future in China. The company’s prestigious image has soured quickly as Chinese Tesla owners this year began blaming the company for car malfunctions, including sudden accelerations and brake failures. 

• The recall affects over 90% of Tesla vehicles made and sold in China, according to figures released by the China Passenger Car Association. 

READ MORE: Safety questions and shady sales tactics are chilling the China-Tesla love affair

Details: Tesla will recall 285,520 cars, including Model 3 and Model Y vehicles built between 2019 and 2021. Affected customers can receive fixes remotely through system upgrades, without bringing the cars back to the dealers. 

• China’s market watchdog, the State Administration for Market Regulation, said it found safety risks in Tesla’s autopilot cruise-control systems. Drivers can easily activate the system by accident, causing the vehicle to accelerate suddenly, the regulator said in a statement (in Chinese). In some extreme cases, this problem can lead to collisions, the regulator said.
• The watchdog said the recall is Tesla’s response to a safety investigation initiated by the regulator. 
• However, Tesla said in its statement (in Chinese) that the recall is a result of the company “acting responsibly to the customers” and that it reported the recall voluntarily to the regulator (our translation). 
• A Tesla spokesperson insisted that the recall was proactive and unrelated to previous accidents in an interview with the National Business Daily (in Chinese). 
• The affected models include more than 211,000 Model 3 vehicles made in China between December 2019 and June 2021, nearly 36,000 imported Model 3s manufactured during 2019, and 38,600 Model Ys made in China since the start of this year. 
• Tesla did not respond to TechNode’s emailed request for comment.

Context: Since early last year, Tesla has faced mounting pressure in China over safety concerns and customer service complaints. The company also faces national security concerns in China. 

• After a car owner launched a high-profile protest at a car show in April, the US carmaker issued an unusual public apology, pledging to respect Chinese customers and China’s laws, and cooperate with the government on its investigations. 
• In late May, the company also established a data center in China, after the Chinese military reportedly banned staff from using Tesla vehicles due to concerns over the cars’ ability to collect confidential data. The center will store and process information generated by locally-made Teslas.
• Chinese government agencies have begun requesting staff to refrain from purchasing Teslas, due to data security concerns, a person with direct knowledge of the matter who asked not to be named told TechNode in early June. 
• In February, Tesla announced a recall in China affecting 36,126 imported Model S and Model X vehicles over touchscreen failures. Three months later, the company issued another recall involving 5,974 imported Model 3 due to safety risks posed by defective bolts, CNBC reported.

As Chinese automakers pour money into autonomous vehicles (AVs), they’re relying on another emerging technology to be the eyes of self-driving cars: lidar. Chinese carmakers are promising that models with lidar will hit the road in the next six months, likely marking the first time the tech sees widespread commercial deployment.

What is lidar? Well, it’s a lot like radar, but it uses lasers. It can pick out details and see small things better—a small dog crossing the road, a pothole. It can see things other systems, such as cameras and radar, might miss. 

But established lidar systems are bulky contraptions that are proving hard to integrate into consumer cars. They’re expensive, too, driving up the price of cars that use them for self-driving functions. For now, it’s mostly seen on prototype robo-cars.

Despite the challenges, most Chinese AV contenders are counting on lidar.

Five Chinese lidar startups say that they’re close to making it work. It’s a tough act: the device has to be small enough to fit in a sedan, reliable enough to trust on the road, and cheap enough to fit into the price of a consumer car. While they won’t be the first to deliver road-ready systems, Chinese companies could be the first to do it at a practical price. 

In this week’s issue, we’ll meet China’s leading lidar players and see how they’re trying to make the emerging technology work.

Robo ski-racks

Most lidar systems on the road today are mechanical spinning lidar on AV prototype vehicles. You’ve probably seen one—they’re the ones that look like half a jetski, or three portly Alexas strapped to a ski rack. If you saw it in China, it was probably made by Hesai, the Baidu-backed startup that’s the dean of the field.

Hesai has dominated the experimental generation in China, making the systems used on most Chinese and some international prototypes. At least 10 out of the top 15 robotaxi startups worldwide are reportedly (in Chinese) among its clients, including Baidu, Didi, and Pony.ai. 

But to address size and durability, lidar makers are now turning to “solid state” sensors that eliminate most moving parts. These can fit the system into a small box, around the size of a lunch box, which fits easily into the grill or tucks under the roof of a car. But miniaturization creates new problems with range, price, and reliability.

In early 2019, Hesai unveiled its latest solid-state device, called Pandar GT and boasting a detection distance of 300 meters, but it is still validating the product and negotiating with auto clients, according to a prospectus filed by the company in January. 

So far, Hesai hasn’t found a customer to put its solid state technology into a production vehicle. Baidu, a leader in China AV tech, has skipped lidar for its self-driving package, known as Autonomous Navigation Pilot, despite years of collaboration with Hesai in mechanical lidars for its test fleets. Speaking to Chinese media during this year’s Auto Shanghai expo, Baidu’s vice president Wang Yunpeng said the company is developing a “reliable and affordable” lidar sensor for production cars with partners, without giving further details.

The key challenges

Five Chinese companies have made real progress on consumer-ready lidar, using a variety of approaches that strike different balances between range, price, and reliability, and reaching deals with major automakers to put their sensors into cars. But they each have difficult technical problems to solve. 

Huawei and Robosense, a Chinese lidar upstart backed by Alibaba, are betting on a technology called micro-electro-mechanical systems (MEMS), which uses a tiny mirror (1 mm to 7 mm in diameter) to steer light. With only this piece of glass moving, the whole unit can be smaller than one that has to rotate as a whole. Robosense is currently making lidar s¯ensors for US electric vehicle startup Lucid Motors.

Both MEMS players are struggling with range: the latest offerings from the two companies only work at distances up to 150 meters.

Experts believe self-driving systems will need to spot objects at least 200 meters away to have enough time to react. 

The MEMS solution has proven to be superior in terms of size, speed, and cost over other types of lidar sensors, according to an article published by three University of Florida engineers last year. However, a short detection distance due to the small mirror is a key flaw and, to deal with it, systems will likely need a larger detector, complicating assembly, the paper said.

With its latest offering boasting an impressive distance of 250 meters, Sunnyvale and Suzhou-based Innovusion seem to have solved the range issue. Their solution uses lasers at a wavelength of 1,550 nanometers, rather than more common 905-nm lasers. Considered a “sweet spot” by lidar developers, 1,550-nm light allows longer-range measurement and poses less danger to human eyesight. When using 905-nm lasers, power is usually restricted to avoid blinding people.

But Innovusion has faced challenges with production, for a physical reason: traditional silicon chips can’t detect 1,550-nm light, and therefore developers have to make custom sensors with an exotic material called indium gallium arsenide (InGaAs), which is more costly and more complex to manufacture. Setting up a production line for this less common technology is no easy feat, and the product may not be cheap.

Speaking at an online conference in March, Innovusion technology chief Li Yimin said getting lidars to work well on production cars had turned out to be more difficult than he expected. Nonetheless, he said his staff have been working “day and night” to meet the early 2022 timeline target set by partner Nio. The Chinese EV maker has promised to deliver its first sedan model enabled with its lidar sensors, the ET7, early next year.

“We have to pull ahead the production schedule of many advanced technologies including lidar … This has posed a lot of pressure on our teams and the partners. We are fully focused on achieving this goal and pushing ahead despite all those challenges,” Nio’s chief executive William Li said during an April earnings call.

Xpeng Motors, with partner Livox, claims it will be the first Chinese automaker to deploy lidar on production cars this October. But it is facing other problems. Livox’s sensors boast a unique method of scanning objects in a spiral or flower pattern, rather than in traditional horizontal linear scanning patterns. This helps its sensors create a higher-definition map of the world and could enable more reliable autonomous driving capabilities, the DJI-backed lidar maker has claimed.

However, the unusual scanning style requires the sensor’s motor driver to operate at a high rotation speed of over 6,000 revolutions per minute, more than five times that of sensors made by major French lidar marker Valeo. These speeds pose a big technical challenge for the five-year-old startup to meet reliability requirements for autos, since high rotational speeds usually come along with high abrasion and reduced lifetime for motors.

Livox recently said that it has resolved the issue with manufacturing improvements, based in part on DJI’s expertise in mechanical engineering from making drones, according to a Chinese media report published last week. However, Xpeng CEO He Xiaopeng last month during an earnings call acknowledged that the company is still testing lidars from multiple suppliers and is “very open” to other choices for new models scheduled for launch over the next two years.

“With an all-round sensing performance on our cars and our production capabilities, we’re very confident that we can be complementary to some of the disadvantages of lidar technology,” He added.

Some Chinese automakers and lidar startups are also seeking overseas partners. In addition to the Robosense-Lucid hookup, Chinese legacy automaker Great Wall Motors, a manufacturing partner of BMW, has teamed up with Germany’s Ibeo as its source for lidar sensors on production cars.

The price is right

After technical barriers, lidar-enable cars will have to leap another hurdle: cost. The sensors don’t come cheap.

China’s low-cost manufacturing advantage appears to apply to lidar, with the offerings of local suppliers usually costing 80% less than international competitors, or below $1,000, French market intelligence firm Yole Développement wrote in a report published last August.

However, lidar cars don’t look cheap. The latest premium electric sedan announced by Huawei and BAIC in April, equipped with three lidar sensors, has a starting price of RMB 388,900 ($60,785), more than 50% higher than that of Tesla’s locally-built Model 3. 

R&D and onboard computing could be driving the cost. The Chinese telecom giant in April announced that it will double its annual auto R&D budget for self-driving cars to $1 billion this year, without giving a breakdown of its investments. Apart from three lidar sensors, the hardware stack of the BAIC-Huawei sedan also includes five more cameras, and five more radars than a Tesla Model 3’s. Although cameras usually take significant computing power in the vehicle, the task of combining data from multiple sensors also requires much computing power and a more complex vehicle architecture. 

Mixed opinions

Not everyone agrees that AVs will need lidar. Tesla has been heavily relying on a cheaper, camera-based approach. Nissan and Baidu, are also skipping lidar, relying on cameras, radar, and ultrasonic sensors for AVs. 

Most other major players, including Google’s Waymo and General Motor’s Cruise, consider lidar an essential part of developing safe autonomous cars. “Lidar sensors contribute to the redundancy and overlapping capabilities needed to build a car that operates without a driver, even in the most challenging environments,” wrote Cruise CTO Kyle Vogt in a post in 2017.

Chinese EV makers are betting on the lidar-based approach in competing against Tesla, and have gained chances to validate the technology. “At the current stage our top priority is not to secure as many contracts as possible, but to fine-tune our products and hit volume production,” (our translation) a Livox spokesperson told TechNode last month.

But lidar prices are falling. As the sensors get cheaper, the case for them looks more and more tempting. “Lidar guarantees high reliability for self-driving cars when vehicle autonomy is still in its early stage. Such redundancy is worth taking in the name of safety,” (our translation) Paul Gong, a China auto analyst at UBS, told TechNode last month.

Traditionally a time for automakers to flex their muscles, the Auto Shanghai expo this year held a surprise: It was China’s big tech firms that took the spotlight, outshining some of the country’s leading EV makers. 

Huawei made a big splash, unveiling its complete self-driving car technologies as it gears up to compete as a central player in China’s autonomous vehicle (AV) industry. Baidu, China’s biggest internet search firm, was not to be outdone, proclaiming itself the undisputed AV industry leader. The company said it expected to equip 1 million new cars in five years with its software.

Some of the biggest startup unicorns such as chipmaker Horizon Robotics were also busy, forging alliances with a list of automakers during the event as they work to establish themselves in the booming industry.

Highlight 1: Chinese tech giants bet on smart EVs

Overshadowing traditional carmakers displaying flashy concept models and production-ready cars, Chinese tech giants generated big buzz at Auto Shanghai this year. 

Tech giants unveiled advanced connected and autonomous driving solutions along with ambitious growth strategies, generating headlines and lending cachet to lesser-known auto partners. In particular, deep-pocketed Huawei and Baidu showed how they are ramping up aggressive pushes into the industry.

Huawei was one of the biggest draws at the show. Crowds swarmed the Arcfox-branded Alpha S electric sedans on display at its booth, equipped with the telecom giant’s hardware and software and made by automaker BAIC. 

After three years of co-development, the two companies said that they are on track to deliver the Alpha S by year-end. According to Huawei and BAIC, the vehicle features “best-in-class” self-driving capabilities for highways and busy streets to customers in China’s four biggest cities. Its other customers that hail from outside of the four cities will get the function via over-the-air software updates within the next two years as Huawei continues to work on its AV mapping.

To reach this target, Huawei has been plowing resources into its new auto business. Its Automotive Solutions unit will beef up headcount 25% to 5,000 employees this year, Wang Jun, president of Huawei’s intelligent Automotive Solution business unit, told Chinese media during the show.

Hands-free driving on busy city streets is widely considered a key milestone for mass AV adoption, one that Tesla has offered in its full self-driving (FSD) package since March. Eager to offset its flagging smartphone sales Huawei has been chasing this capability as it ranks auto among its top-priority businesses, though it is years behind industry leaders. At the company’s global analyst conference a week before Auto Shanghai, deputy chairman Eric Xu announced that Huawei will nearly double its annual auto R&D budget to $1 billion this year.

Lingering questions among industry analysts TechNode spoke with include understanding what progress Huawei has made on the self-driving front so far—a question it has not yet addressed—and how much safer its self-driving cars will be compared with traditional autos. The tech heavyweight faces a significant uphill climb. Many automakers remain skeptical that the “wounded tiger” will manage to make cars itself, these analysts said.

Huawei’s moves into the auto industry present a significant threat to Baidu. Wang Yunpeng, a vice president at the search firm, recently went on the counter-attack in a talk with Chinese media during the auto show, insinuating that even by throwing money at the challenge, competitors stood little chance of quickly catching up. 

Baidu, Wang said, is in the same camp as Google’s AV unit Waymo—it’s on the verge of commercializing its technologies. To compare, “companies like Huawei and Didi are probably still at the stage of testing their vehicles on fixed routes,” Wang said (our translation).

Baidu’s robocars have logged 10 million kilometers (6.21 million miles) on public roads, around a third of Waymo’s. During the event, Baidu launched what it boasted was China’s most advanced driver-assist system. Called Autonomous Navigation Pilot (ANP), the technology enables autonomous driving capabilities for vehicles made by Baidu’s automaker partners. The system will be first available to owners of these vehicles in 20 cities by year-end and then over 100 cities by 2023, the company said. Baidu said its self-driving tech will power at least one new model per month beginning in July and equip more than 1 million cars with its software over the next five years.

With blurred lines between vehicles and technology, how much tech is in a Baidu- or Huawei-enabled smart car? Using as an example WM Motor’s W6, the latest crossover from the Baidu-backed EV maker, the tech giant is responsible for most of the digital technology in the car, from the voice assistant to the map navigation in the operating system. WM Motor also sources Baidu’s self-driving software and hardware suite including 12 cameras, 12 ultrasonic sensors, a radar system, and a computing platform, while it independently develops the car’s mechanics, such as the powertrain system.

Chinese carmaker Chery is also clamoring to join Baidu’s friend circle, while BAIC is one of Huawei’s oldest allies in the automotive industry. However, some of the bigger names in auto want full control in developing the next-generation of vehicle architecture. For that reason, China’s biggest automakers, SAIC and Dongfeng Motor, displayed their latest offerings with software developed in-house or by Chinese AV unicorns they have backed.

During the expo, SAIC began to take orders for its first sedan, the L7, under its new premium EV brand IM. Short for “Intelligence in Motion,” SAIC co-launched the brand with Alibaba in November to compete against Tesla. The Volkswagen partner recently raised its holdings in Chinese AV upstart Momenta, aiming to offer urban self-driving capabilities early next year. Meanwhile, Dongfeng announced (in Chinese) that it aims to sell a total of 1 million EVs and master fully driverless technologies within the next five years.

Experts TechNode spoke with were optimistic about Chinese automakers’ moves into smart, electrified cars, thanks in part to local tech giants. Domestic players could account for 70% of auto sales from the current 40% within the next 10 years, Liu Guanghao, an investment director at Shanghai-based venture capital firm BeFor Capital told TechNode. “These driver assistance features are industry-leading, and the car interiors, such as the digital dashboards, appeared forward-thinking. This could help traditional automakers reposition their brands to be more premium,” (our translation) Liu said.

Highlight 2: EV Big Three momentum slows

Amid the hubbub from big tech and traditional auto companies, Chinese EV contenders were comparatively quiet, with no mention of new models at Auto Shanghai.

Well-funded Nio, Xpeng, and Li Auto are considered emerging EV leaders and the most promising of China’s Tesla challengers. Now, as competition heats up, they are collaborating with smaller tech unicorns—such as Li Auto’s partnership with Chinese chipmaker Horizon and Xpeng’s partnership with DJI’s Lidar unit, Livox—in an effort to maintain their leadership positions in the sector. 

But their outlook may be clouding over after internet giants overshadowed them during the expo.

On the first day of the show Nio kicked off a massive expansion of its charging infrastructure, announcing that it would open 100 battery swap stations and 500 supercharging stations in an area spanning eight northern provinces during the next three years. Meanwhile, Nio president Qin Lihong acknowledged to Chinese media on April 19 that big tech’s push into EVs was a challenge for the company considering Huawei’s established retail network, and reaffirmed its goal to expand its sales network by 60% to 366 stores nationwide by year-end.

There has been growing concern over EV upstarts lagging larger players in new product and technology development going forward. Nio CEO William Li last month expressed confidence that it would release the ET7, its next-generation electric sedan, on time, slated for delivery early next year. It would happen, he confirmed, despite steep challenges in advanced technology adoption. The company said it is doubling its R&D budget to RMB 5 billion ($774 million) this year. “Auto intelligence is where this game may be decided,” Li told Chinese media during the auto show.

Li Auto is seen as falling behind its peers in the AV race, having not yet delivered highway self-driving functionalities to its customers. Feeling the heat at the auto show, CEO Li Xiang said April 20 on Chinese social media platform Weibo that its self-developed AV system will be able to compete head-to-head against those by Huawei and Tesla next year. The EV startup in September announced plans to adopt Nvidia’s advanced supercomputer Orin for its second model, scheduled to launch in 2022.

The six-year-old automaker also turned to Chinese AI unicorn Horizon Robotics for help, and the two companies during the show deepened their partnership to an “in-depth cooperation in building upgradable smart and electric vehicles” (our translation). Despite its best efforts, Li Auto may be too late to catch up and gain a competitive advantage, as tech heavyweights venture into EVs, an analyst told TechNode at the show. 

Li Auto in February assured investors that it will triple its R&D spending to RMB 3 billion ($464 million) this year. Since December it has raised around $2 billion from a new share offering and bond sales to ramp up in-house R&D capabilities.

Xpeng Motors is ahead of its peers in driverless technologies, but also failed to wow the crowd during the show, despite unveiling its second sedan, the P5, which it displayed at a press event in Guangzhou a week earlier. Touted as China’s first production model equipped with two Lidar sensors, an expensive and essential component for 3D perception, the P5 is expected in the first half of 2022 to self-navigate driving scenarios such as being cut off on busy streets.

However, Xpeng did not release the P5’s pricing information as planned, spurring concern from industry insiders that the company’s best days are behind it. Several insiders and analysts that TechNode spoke with said that the P5 launch fell short of expectations while the cost of the vehicle’s hardware suite has remained high, pressuring Xpeng in pricing the new product, people close to the company told TechNode during the show.

Xpeng fired back on April 22, saying on its Weibo account that it had secured more than 10,000 orders of the P5 in 53 hours after opening orders (with refundable RMB 99 deposits). “The market feedback was beyond our expectation,” (our translation) a company spokeswoman said to TechNode on Wednesday. 

Big tech disruption

Chinese tech giants at the Auto Shanghai 2021 disrupted the already-breathtaking pace of China’s new energy and autonomous driving world by doing what they were there to do: build consumer brand awareness and deliver advanced car technology solutions. The disruption is boosting the perception of Chinese-built vehicles—no longer synonymous with cheap, low quality cars—up the industry value chain.

This disruption is pressuring Chinese EV upstarts’ lead in the industry. These EV firms will have to convince investors that, after notching early wins, they can maintain their momentum in an increasingly crowded playing field. 

“Big tech’s entry into the market would inevitably erode the influence young EV makers have in the industry. This has created an alternative regarding the competitive landscape in the next five to 10 years,” (our translation) Paul Gong, China auto analyst at UBS, told TechNode on April 21.

Tesla on late Thursday announced (in Chinese) that, earlier in the day, it had mailed to a customer surnamed Zhang the full data logs for the 30 minutes prior to the accident involving her Model 3 sedan. The company also released to the public data of the car for one minute prior to the crash.

In a statement sent to state-owned media China Market Regulation News, Tesla said the vehicle was traveling at 118.5 kilometers per hour (around 73.6 mph) when the driver, Zhang’s father, hit the brake for the final time before the crash. Then the car’s automatic emergency braking system reacted 2.7 seconds later and the crash occurred after another 1.8 seconds.

The US automaker insisted that the car’s brake functioned properly throughout with the car continuously slowing down to 48.5 kms per hour before the crash occurred. The company said that it is currently in negotiation with the owner to set up an inspection of the car by a third-party institution. Tesla pledged to fully cooperate with regulatory departments for more in-depth investigations and accept without reservation criticisms from the public.

Zhang in early March told Chinese media that her Model 3 crashed one late afternoon in February when her father was driving at a speed of around 60 kms per hour on a highway in Anyang, a city in central Henan province. Zhang insisted her father was driving under the speed limit, given that her mother and one-year-old daughter were also in the car and that the road was dense with traffic. She said that the brake failed to respond when her father pressed the pedal.

Tesla’s release comes two days after Chinese authorities asked Tesla to provide data for the crash investigation. On Monday, Zhang had climbed atop a car to protest at China’s premier annual auto exhibition.

Why it matters: For the first time China will officially investigate complaints about Tesla brake failures. Tesla owners in both the United States and China have complained about faulty brakes for years. So far, however, safety regulators have not found evidence for these claims. The company’s reputation in China has suffered in the past year as customers allege safety defects and shady sales practices.

READ MORE: Safety questions and shady sales tactics are chilling the China-Tesla love affair

Details: A branch of the State Administration for Market Regulation (SAMR), China’s top market regulator, in the central province of Henan, on Wednesday ordered Tesla to share “the full range of data” about a crash two months ago to aid its investigation. The owner of the Tesla Model 3 involved, a woman identified only by the surname Zhang, staged a widely publicized protest at Auto Shanghai on Monday. Regulators told Tesla to send the data to the owner “as soon as possible,” according to a Chinese media report (our translation).

Ge Weihua, a customer service manager at Tesla’s regional office in Zhengzhou, the capital of Henan province, told state television channel CCTV on Thursday that the company’s head office had prepared the relevant data and the local office would share it with Zhang by 6 p.m. Beijing time.

Zhang, accompanied by two other female Tesla owners, staged a protest Monday on the opening day of this year’s Shanghai Auto Show, alleging that the brakes on her sedan malfunctioned while her father was driving in Anyang, Henan, in February, causing a crash with another vehicle. The protest was widely reported in Chinese media, with many online commentators siding with the customer.

Tesla responded later that day that the accident was due to excessive speed. Grace Tao, Tesla’s vice president of external affairs in China, told local media that “there is no possibility Tesla will compromise,” Reuters reported.

On Tuesday, national market regulators publicly instructed local market watchdogs in Henan province and Shanghai, where Tesla’s production facility is located, to protect consumers’ legal rights. Later the same day, the company issued an apology (in Chinese) for being slow to respond to the complaint.

In an additional statement, published late Wednesday on the Chinese social media platform Weibo, the US automaker requested Zhengzhou authorities appoint an officially recognized testing agency for the investigation and pledged to “accept the result whatever it might be” (our translation).

Update: Details added April 23 about Tesla’s release of crash data.

Geely announced Thursday that it will sell electric vehicles from its new premium brand Zeekr directly to customers, a business endeavor for which it plans to open retail shops and build an online community.

Why it matters: The move is part of a broader plan by China’s largest private automaker to become a frontrunner in the electric and software-based vehicle race.

• Zeekr can sell directly because it operates as a standalone company within the Volvo parent company’s empire. “The goal for Zeekr is to become a technology company,” (our translation), said Geely president An Conghui during a press event at its Ningbo facility on Thursday.
• Direct sales, compared to the traditional model of selling cars through franchised dealerships, is seen as key to Tesla’s success in the global auto industry and has been adopted by a number of Chinese EV upstarts such as Nio.

Details: Zeekr on Thursday laid out plans to join the country’s most competitive mass-premium EV segment by opening two clubhouse-style flagship stores called “Zeekr Centers” and 60 smaller “Zeekr Spaces” in local shopping malls this year.

• The company expects to rapidly expand its sales footprint to a total of 225 branded shops in three years. It is on track to deliver its first model, the Zeekr 001, in October, according to An, who is also the CEO of the new EV unit.
• Equipped with Mobileye’s SuperVision, a hands-free advanced driver-assistance system, the company began taking orders for the four-door coupe on Wednesday at a starting price of RMB 281,000 (around $43,077) after subsidies.
• The Zeekr 001 is priced around 20% lower than Tesla’s locally made Model Y and Nio’s popular crossover, the ES6. It is roughly 20% more expensive than BYD’s premium model, the Han, and Xpeng’s P7 sedan. These models are considered the primary contenders expected to grab share from gasoline cars.  
• Meanwhile, the company will launch a smartphone app in June capable of transacting online sales, and to help with forming a virtual community, An said.
• The management of multiple teams and the expenditure involved in operating a direct sales model is a big challenge for traditional automakers to take on, and is not currently feasible for all of its business units, An explained during the event.

“It’s an emotional play at the high end where consumers buy EVs because they’re high-tech gadgets with premium experience. That’s been a successful play in China and will continue to thrive without government subsidies.”

—Stephen Dyer, managing director of global consultancy AlixPartners, told TechNode during the panel, “EV: What’s next as the industry recovers” at TechNode’s Emerge event in November.

Context: Volkswagen is one of the traditional auto majors which adopted a direct-sales model, opening its first branded shop in December in the eastern Chinese city of Hangzhou. It plans to build 40 stores across China over the next year or so, according to a Reuters report.

• Geely in March announced a RMB 2 billion investment initiative to set up Zeekr Technology and establish a presence in the fast-growing luxury EV segment.

Correction: An earlier version of this story incorrectly identified the EV company as Zeeker, not Zeekr.

Update: added the names of the November TechNode event and panel discussion that Stephen Dyer took part in.

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.”

After completing a test drive across China’s eastern coastal region, Xpeng Motors said on Wednesday that its driver assistance technology is the top performer in China, using a technology rejected by Elon Musk: high-definition maps.

At a press event in Beijing, Xpeng executives said its Navigation Guide Pilot (NGP) function, which enables primarily unassisted highway driving, surpassed Tesla’s Navigate on Autopilot (NoA) in several key metrics. Specifically, Xpeng said that it had achieved a lower rate of human driver intervention and a higher success rate for automatic lane changing, among others. The 3,600-kilometer (1,864 miles), eight-day road trip, which included members of the media, ended on Sunday.

The road trip included a fleet of 15 P7 sedans traveling a combined total of around 50,000 kilometers on highways and urban streets through major domestic cities including Beijing, Shanghai, and Guangzhou. Xpeng said it logged 0.71 disengagements per 100 kilometers. This means a human driver was forced to take control of the vehicle after traveling in autonomous mode for 140 kilometers on average. In the meantime, Xpeng claimed several Tesla vehicles in tests conducted by local media experienced 1.03 disengagements per 100 kilometers.

The Chinese EV maker also announced its latest version of NGP, scheduled to launch through an over-the-air update in the second quarter, resulted in a 94.4% success rate for lane changes versus Tesla’s 81.3%. Xpeng vehicles successfully self-navigated through tunnels 95.0% of the time compared with Tesla’s 41.8%. Huang Xin, a director at Xpeng Motors, called it “an overwhelming lead” (our translation).

”NGP completely exceeded Tesla’s NoA regarding all the metrics in our tests… and has become the most advanced driver-assist function for production models,“ (our translation) Huang said while calling out challenges from all of its competitors. Huang added that Xpeng will release all the data collected during the trip.

TechNode took one of the Xpeng sedans on a test drive from a hotel in Shanghai to a highway service zone in neighboring Suzhou city, sitting alongside the driver. During the 45-kilometer, 40-minute test ride, the vehicle drove primarily at around 120 kilometers per hour, navigated safely and responsively including changing lanes a number of times. However, at one point, the driver was required to take over the wheel when the vehicle passed an off-ramp on its right while being cut off by a car from the left.

In another test drive made by Chinese trade publication 42How, the P7 disengaged 19 times over 2,000 kilometers of autonomous highway driving compared with 22 driver interventions for a China-made Model 3 on the same route. The article said that Xpeng’s tech provided a better, more localized experience for Chinese customers, including a smoother drive when guiding its car from a highway on-ramp to off-ramp, and normal operation in tunnels or with heavy rain, which caused Tesla’s NoA to stop working.

Alibaba helps

So far, around 20% of owners of Xpeng’s P7, the company’s first premium model with the hardware necessary for offering advanced self-driving capabilities, have ordered its latest Xpilot 3.0 advanced driver-assist system (ADAS) featuring the NGP function, which launched in January. The Nio Pilot, which has been offering for almost three years, had a 50% take rate. More than 68% of Tesla buyers had reportedly opted in for its Autopilot software back in 2019.

READ MORE: Nio, Xpeng, Li Auto: your cheat sheet to China’s listed Tesla rivals

And yet, Xpeng is considered by many to be a big threat to Tesla in China where vehicle autonomy is concerned. Xpeng has boldly marketed itself as one of few companies capable of developing in-house the entire software architecture for AVs. The P7 currently remains the first and only production vehicle in the market equipped with Nvidia’s Xavier computer dedicated to highly autonomous driving, according to Xpeng’s vice president of autonomous driving Wu Xinzhou.

And now, the Alibaba-backed EV maker is stepping up its challenge against Tesla by working hand-in-hand with Alibaba’s map platform Amap, or AutoNavi. The company is confident that an elaborate, detailed map for real-time self-driving purposes would give it a leg up in luring increasingly savvy Chinese consumers, according to comments during the online press event. Xpeng attributed Amap’s latest high-definition map with providing navigational capabilities in adverse weather conditions or places with poor signal such as tunnels.

“Our vehicles can enter and exit highway ramps automatically and switch highways pretty much all by themselves, because most of the interconnections between highways are mapped by our partner AutoNavi. So we can have a seamless experience when you’re switching highways using NGP,” Wu said during an online conference in late January.

NGP could work properly in benign weather conditions, Wu added, and even under “medium to heavy rains” although it is designed to shut down and require human intervention when the windshield wipers are on the highest setting. Wu acknowledged there are also challenges in snow, which make it difficult for the vehicle’s sensors to detect road lane lines.

Tech dogma

The practice of using HD maps for AV navigation has long been criticized by Tesla’s Musk, partly because maintaining an constantly updated HD map was believed to be an arduous and costly effort. Musk in 2018 publicly stated that dependency on HD maps would cause an AV to fail when real world changes are not reflected on the map. Tesla’s vehicles, he said, have sufficient sensors and processors to drive themselves.

Tesla did not respond to TechNode’s request for comment.

However, most other automakers and AV companies including Waymo and GM Cruise, rely on a suite of hardware stacks comprised of cameras, radar, Lidar, and HD maps—usually viewed as “another sensor.” Xpeng is currently the only car company incorporating Amap’s latest map technologies for on-board navigation, a partnership which Wei Dong, a general manager of Amap, commented requires an automaker have a strong proprietary capability in software development, since map data will be aggregated with sensor data to give AVs a sense of their surroundings.

“We do a very careful checking between what the cameras see and what the map is telling you pretty much all the time. And whenever there is a difference, the system will send a warning to the driver and sometimes just downgrade the AV functionality to make sure it’s safe,” Wu told TechNode.

SAIC Motor, the biggest automaker in China, will use processors for its self-driving cars from a domestic chip startup, throwing its weight behind a young upstart as Beijing accelerates plans to replace foreign-made chips with homegrown.

Why it matters: For one of the world’s biggest automakers to gamble a major strategic push on a young and relatively untested chipmaker signals the importance that Beijing places on rapid acceleration of self-reliance in advanced chips.

• Horizon Robotics lacks a global reputation compared with larger rivals such as Nvidia and Mobileye. In August 2019, it launched the Journey 2, its first auto chip to meet global auto stress-test standards, and began shipments in March.

Details: SAIC, China’s largest automaker and Volkswagen’s manufacturing partner, will use processors and software from Horizon Robotics, a rising Chinese chipmaking startup, for its upcoming car models that include advanced driver-assisted capabilities, according to a joint announcement released Monday (in Chinese).

• The state-owned auto manufacturer will also collaborate with the chipmaker to build and mass produce its next-generation, highly autonomous driving technology that is finally “capable of competing with Tesla’s full self-driving (FSD) capability,” the statement said (our translation).
• The company is valued at around RMB 30 billion ($4.64 million), a 50% increase compared with early 2019, and is eyeing a public listing on China’s Nasdaq-style STAR Market later this year, persons close to the company told TechNode.
• A company spokeswoman declined to comment on the valuation and the public offering when contacted by TechNode on Monday.

Context: SAIC is among a list of state-backed automotive majors now shifting towards Horizon Robotics as a domestic source for semiconductors. The chipmaker is considered to be China’s only alternative to global chip-making giants for auto processors.

• US sanctions of Chinese technology giants including Huawei, as well as a pandemic-fueled global chip shortage, is renewing Beijing’s urgency to cultivate a domestic chip sector by 2025.
• Carmakers are receiving state support. The Shanghai municipal government announced (in Chinese) Saturday that it is partnering with Horizon Robotics to establish its global research and development center in the city in an effort to accelerate the development and adoption of China-made central processing units for intelligent vehicles.
• In an interview with Chinese state broadcaster China Central Television (CCTV) last month, Horizon Robotics vice president Zhang Yufeng said that it is currently the only Chinese chipmaker with computing platforms for mass-produced vehicles.
• The company said recently that it shipped 160,000 of its Journey 2 artificial intelligence chips, which it boasts is more power efficient than Nvidia’s offerings, to Chinese automakers including SAIC, Changan, and Chery as of December, nine months after shipments began. It has outsourced production of its processors to Taiwan Semiconductor Manufacturing Corporation (TSMC) since 2017.
• Journey 5, its next chip model for advanced self-driving functions, is scheduled to launch before June and ship in 2022. Its computing power is expected to reach 96 trillion operations-per-second (TOPs), higher than the 72 TOPS of Tesla’s FSD computer.
• The company has an annual shipment goal of more than 1 million units this year.
• The five-year-old startup announced earlier this month that it had closed its $900 million Series C from investors including China’s State Development & Investment Corporation (SDIC), China’s biggest EV maker BYD, as well as Great Wall Motor.
• Competition with Tesla’s advanced self-driving capabilities is a catalyst for many Chinese AV manufacturers, and SAIC is no exception.

Correction: An earlier version of this story erroneously stated that the Journey 2 was Horizon Robotics’ first auto chip instead of the company’s first auto chip to reach global stress test standards.

Local fire departments are investigating the cause of a Tesla Model 3 vehicle which caught fire inside of a residential parking garage in Shanghai on Tuesday.

Why it matters: As Tesla’s locally built models take off in the Chinese market, the vehicle blaze, which has attracted a remarkable amount of media coverage, could hamper more widespread EV adoption.

Details: Tesla confirmed to Chinese media on Wednesday that one of its Model 3 vehicles burst into flames in Shanghai on Tuesday night. The owner reportedly drove the sedan into an underground garage, struck a manhole cover at a very low speed, and saw flames coming out of the car’s floorpan after exiting the vehicle.

• The vehicle then “exploded,” though the driver managed to avoid injury, according to state-owned media, The Paper. Other media reported four explosions in total.
• A Weibo user going by the handle “Zhou Wanjun,” also a Tesla owner, arrived at the scene after the fire was extinguished. He told TechNode that a witness he spoke with had watched several fire trucks arrive as the fire intensified. Zhou first posted to the Chinese microblogging site on Monday a photo of the car showing extensive damage.
• Firefighters were quickly called to the scene and controlled the fire, after the owner and parking garage security staff failed to extinguish the fire, according to a Chinese media report. No one was injured.
• The body of the car was badly burned as a result of the fire reaching its interior cabin.
• An initial investigation indicated that the collision with the manhole cover could have caused significant damage to the vehicle and triggered the subsequent incident, according to a company statement to Chinese media.
• The type of battery pack in the vehicle is still unknown, but Tesla’s Chinese battery partner, CATL, on Wednesday denied any involvement in the car fire, reported National Business Daily (in Chinese).

Context: The vehicle blaze has prompted concern over a possible design flaw or quality issue in Tesla’s locally built cars, with some saying a low-speed collision to the chassis of a vehicle is an unlikely cause of a battery fire.

• Tesla in early 2019 reported that one of its imported Model S vehicles caught fire in a Shanghai parking garage and blamed the fire on a battery short circuit.
• Tesla’s locally made Model 3 was China’s top-selling electric car last year, with deliveries of 137,459 units. General Motors’ Wuling Hongguang Mini EV followed close behind, according to figures from China Passenger Car Association.
• Tesla did not respond to TechNode’s request for comment.

Updated: additional information about incident added to “Details” section.

China’s electric vehicle market posted unexpected growth in 2020 despite a global health crisis and subsequent economic recession, and the industry is anticipating the momentum to accelerate this year, powered by true demand rather than government incentives.

Sales of new energy vehicles (NEVs), which include all-electrics, plug-in hybrids, and fuel cell vehicles, increased 10.9% annually to nearly 1.37 million in 2020, the China Association of Automobile Manufacturers (CAAM) said on Wednesday, after sales fell 4% the year before. The industry group forecasted sales would accelerate to 40% year on year to 1.8 million in 2021; critically, Beijing’s subsidy program will no longer play a key role in driving demand.

Analysts have also weighed in positively on the growth prospects of China’s EV sector. The world’s largest EV market will likely maintain its upward momentum this year, with consumer confidence in EVs on the rise and with it, a willingness to pay for the technology, Paul Gong of UBS said Thursday during an online conference. The Swiss investment bank predicted China’s EV sales would rebound to more than 1.56 million units this year.

Tesla leads the way with price cuts

Electric cars are making their way into the mainstream. Tesla recently kicked off production of its popular Model Y electric crossovers in its Shanghai facilities, after churning out Model 3 sedans for a year. The company has managed back-to-back price cuts since it launched its entry-level model, which experts believed not only makes EVs from the US giant an economically viable choice but also boosts overall consumer awareness and excitement about EVs.

That said, analysts warned that the surprise launch of the China-made Model Y, priced 30% lower than its imported version, could be a short-term hit for NIO and Xpeng Motors, Tesla’s most prominent Chinese challengers. The American carmaker immediately sold out of its Model Y in China and has guided delivery windows in the second quarter for new orders. This followed Chinese media reports that a Tesla showroom in Shanghai sells nearly 200 vehicles per day after releasing its new pricing.  

Some industry watchers believe Chinese EV upstarts should follow suit and slash their prices in order to maintain momentum. In response, NIO and Xpeng bosses voiced confidence about their sales and no indication that they would discount pricing. NIO has gained traction especially among China’s growing middle-to-upper-class families, and delivered 43,728 SUVs last year. Xpeng, in a head-to-head competition against Tesla with its sedan, recorded deliveries of 27,041 vehicles in 2020.

The big race

Chinese carmakers are competing for the same mainstream, luxury customers as Tesla. They are not undercutting prices but rather focusing on value-added offerings—unusual for the Chinese auto industry. From the old guard to young startups, all the major players are racing to use the latest self-driving tech in their EV lineups as vehicle technology undergoes the most significant changes in a generation.

NIO, now emerging as a top contender, last week unveiled a top-of-the-line hardware suite capable of providing high-level autonomous driving functionalities for the ET7, its first mass-production sedan. Prior to that, Xpeng had announced a partnership with Livox, a Lidar maker backed by Chinese dronemaker DJI, in order to equip its 2021 production model with the technology—expensive for mass market use.  

Traditional carmakers are gearing up to rapidly follow Tesla’s lead. SAIC, Volkswagen’s manufacturing partner, and BMW’s Chinese ally, Great Wall Motors, announced plans this month to offer self-driving capabilities in 2021, with a hardware stack integrating multiple sensors and high-resolution map data to navigate road safety.

And yet, few have revealed detailed timelines for when their vehicles will be able to navigate driving complexities such as urban Chinese traffic. Tesla meanwhile announced that its fully self-driving system—a beta version of which is being tested by selected users—can handle both highway and urban driving duties. Tesla has so far maintained a significant lead when it comes to software and self-driving, using its vision-based approach which relies on lower-cost cameras and artificial intelligence for navigation and planning.

“NIO’s long-term strategy for self-driving is to be open to and able to utilize the latest technologies and push the industry forward with our strategic partners. The competition will result in several industry alliances and we will make sure to stay on the winner’s side,” (our translation) William Li, NIO CEO told reporters during an interview last week.

As a tipping point for mainstream EV adoption approaches, NIO and its peers are prying open a window of opportunity to beat Tesla. But time is limited, and every company is sprinting to catch up.

Electric vehicle maker NIO on Saturday released what the company called “its first autonomous driving model” which could prove a game changer in its competition against Tesla and German automakers in China’s premium auto market.

The company’s first production sedan, the ET7, features a top-of-the-line hardware stack for self driving, including 11 8-megapixel cameras, a dozen ultrasonic sensors, and a Lidar which scans the environment at a range of 500 meters.

All of those sensors will be powered by four of Nvidia’s latest AD processors, the Orin, each offering 254 trillion operations per second (or TOPS), versus Tesla’s 144 TOPs for its hardware version 3.0 self-driving computer. Together, the computing power of NIO’s so-called Adam Super Computer exceeds 1,000 TOPS, the highest for current production models worldwide.

The seven-year-old EV maker is now publicly confident about its chances of beating big auto names with this latest offering. Its sales forecast for the ET7 surpasses those of Tesla’s Model S and BMW’s 5 Series sedans, Chinese media reported Saturday citing CEO William Li. In a separate interview with reporters on Sunday, Li said the ET7 could be a big hit in the Chinese luxury market, and that sales will gradually meet its target after production ramp-up with suppliers.

With a price range from RMB 448,000 to RMB 506,000 (around $61,824 to $78,130) before subsidies, the new offering is expected to further differentiate NIO not just from its Chinese peers, but Tesla as well. The US EV giant this month began selling China-built Model Y crossovers with a starting price of RMB 339,900, a price 30% lower than its imported version, following a 25% reduction on the price of its basic version Model 3 last year.

NIO said that it will not take a similar approach, reaffirming its goal to become a mainstream, premium EV brand in China targeting BMW, Mercedes-Benz, and Audi. Tesla is China’s most dominant EV player by sales volume, with deliveries of 113,649 China-made Model 3 vehicles from January to November last year, according to figures from China Passenger Car Association.

Xpeng Motors, another Chinese Tesla challenger, is similarly looking to quickly grow its share of the market. On Thursday the automaker revealed plans to launch in 2021 a new sedan model equipped with a Lidar sensor. The Alibaba-backed EV company has delivered 15,062 of its first sedan, the P7, in six months from late June to December.

Updated: added six-month time frame for Xpeng’s unit deliveries in 2020 in last paragraph.

Walk into NIO’s joint-venture factory grounds in Hefei, capital of China’s eastern Anhui province, and you might mistake it for a sprawling tech campus rather than an auto manufacturing plant. The factory sits next to a cluster of elegant, low-slung glass buildings, surrounded by a large, well-kept lawn.

The campus has become somewhat of a local icon, attracting interest beyond its employees, partly due to NIO House, the company’s expansive, clubhouse-style retail space and gallery located next to the plant. As customers peruse vehicles in the space or wait for a latte in the showroom’s café, a crossover rolls off the production line every two minutes, with the assistance of more than 300 robots, from assembly lines to painting.

Two weeks ago, TechNode paid a visit to NIO’s Hefei plant to view the production process and understand how it works. The plant itself is a scene of bustling activity—giant robotic arms work on production lines to assemble vehicles, while human employees conduct inspections on the final assembly line. Each vehicle varies in model, color, and configuration.

“Sometimes, in a month, no two vehicles leaving the factory are exactly alike,” (our translation) a company spokesperson told TechNode reporters.

When the EV maker received earlier this year a $1 billion funding lifeline led by the Hefei government, the city—a lesser-known automaking hub known for churning out lower-end sedans and trucks—got a major boost in return. Hefei is readying itself to spearhead China’s goal of becoming the world’s leading EV producer and consumer market and NIO, its best-known EV firm, is poised to ride the wave.

Futuristic factory

Located minutes from the city’s downtown, the 16-acre joint plant is the size of nine football fields and employs more than 2,000 workers—mostly technicians from its partner, state-owned automaker JAC Motors, as well as several hundred NIO engineers. Much of the landscaping still looks new after three years of operation. The two companies reached an outsourcing agreement in mid-2016.

The factory is well-organized and spotlessly clean. TechNode saw high levels of automation throughout the factory, with robots of all shapes and sizes waving their arms in various workshops. NIO boasts that all major vehicle components are assembled in a completely automated process.

A seamless human-robot collaboration powers the highly flexible, mixed-model production process and a made-to-order car business that allows customers to configure their cars “in a free style.” NIO said there is more than 200,000 different configurations, around 3,000 of which most popular with its customers. “This [customization process] was highly demanding in terms of error proofing… but we finally did it,” (our translation) Victor Gu, general manager of NIO’s Hefei Advanced Manufacturing Center, told TechNode.

Manufacturing ramps up

After delivering a cumulative 70,000 EVs to customers, the company is preparing an expansion that will increase output by 50% in January, amid rising domestic demand for luxury EVs. “We’ve seen substantial order growth in the second half of this year, sometimes by 30% to 50% in just one month, which is far faster than conventional production acceleration. Normally you need at least two to three months to improve existing production equipment,” (our translation) Gu said.

The company is on track to reach in January a monthly production goal of 7,500 vehicles, Gu added, and has stepped up output by 50% to 30 SUVs per hour starting this month. The Hefei factory has production capacity to build 120,000 vehicles per year with two labor shifts, and is capable of a 25% expansion “without significant investment,” according to CEO William Li during an earnings call in August.

Meanwhile, Tesla has reportedly (in Chinese) planned to more than double the annual capacity of its Gigafactory Shanghai to 550,000 units in 2021. Another Chinese EV maker, Xpeng Motors built its second plant in the southern Chinese city of Guangzhou and will be able to produce 350,000 EVs by the end of 2022, according to a Chinese media report.

Carmakers are aggressively expanding production as Chinese EV sales accelerate, with strong momentum expected in the next few years. UBS analysts estimated in a Dec. 11 research note that Chinese EV sales will surge 55% to 1.6 million units next year and maintain double-digit annual growth to reach more than 5.5 million units in 2025.

EV push in Hefei

Analysts are echoing China’s grand ambitions to hold a commanding lead in the global EV market. In a finalized blueprint issued Nov. 2, the central government said that new energy vehicles (NEVs)—namely electric, plug-in hybrid, and hydrogen-powered vehicles—would account for 20% of total car sales in 2025. This is equivalent to 5.15 million units, according to last year’s sales figures, and Hefei is one of several municipalities which has committed to supporting this vision.

Auto production in Hefei accounted for around 3% of China’s auto sales last year. Now, the local government has set a 2025 output target of 1 million NEVs, according to a document released last month (in Chinese). The government has high hopes for local EV makers, which it expects to “gain influence in the global market.” Hefei is also planning to build a local supply chain with at least 10 “hidden champions“—relatively unknown but globally competitive companies, in segments such as battery, powertrain, and Lidar.

While not unattainable, such a goal will require a hard push, and the city is beginning within its own borders. In Hefei’s recent stimulus program, the city will exempt EV drivers from payment in public parking lots and allow them to travel in the city’s bus lanes during off-peak hours. The government is planning to electrify all public transit starting next year, while the taxi fleet will be 100% electrified by 2025.

Historically known for manufacturing display panels and electronics, Hefei is now considered one of the country’s emerging EV capitals, surrounded by major industry players such as Volkswagen and its two manufacturing partners. Moreover, the city has had its own EV darling, with its RMB 7 billion ($1 billion) investment in NIO in April.

Hefei is not the only city with EV aspirations. Guangzhou, capital of southern Guangdong province, in September promised to be listed among the three biggest EV manufacturing bases in the country by making at least 1.5 million NEVs in 2025. As one of China’s auto manufacturing hubs and a foothold for Japanese auto giants Toyota and Honda, the southern gateway city is determined to stay ahead, and recently doubled down on EV startup Xpeng.

More local governments are playing catchup. Xi’an, the capital of northwestern Shaanxi province last week said it will extend government subsidies and tax exemptions on EVs to the end of 2022. Meanwhile, in central China, buyers of fully electric cars in Wuhan have been eligible since May for an additional RMB 10,000 rebate on top of Beijing’s subsidies.

China will maintain its leadership in the global clean energy vehicle industry powered by its mass production of cheaper electric vehicle (EV) batteries, according to an industry expert, though it will struggle to surpass technological advances from Asian peers.

“Technically, Chinese battery makers are catching up to the Korean and Japanese battery suppliers. The technology gap is getting smaller, though reliability is still sometimes a question compared with Korean and Japanese batteries,” Stephen Dyer, managing director of global consultancy AlixPartners, said Thursday on the sidelines of the TechNode Emerge 2020 event in Shanghai.

Large Chinese battery manufacturers are among the world’s top producers by volume. However, its low-cost providers still lag Asian peers in technology, resulting in issues such as combustion risk. Beijing has pledged to emphasize quality growth over speed—earlier this month the central government approved a new energy vehicle (NEV) action plan for the next 15 years featuring innovation in key technologies such as EV batteries.

EV battery fire issues linger

China’s battery improvements are a priority amid safety concerns about EVs catching fire. In the latest example, government-backed WM Motor on Wednesday announced a nationwide recall of 1,282 EX5 SUVs after four reports of battery fires in a month.

The company said that impurities in the battery cell production could cause short circuits and potentially, fires. ZTE Gaoneng Technology, a four-year-old battery supplier affiliated with Chinese telecommunications giant ZTE, later acknowledged it was involved in two of the incidents, while WM Motor has not revealed the suppliers for the other two incidents. The EV company works with multiple battery makers to keep prices low, including Chinese battery giant CATL.

WM Motor is the second Chinese EV maker that has issued a recall due to combustion risk. The move could be very costly and overshadow its plan for a listing on Shanghai’s STAR Market scheduled for early next year. Nio last summer recalled 4,803 crossovers due to a battery pack vulnerability which could result in a short circuit, costing the company RMB 340 million ($49.4 million). CATL is Nio’s only battery pack supplier.

Thanks to government support, China leapt into the EV battery big leagues. Four out of the the top 10 battery suppliers in the world are Chinese, according to figures from market research firm SNE Research.

Chinese firms are also catching up on battery performance, with CATL’s latest battery pack reaching parity with Panasonic’s 2170 batteries used in Tesla’s Model 3, which travels more than 500 kilometers (310 miles) on a single charge.

However, the CATL lithium ion batteries sparked a handful of EV fires this year, followed by reports that multiple automakers were abandoning the technology. Panasonic batteries, on the other hand, are known for reliability and performance, thanks to the company’s vast number of patents which prevent overheating.

Advanced EV battery capacity

Nickel, cobalt, and manganese (NCM) batteries, including CATL’s NCM 811 battery, are naturally more unstable. A growing number of automakers in China are thus turning to lithium-iron-phosphate (LFP) batteries from a safety and cost perspective, Daniel J. Kollar, head of Automotive & Mobility Practice at business development consultancy Intralink Group, told TechNode.

Some progress has been made in China. BYD’s newly designed LFP battery has enabled a driving range for its flagship sedan model, the Han, similar to Tesla’s Model 3. The company, however, does not manufacture the batteries for other automakers, signaling production capacity limitations. The average density of LFP battery cells meanwhile are less than half that of Panasonic’s NCA batteries, Reuters recently reported citing a Panasonic executive.

“Great things are happening with LFP for certain applications, but it just can’t compete with NCM with regards to long-range applications,” Kollar said.

Looking ahead, analysts expect NCM battery technology, which accounted for more than 60% of total EV battery demand last year, will remain the dominant battery type in China due to a higher energy density that offers a longer driving range. Chinese makers are looking to innovate the structural design of EV batteries to improve safety without undermining performance and increasing cost. “There is an argument in the industry now about whether this should be done at the cell level or the pack level,” Kollar added.

An evolving industry

A cheap battery producer in the past, Chinese battery makers are moving up the industry value chain by building more technologically advanced capacity to replace obsolete facilities. As the country moves toward its goal of becoming a clean energy vehicle powerhouse, a wave of consolidation is expected in the coming years.

With billions of RMB invested in the EV industry, China has dominated the world’s production of lithium-ion EV batteries, accounting for 77% of total capacity this year, according to figures from Bloomberg NEF. However, only 30% of capacity has been utilized, with lower-end battery makers seeing falling demand, Chinese media reported last week citing Zheng Mianping, a member of Chinese Academy of Engineering.

“We’ve seen a lot of companies came in and failed in the Chinese steel and solar industries, and the battery sector is going to follow that trajectory,” Tu T. Le, founder and managing director of business intelligence firm Sino Auto Insights, said during the panel discussion.

US electric vehicle giant Tesla will begin exporting its China-made Model 3 sedans to a dozen of European countries this month as it faces dual pressures of plunging sales in Europe and slower-than-expected growth in China, according to persons familiar with the matter.

Why it matters: Excess inventory at Tesla’s Gigafactory Shanghai is piling up as the EV maker’s brick-and-mortar showroom expansion in China—particularly in lower-tier cities—struggles to keep up.

• The California-based automaker also aims to make up for lost ground in Europe where sales have plunged this year due to the pandemic and growing competition.

Details: Tesla will start shipping China-made Model 3 vehicles to a dozen or so European countries including Germany and France on Tuesday with deliveries scheduled for December, as the Shanghai facility’s production has sufficiently ramped up to fulfill local demand, the company said on Monday.

• In an announcement sent to Chinese media, Tesla said that the company is striving for a breakthrough in business development, including doubling production capacity, sales, and charging locations by end-year.  
• Tesla’s sales have not keep pace with accelerating production in China, people with the knowledge of the matter told TechNode on Wednesday. Existing showrooms have achieved significant operational efficiency; the company needs to expand its presence with more locations, the people added.
• The US EV giant currently runs a sales network of 105 retail locations in 33 Chinese cities, and nearly half are located in the four top-tier cities. It has only a dozen retail stores across more than 600 Chinese third- and lower-tier cities, according to information on its official website.
• To compare, Chinese EV maker Nio operates more than 150 retail locations across 91 cities, and Xpeng Motors operates around 130 stores in about 60 cities.
• Tesla’s China-made Model 3 is the top-selling EV model in China with around 80,000 units delivered in the nine months ended Sept. 30, according to figures from the China Passenger Car Association (CPCA).
• Tesla did not respond to a request for comment.

Context: The significantly lower sticker price for the China-made Model 3 is expected to help Tesla gain a competitive edge in the European market.

• The company slashed the starting price of its Shanghai-made sedan by nearly 10% to RMB 249,900 (around $37,550) earlier this month, Reuters reported, thanks to the cheaper lithium iron phosphate (LFP) batteries reportedly supplied by Chinese battery giant CATL. The model currently sells for €46,600 ($55,220) and above in France, according to an Electrek report.
• Tesla’s global sales grew 21% year on year to around 185,000 units in the first seven months of this year. However, its sales in Europe fell 23% to 38,000 units over the same period, according to figures from automotive market research firm MarkLines.
• Europe is the the only region where Tesla’s sales have plunged, owing to business interruption caused by the pandemic and growing competition from local auto giants including Renault and Volkswagen.
• Renault’s Zoe mini all-electric surpassed Tesla Model 3 to become the best-selling EV model in Europe with 36,573 units sold during the first half of this year, Bloomberg reported.

With China’s electric vehicle (EV) sector still reeling from a withdrawal of government support, three companies have emerged as viable challengers to Tesla in the world’s largest car market: Nio, Xpeng Motors, and Li Auto.

The three Tesla wannabes vary in their approaches and development.

Nio is the showiest, led by its charismatic founder, William Li Bin, and boasts the deepest pockets and boldest business plan. The company is known for its grand, customer-centric strategies ranging from a network of luxurious showrooms to a free battery swap service. It was the first of the three to deliver cars to its customers, in June 2018.

Alibaba-backed Xpeng has its targets set on self-driving technology, and began delivering cars just six months after Nio. Led by a former Alibaba executive, its vehicles have been criticized for bearing a close resemblance to Tesla’s—this is no coincidence.

The staid Li Auto is more practical, solving the most urgent issues of early EV adopters, and was the last of the three to begin deliveries, in late 2019.

Comeback story

While EVs may be exciting, investors have doubted the viability of the market as a whole and question Chinese EV makers’ prospects. Even in their home market, these companies are dwarfed by Tesla, whose locally built Model 3 is the country’s top-selling EV. Critics had viewed Nio’s prospects as gloomy, last year speculating that the company was insolvent and wondering if other companies might follow in its footsteps.

But the Chinese government is bolstering a surge in EV adoption and clean energy vehicles are expected to grab a quarter of total car sales by 2025. The state’s efforts to achieve this goal has benefited EV makers, including Nio. The company landed a $1 billion bailout from the government of Hefei, capital of China’s eastern Anhui province. As a result, its shares have rocketed a whopping 470% this year.

Nio, Xpeng, and Li Auto have reported surging deliveries that outperform legacy automakers. As investors reverse their attitudes towards Tesla’s Chinese challengers, we wonder whether they are well-positioned to sustain high growth rates into the future, and even more interestingly: which one has a stronger shot at becoming the “Tesla of China”?

Infection points

Chinese EV makers seemed to be teetering on the edge of collapse earlier this year after Beijing slashed purchase subsidies by half last year to cool the overheated industry. As a result, EV makers saw sales figures sink while cash burn rates stayed high.

Nio—then the poster child for China’s EV industry—saw its cash reserves disappear after years of aggressive spending on its retail strategy, which included building impressive showrooms across China. The market went from around 500 EV companies in early 2019, to fewer than 10 that have managed to deliver cars in 2020.

Then, the EV market quietly began to turn around. Growing consumer demand and extended government support have led to robust sales growth and narrowed losses. As the world’s biggest auto market recovers from the Covid-19 pandemic, analysts expect strong long-term growth for Chinese EV makers, with Nio and Li Auto potentially expanding their lead among the homegrown players.

Deliveries

Nio, Xpeng, and Li Auto recorded surging sales over the past two quarters, illustrating their improving performance. Analysts expect further top-line revenue growth in the second half of this year, as Tesla’s success in China draws more funding to help local EV makers grab a share of the market.

• Nio delivered a record 4,708 vehicles to customers in September, up 133% year on year. The company sold 12,206 vehicles over the summer, a new high in quarterly deliveries. Li Auto came in behind Nio, selling 8,660 of its own EVs over the same period.
• Growth may prove more difficult for Xpeng, which has just recently launched its first sedan, the P7. Some analysts have expressed concern over Xpeng’s near-term prospects considering that the P7 competes head-to-head with Tesla’s Model 3.
• Meanwhile, Tesla is seen as a growth driver for China’s EV market by increasing consumers’ awareness of these cars. The US carmaker this month launched a Model 3 with Chinese-made batteries, bringing the post-subsidy price down by almost 10%, Bloomberg reported. China’s biggest brokerage, Citic Securities, remains bullish, in a note (in Chinese) on Oct. 9 saying Tesla is stimulating the overall market.

Tackling money problems

As China’s EV makers produce and sell more cars, they have also been able to absorb costs more effectively. In the first half of the year, Nio and Xpeng narrowed their net losses by more than 50% compared with the same period a year ago.

• Li Auto improved its gross margin to 13.3% in the second quarter from 8% in Q1, impressing observers. Still, Bernstein analysts warned that future losses are inevitable as the company ramps up development of new vehicles and self-driving technology.

Meanwhile, Tesla’s success in China is good for the company—but also for its competitors. The US carmaker’s growth has local governments scrambling to bail out homegrown competitors.

• Nio’s $1 billion lifeline spurred some analysts to rethink their evaluations of the EV maker, though the company will continue to face pressure to raise more capital. UBS analyst Paul Gong in late August jacked up his target share price for Nio to $16.3 from $1 while upgrading the company to neutral from sell, according to a CNBC report, since the company’s liquidity concerns were “assuaged” by the successful fundraising.
• Xpeng followed soon after. In September, the company secured $586 million from the government of Guangzhou, capital of China’s southern Guangdong province. Analysts said that Beijing-based Li Auto could strike a similar deal with local authorities.

Strategies

Tesla’s Chinese rivals have taken vastly different approaches to gaining a foothold in the market. Nio, the most high-profile and best-financed of the three, had a market cap of $29 billion as of Oct. 14, almost equivalent to that of Xpeng and Li Auto combined (Update: These figures are slightly out of date—Nio’s stock jumped 22.57% in trading Wednesday following publication of a favorable report from J. P. Morgan, coming after this article was published in a newsletter). However, analysts are sharply divided over the company’s ability to improve margins because of its big budget, customer-centric business model, which includes offering battery swap facilities around China.

But Nio’s investment in its costly retail and community strategy appears to be paying off. Deutsche Bank said last month that a growing number of consumers recognize Nio as “a high-quality premium brand with best-in-class technology and customer service.” Meanwhile, Credit Suisse reportedly raised Nio’s price target to a new high of $25 when the company guided a record number of orders last month and expanded its monthly production capacity to 5,000 vehicles.

• Still, analysts warn that Nio sales are likely to fall off following the end of an offer of unlimited free battery swaps in October. Sales may have been artificially high if consumers sought to lock in purchases before the deadline.
• China International Capital Corporation (CICC) expects Nio’s net loss to narrow another 6.8% to RMB 4.4 billion in 2021. In a note (in Chinese) published in August, analysts said the company’s battery-leasing service could significantly lower the cost of EV ownership, while enhancing user experience with upgradable battery technologies.
• Still, bearish researchers including Bernstein think otherwise, warning that the launch of Tesla’s locally built Model Y next year could deal a blow to Nio’s sales.

Analysts are generally more positive about Xpeng and Li Auto, which have more conventional business models. These companies are more circumspect about spending, have strong growth potential, and have successfully tightened manufacturing costs.

J.P Morgan said Xpeng could be the potential winner in China with its in-house self-driving technologies and mid-to-high-end positioning. The company expects Xpeng to break even in 2023 and sell 345,000 cars a year by 2025.

• Targeting more frugal consumers than Nio and Li Auto means Xpeng could find itself locked in a price war against companies including Tesla and BYD, among others, Bernstein noted, adding that autonomous driving technology in general is still in its infancy.

While Nio is seen as the higher-tier brand and Xpeng the cutting-edge competitor, Li Auto’s pragmatic approach is viewed favorably. The company has distinguished itself from competitors by offering extended-range electric vehicles (EREVs), a bridge technology that addresses the pain points of owning a standard EV, including range anxiety and charging point bottlenecks.

Bernstein expects Li Auto to reach a gross margin of 13.5% this year and break even between 2022 and 2023. Goldman Sachs in August classed Li Auto as a “conviction buy,” predicting that the company’s stocks would outperform expectations, and estimated an annual sales volume of 445,000 vehicles in 2025.

• There has been some controversy over EREVs as a transitional technology, as well as doubt about how long it will remain relevant as EV technology improves. Nevertheless, Bernstein and CICC analysts said Li Auto could jump from EREVs to all-electric, since the latter is simpler from an engineering standpoint.
• Li Auto may break even earlier than its peers, while Nio remains a bigger threat to Tesla with a solid reputation in the high-end segment, something no Chinese manufacturer has accomplished before.

Market shifts

China’s EV sales have slumped since last year. Beijing’s subsidy cuts followed by the economic shock of the Covid-19 outbreak have left companies reeling.

More analysts have reversed their initially positive outlook for 2020, predicting a 20% drop in sales compared to last year’s 1.2 million deliveries. In August, the country’s top auto industry body, the China Association of Automobile Manufacturers (CAAM), lowered its 2020 EV sales forecasts to 1.1 million vehicles.

The situation could get even worse for EV companies, as legacy automakers including VW plan to release more EV models from 2022 onwards. This, coupled with Nio, Xpeng, and Li Auto’s relative inexperience in manufacturing, could make for a difficult next couple of years.

However, the transition from internal combustion vehicles to EVs is gaining speed. And Chinese firms are riding the wave of Beijing’s push to maintain its leadership as the world’s biggest EV market. Sales of all-electric and plug-in hybrids vehicles have to make up around one-quarter of total auto sales in 2025 in order to reach China’s mandated EV quotas, according to IHS Markit (in Chinese).

Consumer demand for EVs is expected to grow rapidly over the next few years due to increased affordability, with the high-end market seeing a rapid surge in sales. Around 1 million luxury EVs will be sold in China by 2025, according to Bernstein analysts. Half of this total will be made up of sales from smaller EV players like Nio, Xpeng, and Li Auto.

“China’s smart and electric vehicle market will enter the fast lane over the next 10 years, and the hand-to-hand fight between homegrown carmakers and overseas giants has started,” Citic Securities wrote in a note in July (our translation).

While many Wall Street analysts have taken bearish views of the field, Asia-based analysts are embracing the notion that young EV makers could co-exist with Tesla and even benefit from its China success. Nio and its peers collectively accounted for 14% of China’s EV sales in June, a significant rise from 7% a year ago, figures from the China Passenger Car Association (CPCA) show.

The road ahead

Speed is the key to success for homegrown Tesla challengers to carve out a position in the market and avoid getting squeezed out by established automakers.

Bernstein expects that the pace of sales network expansion will be a “critical determinant” for Li Auto’s performance in the coming year. As of Sept. 30, the company currently has 35 retail stores in 30 cities, only a quarter of those of Nio and Xpeng.

Time is also short for Nio and Xpeng to scale charging service networks, which IHS Markit sees as one of Tesla’s early competitive advantages in encouraging consumers to go electric. Nio last month announced a RMB 100 million ($14.9 million) initiative to build 30,000 fast chargers over the next three years. Xpeng is also ramping up with its lifelong free charging for first-time owners program, which launched on Sept. 26.

As costly projects come to life, Chinese EV makers need to continually raise capital to keep funding their ambitions. Any gaps in financing could mean being left behind.

“The combined market cap of Nio, Xpeng, and Li Auto is $50 billion, far below Tesla’s $450 billion. There is still great room for (valuation) growth,” Chinese media in August reported citing Wang Sheng, deputy head of global investment banking at CICC. (our translation).

Updates: An earlier version of this article incorrectly compared the price of Tesla’s Chinese-made Model 3 to competing autos. Additionally, Li Auto has 35 retail stores as of Sept. 30 according to an announcement released earlier this month, not 30. This article was also updated to reflect a jump in Nio’s stock price shortly after publication.

Chinese electric vehicle maker Li Auto on Tuesday said it will partner with Nvidia Corp to provide its next-generation SUV with a chipset and software platform that can be used for self-driving functions.

Why it matters: The partnership is the latest in a series of Li Auto’s efforts to develop its own autonomous driving capabilities to catch up in a race led by Tesla.

• The collaboration also means that Li Auto, currently a partner of Intel’s automotive sensor company Mobileye, is switching to Nvidia for a custom-designed chip and to retain control over the development schedule.

Details: Li Auto is teaming up with Nvidia and its Chinese partner Desay SV Automotive to develop a self-driving platform based on the Orin chipset and software stack for its next large-sized premium SUV which will launch in 2022, the companies announced Tuesday.

• Li Auto will be the first automaker to use Nvidia’s newest processor to facilitate upgradeable autonomous driving functions for its EVs, ranging from assisted driving functions and eventually, vehicle autonomy, according to an announcement.
• Nvidia in 2019 unveiled Orin, its next-generation system-on-a-chip (SOC) for automobiles, capable of performing 200 trillion operations per second (TOPS) using just 45 watts. The SOC is scheduled for production in late 2022.
• Its previous generation chip, Xavier, delivers 30 TOPS and consumes 30 watts of power, was first included in Xpeng’s latest P7 sedan which it began delivering in June. The two companies formed a partnership in late 2018.
• Li Auto currently offers assisted driving functions on its first Li One model based on the Mobileye Eye Q4 vision processor, which is also deployed on Nio’s crossovers.
• Li Auto’s new technology chief Wang Kai said to Chinese media in Beijing on Tuesday that Mobileye’s data center offerings, including algorithms for vehicle perception, was “sophisticated but not open enough” (our translation), leaving limited room for self-improvement.
• The Meituan-backed EV maker recently kicked off Level 4 autonomous driving development a year ahead of schedule. It is also ramping up plans to offer a hands-off Level 3 automated navigation driving function, similar to Tesla’s Navigation on Autopilot, as early as 2021.

Context: After big cash injections from US stock markets, young Chinese EV makers are speeding up efforts to close the gap with Tesla.

• Nio raised $1.7 billion earlier this month with a follow-on share offering. The Tencent-backed EV maker plans to use part of the proceeds to enhance self-driving technologies, following the hiring of a Chinese computer vision expert to lead its AV team of 200 employees.
• Li Auto currently has 60 self-driving scientists and engineers, and is planning to triple the size to 200 by early next year, according to Chinese media reports. It appointed Wang Kai, a former global chief architect at American Tier 1 supplier Visteon, last week as CTO to lead AV development.
• Li Auto’s collaboration with Mobileye will continue—the Israeli self-driving firm makes chipsets for the automaker’s first production model, the Li One.

Shares for Chinese electric vehicle maker Xpeng Motors climbed more than 40% in its $1.5 billion debut on the New York Stock Exchange on Thursday.

Why it matters: Xpeng’s wild first day of trading reflects a growing demand for EV stocks, as investors become increasingly bullish on Chinese new energy vehicles. However, some analysts warned about the potential for an EV bubble.

• Xpeng’s first sedan, the P7, will be facing tougher competition from Tesla’s China-made Model 3, Bernstein analysts wrote earlier this week in a report. The US EV giant will reportedly release a cheaper version with LFP batteries this year.
• Meanwhile, JL Warren Capital questioned the competitiveness of the P7 compared with the Model 3, given their similar price ranges and the effects of their ongoing legal dispute over intellectual property theft.

Details: The six-year-old EV maker now has a market capitalization of nearly $15 billion, nearing the size of a number of giant Chinese automakers, including Toyota’s Chinese partner GAC Group and BMW’s partner, Great Wall Motor.

• The offering of 99.7 million American depositary shares was priced at $15 per share, higher than the target price range of $11 to $13. The stock opened at $23.1 and rose as high as $25. It closed up 41.5% at $21.22 on Thursday.
• There has been strong appetite for Chinese electric vehicle businesses in the US stock market, helped by Tesla’s strong performance, (our translation) said Wu Tianhua, founder and CEO of Chinese online brokerage firm Tiger Brokers, an underwriter for Xpeng’s IPO.
• Xpeng, backed by Chinese tech giants Alibaba and Xiaomi, followed domestic peers Nio and Li Auto in listing in the US. The three companies now enjoy a market cap range between $15 billion and $23 billion.
• Nio has so far delivered a cumulative 49,615 vehicles as of July over a two-year period. Xpeng began mass deliveries in February 2019 and has delivered a total of 20,707 units, and Li Auto has cumulative deliveries of 12,989 since December. All three are still operating at a loss.

Context: Unlike its counterparts, Xpeng lays claim to a strong capability in developing self-driving technology, positioning its automated driving system Xpilot head-to-head with Tesla’s Autopilot.

• In the latest IPO filing, the company said it is planning to roll out early next year the Xpilot 3.0 version with functions for autonomous lane changing on highways. However, small-scale testing will begin among customers as early as October, according to multiple people familiar with the matter.
• P7 currently has a post-subsidy price range of between RMB 229,900 and RMB 349,900 ($33,470 to $50,945). The standard-range China-made Model 3 is priced at RMB 271,550 after purchase subsidies.
• Tesla in March 2019 filed a lawsuit against a Xpeng employee for allegedly stealing trade secrets related to its automated driver assistance software Autopilot. Xpeng Motors is a third party in the suit.

Xpeng Motors is priming for a public listing in New York where it could raise up to $1.1 billion from a number of high-profile backers, including Chinese technology giants Alibaba and Xiaomi.

Why it matters: Xpeng’s listing is timed to benefit from strong investor appetite for electric vehicle stocks, a spillover effect from Tesla’s massive run this year as it ramped up production of China-made Model 3 sedans.

• The initial public offering (IPO) would also be a test of US investor demand for Chinese stocks amid harsher financial scrutiny and rising tensions between Beijing and Washington.
• Xpeng would be the third Chinese EV maker to list in the US after Nio and Li Auto—currently the most potent local Tesla challengers, backed by Chinese tech giants Alibaba, Tencent, and Meituan, respectively.

Details: Xpeng Motors is offering 85 million American depositary shares (ADS) at $11 to $13 each, according to a Friday filing to the US Securities and Exchange Commission. The company said each share will represent two Class A ordinary shares.

• The high end of the range gives the EV maker a valuation of $9.17 billion. After the closing bell on Friday, Nio closed with a market cap of $16.7 billion and Li Auto with $12.5 billion.
• Chinese e-commerce giant Alibaba, its biggest external shareholder with a 14.4% stake, will purchase up to $200 million in the share sale, followed by US hedge fund Coatue with an expected subscription worth $100 million.
• In the meanwhile, Primecap Management Company, a US investment firm that has held Tesla stocks since 2011, also indicated interest in purchasing $100 million worth of shares in the offering.
• California-based Primecap is currently a Tesla shareholder with a 0.7% stake reduced from 1.8% in 2012, which accounts for 1.22% of its total portfolio, according to online research platform GuruFocus.
• Sovereign wealth fund Qatar Investment Authority will subscribe for $50 million worth of shares, after joining in its $800 million Series C+. Xiaomi, Hong Kong-listed smartphone maker and a long-time backer, will also buy up to $50 million worth of shares.
• He Xiaopeng, CEO of the company and a former executive at Alibaba, will retain 31.6% of the business and 58.9% of the voting power, according to the amended registration statement.

Context: Guangzhou-based Xpeng Motors is currently the only new EV maker that has delivered both electric sedan and SUV models to customers in China.

• Xpeng has delivered a total of 20,707 EVs as of July starting in late 2018, mostly its first production model, the G3, compared to Nio’s 49,615 units which began delivery four months earlier.
• It has sold 1,966 units of its second EV model, the P7, an electric sedan boasting a driving range of 706 kilometers (439 miles) and a proprietary assisted automated driving system XPilot, in the three months ended July 31.
• The company plans to launch its third and fourth models, one sedan and one crossover, based on its existing EV platforms by the end of 2022, according to the prospectus.

The head of Tesla China urged employees to speak up in defense of the company on social networks amid a public spat with online marketplace Pinduoduo over a discounted Model 3 group-buy purchase.

Why it matters: Tesla’s reputation in China for poor treatment of its customers and arrogant business practices is growing as a result of the public squabble. Pinduoduo’s circumvention of Tesla’s restrictive direct-sales only channel meanwhile threatens to open the door to other third parties looking to gain from the brand’s strong consumer demand.

• Tesla has a direct sales model in China with a retail network of 58 showrooms across major Chinese cities in addition to its online sales channel. It opened a flagship store on Alibaba’s Tmall marketplace earlier this year, but only for traffic from customers looking to test drive and purchase car accessories.

Details: Zhu Xiaotong, Tesla’s global vice president and the top boss in China, on Monday called for employees to speak up and defend Tesla’s direct sales retail model in cyberspace, Chinese media reported citing persons close to the company. 

• Zhu urged “every employee to take action” (our translation) on behalf of the company on social media networks. Given the limited manpower and budget in the company’s public relations, Zhu also asked employees to fight back against slander by reporting rumors to internet regulators.
• Tesla then sent a statement to Chinese media on Wednesday, in which it accused Pinduoduo of twisting the truth and manipulating public opinion for its own benefit.
• On Tuesday, the e-commerce platform told Chinese media that a Wuhan-based customer who had been refused the Model 3 delivery had placed a new order along with valid auto insurance with the assistance of Pinduoduo and Yiauto, a Chinese car dealer company.
• Tesla countered, saying that the sedan was not delivered according to its normal procedures. The Model 3 it delivered had been ordered in late July, long before the customer’s later order involving Pinduoduo, which it canceled, according to Tesla’s statement.
• This contradicts the Wuhan buyer’s story to Chinese media that he placed the new order in a family member’s name after Tesla cancelled his group purchase Model 3 and has blocked him from placing a new order, the electric carmaker said.
• Pinduoduo said it was “disappointed” that Tesla was making it difficult for some of their fans to get their dream car and “will do everything” to protect consumers’ rights, the company said to TechNode in an emailed statement.
• The company reiterated to TechNode that the Wuhan buyer, who paid the discount price, has received the car. 
• Tesla did not immediately respond to a request for comment.

Context: Along with Chinese car dealer Yiauto, Pinduoduo in July began promoting a group buy flash sale, offering five randomly selected buyers the chance to purchase a Tesla Model 3 at a discount of RMB 40,000 ($5,770), if 10,000 people signed up for the campaign.

• Tesla denied on July 21 via microblogging site Weibo that it was involved in the promotion, saying that it didn’t provide vehicles for the group buy. The campaign meanwhile hit the target number of sign ups, and five selected buyers paid for the vehicles.  
• A Shanghai-based buyer from the same flash sale has received the vehicle, local media reported.
• Pinduoduo, the social e-commerce platform known for its steep discounts, has a history of clashing with premium brands when applying its subsidy strategy to drive sales.
• In addition to Tesla, Pinduoduo’s aggressive discounting tactics has reportedly irked the likes of Apple and Dyson.

Chinese electric vehicle maker Nio has quietly hired a Chinese computer vision expert to lead its self-driving unit following the June departure of Jamie Carlson, its tech lead since early 2016.

Why it matters: The management change comes as Nio works on its self-driving technology development to catch up with peers after securing $1 billion in funding from the Chinese government.

• Nio has trailed behind rivals Tesla and Xpeng Motors in making autonomous vehicles after a series of layoffs last year when the company was under a massive cash crunch.
• It dismissed 141 employees in its third round of cutbacks in December, the majority of which came from its AV team, and partnered with Intel’s Mobileye to share the cost of developing robocars. The company currently has around 40 self-driving engineers based in the US, along with 160 in China.
• The latest hire will help Nio build in-house self-driving capabilities and partly offset its R & D headcount in the US, which it has been gradually reducing, people close to the company told TechNode.

Details: Ren Shaoqing, a computer vision expert and co-founder of Chinese self-driving startup Momenta, recently joined Nio as the assistant vice president of autonomous driving, according to three persons familiar with the matter.

• Jamie Carlson, Nio’s AV tech lead since 2016 and a former Tesla and Apple engineer, left the company in June, according to a Chinese media report. Nio declined to comment when contacted by TechNode on Friday.
• Ren will report directly to CEO William Li, taking charge of Nio’s perception solution development, which provides visuals of vehicle surroundings using cameras and sensors.
• Among the most highly cited Chinese researchers in self-driving technology, Ren in 2016 co-founded Momenta, an AV startup that develops camera-based software solutions for self-driving cars.
• Nio has backed Momenta since 2017, when Nio Capital, a venture capital fund established by the EV maker, led its $46 million Series B. German auto giant Daimler was also involved, along with other investors.
• Momenta also builds high-resolution maps that facilitate more accurate road navigation and enhanced safety for AVs. It was granted a permit to draw up high-definition navigation maps from Chinese regulators in 2018.
• Momenta did not respond to a request for comment.

Context: Nio’s progress in self-driving car technology has slowed over the past year. On the other hand, Xpeng Motor has advanced rapidly, and has a growing reputation in automated driving capabilities.

• During a call with analysts on Tuesday, Nio CEO William Li revealed that the proportion of owners who ordered full Nio Pilot self-driving package is around 25%, far lower compared with the 68% of Tesla buyers which opt in.
• Li added that Nio is on track to release its Navigate on Pilot (NoP) solution, which allows the vehicle to change lanes on its own, within this year, while acknowledging its self-parking feature was “not as competitive as Tesla’s.”
• Meanwhile, Xpeng boasts the highest auto-parking success rate among all vehicles available on the market, enabled with a dozen sensors and HD map solutions, and plans to provide its vehicles with an autonomous lane change feature on highways later this year.

Vehicle fires involving electric cars from Xpeng and Li Auto are sparking quality concerns a year after a series of blazes involving Tesla and Nio cars drew widespread media attention.

Why it matters: The incidents come just as Xpeng Motors and Li Auto debut on US stock markets, highlighting issues around EV quality control.

Details: An Xpeng G3 crossover caught fire in the southern Chinese city of Guangzhou on Tuesday, Xpeng Motors reported on microblogging platform Weibo. Local firefighters extinguished the blaze and there were no injuries.

• An initial investigation showed that the vehicle battery pack was severely damaged from bottom impact, which Xpeng said may have caused the fire.
• The brand name of the battery was not disclosed. Xpeng started equipping its cars with the NCM 811 batteries from battery giant CATL in 2019, and had earlier sourced batteries from two smaller domestic battery makers.
• The so-called NCM 811 battery, also used in Tesla and Nio EVs, contains 80% nickel, 10% cobalt, and 10% manganese. It is capable of a longer driving range compared to a lithium iron phospate (LFP) battery, but carries a higher thermal runaway risk.
• The incident was the first combustion report for Xpeng. A company spokeswoman declined to comment.
• A week ago, Li Auto said one of its Li One plug-in hybrid vehicles caught fire on an expressway in the southern Chinese city of Zhaoqing. Two passengers were hospitalized and under observation, according to a company announcement (in Chinese).
• The Nasdaq-listed EV maker blamed the accident on what appeared to be iron bands snagged by the speeding SUV that smashed through the fuel pipe, sparking the fire. The final results from the investigation have not been revealed.
• This was the second report from Li Auto about a fire involving one of its vehicles. There have been a series of quality complaints ranging from brakes to suspension problems over the past few months. Multiple car owners have requested additional plates to protect the vehicle chassis on the company’s online community forum.

Context: Xpeng is the latest in a number of Chinese EV makers which have filed for a US initial public offering, following rivals Nio and Li Auto. The Alibaba-backed company is looking to build up its war chest amid a stiffer competition in its home market thanks to Tesla.  

• Li Auto delivered 2,516 units in July and Xpeng delivered 1,641 EVs to customers during the same time period. Together, the two EV makers have produced less than half the number of China-made sedans that Tesla has delivered, according to figures from China Passenger Car Association.

Shares for Chinese electric vehicle maker Nio fell 8.6% on Tuesday after the company posted better-than-expected gross profits for the second quarter amid concerns over the long-term scalability of its ambitious battery-swap program.

These second-quarter financial results are an important milestone for Nio, which, for the first time reported a positive vehicle margin of 9.7%, nearly double the 5% company management had guided.

Nio attributed the improvement primarily to a record number of deliveries during the quarter, during which it handed over 10,331 vehicles to customers in the three months ended June 30. Total revenues jumped 146% year on year to RMB 3.7 billion ($526.4 million), beating analyst estimates of RMB 3.49 billion. Losses attributable to shareholders meanwhile narrowed 63.6% year on year to RMB 1.13 billion ($160.1 million).

The margin improvement owed much to a significant cost reduction in battery packs, among other materials. Nio now enjoys a much lower purchase price for battery packs from its supplier, CATL. It now pays RMB 0.8 per watt-hour (Wh) compared with an earlier rate of over RMB 1 Wh, Chinese media reported citing persons familiar with the matter. The six-year-old EV maker became CATL’s biggest battery client in the passenger vehicle segment during the first half of this year, according to figures from Chinese consulting firm GGII.

BaaS ready for Q3 launch

Nio said it has achieved “profound progress” in its plans for a “Battery-as-a-Service” (BaaS) offering, in which a battery rental service will be sold separately from cars. CEO William Li said Tuesday during the earnings call that it was in the final stages of preparing to launch its BaaS solution offering in the third quarter. All the necessary validation procedures with the government have been completed, he said.

Beijing has traditionally required automakers include a battery pack with each new energy vehicle sold, but the restrictions are now being lifted. A government announcement (in Chinese) last month revealed that Nio will be allowed to sell the EC6, its third mass production model, without a battery.

“We believe this is going to be a very good boost to our vehicle sales… and help us with the gross margin,” Li said. Nio expects a battery-leasing program to considerably lower the price of a Nio-branded premium crossover by one third to around RMB 258,000, for example, when renting a battery pack for daily use.

The Chinese Tesla challenger is betting heavily on battery-swapping technology as part of its broader BaaS strategy, which it hopes will resolve consumer range anxiety and effectively remove the issue as a barrier for EV adoption. The company now has a network of 142 battery swap stations in 63 Chinese cities, and is rapidly expanding the swap infrastructure by opening one station on average per week, Li said last month at a company event.

Investors unconvinced

However, multiple industry people TechNode recently spoke with have expressed doubts about the scalability of such battery replacement service, given a constantly evolving vehicle driving range and the ever-shortening EV recharge time. The difficulty in reaching a shared battery standard among multiple automakers is another hurdle, making battery swap a less economical solution for EVs over the long term, UBS analyst Paul Gong said in June during an online conference.

Nio said that it recently completed 750,000 battery swaps nationwide, highlighting growing adoption from its vehicle owners. It also boasted that each battery replacement took just three minutes, far faster than even the average 15 minute charge time at a Tesla V3 supercharger.

Nio is forging an alliance with giant industry players to minimize its financial burden in the swappable battery program. Li on Tuesday revealed plans to form a battery asset management company with multiple partners, in which Nio will hold a minority stake. The joint business is scheduled to open this month, which CATL reportedly (in Chinese) intends to invest in.

Founded by a titan in China’s entrepreneurial community and backed by a battle-hardened internet billionaire, on July 30 Li Auto became the second Chinese new energy vehicle (NEV) maker to list on an American stock market after its $1.1 billion Nasdaq IPO. 

The company’s strategy is uniquely low-key. Instead of pursuing fully electric vehicles, Li Auto is focused on plug-in hybrid vehicle technology. It hopes this will calm customers’ anxiety over vehicle range and reduce the high cost of EV ownership in China.

While competitors Nio and Xpeng have modeled their tactics after Tesla’s flashy approach, Li Auto has fashioned itself in Toyota’s image. It has applied the Japanese automaker’s cost-cutting strategies to the premium vehicle market. 

But investors are concerned about the long-term prospects of a company that is built on the technology that drives hybrid electric cars: They are uncertain whether Li Auto can effectively transition into competitive zero-emission electric vehicles.

So far, Li Auto’s approach has paid off. The company delivered 10,000 vehicles—an oft-celebrated figure among the small EV makers—faster than any of its Chinese rivals. It was also the first Chinese EV maker to report a positive quarterly gross margin in the first quarter of 2020, while Nio was still in the red.

Li Auto still has several hurdles to overcome—and the clock is ticking. Its all-electric competitors are lowering prices, and the government is working to provide them with an extensive charging network.

Key facts about Li Auto

• Founded in Beijing in 2015, Li Auto raised more than $2 billion with a valuation of $4.05 billion before it listed on the Nasdaq.
• Founder Li Xiang owns a 25.1% stake in the company but has 70.3% of the voting power, followed by Meituan founder Wang Xing with a 23.5% stake and 9.3% of the voting rights.
• The company’s first mass-market model, the Li One, is a six-seat premium plug-in hybrid electric SUV with a starting price of RMB 328,000 ($46,800)—cheaper than Tesla’s China-made long-range Model 3 (RMB 344,000), but pricier than most of its Chinese counterparts.
• Li Auto delivered 10,473 vehicles between December and June 2020. The company plans to increase its retail footprint threefold to 60 stores by the end of the year. 
• Despite its fast rise and future ambitions, it remains a small player in China’s EV industry. In the first half of 2020, its market share was 2.4%, selling 9,500 NEVs. A total of 397,000 of these kinds of vehicles were sold in China during the same time period, government figures show (in Chinese). 

Betting on transitional technology

While loss-making rivals jumped into the deep end with pure electric vehicles, Li Auto took a more conservative approach. Dubbed extended-range electric vehicles (EREVs), the cars it markets can be charged by a gas engine when the battery is low. Unlike conventional plug-in hybrids (PHEVs), which use both electric and gas-driven motors in tandem for power, EREVs are always driven by electric motors. 

• Plug-in hybrids, and now EREVs, are considered a bridge technology that could reduce car owners’ reliance on gasoline until the technical and operational hurdles of EV adoption are overcome. 
• When an EREV’s battery is low, the gas motor kicks in to charge it, providing the “extended range.” Because the vehicle’s battery can be charged by the gas engine during a trip, EREVs require a smaller battery pack compared with all-electric vehicles, reducing the cost of ownership.
• Li Auto expects EREVs to overcome some of the biggest bottlenecks of EV adoption in China: the relatively high cost of EVs and the lack of convenient charging stations.
• But previous EREV launches by major Chinese automakers have fallen flat. Geely and Chery released their EREV models in 2010 but failed to reach mass production due to high costs and little consumer interest.
• The market for these types of vehicles in China is still small. Li Auto is currently the first and only manufacturer to “successfully commercialize” EREVs in China, according to its prospectus.
• The market for these types of vehicles in China is still small. Li Auto is currently the first and only manufacturer to “successfully commercialize” EREVs in China, according to its prospectus.

‘China’s Toyota’

The cornerstone of Li Auto’s approach to its business is cutting costs, just like Toyota. The company aims to bring Toyota’s approach to manufacturing premium SUVs. 

In a post on popular messaging app Wechat in June, Li Auto founder Li Xiang described some of the company’s cost control measures when commenting on rival EV maker Byton’s recent collapse. 

• Employees of Li Auto are required to book corporate travel at rock-bottom prices, including the cheapest economy flights, Li said.
• Employees of the same gender are also required to share hotel rooms during business trips, the CEO added. 
• The launch event of its first mass-production model Li One cost just around RMB 2 million. This is rare in a cash-burning industry known for events that cost tens of millions of yuan. The company secured more than 10,000 orders in return, Li boasted. Nio is rumored to have spent up to RMB 80 million on its first launch event in 2017, Chinese media reported. 
• Li is proud of a modest net loss of RMB 4 billion over the past two years, around a fifth of Nio’s losses in the same time period. He believes these measures to reduce costs will ensure the company reaches profitability early in the battle for China’s upscale consumers.

Customer complaints

Despite success in keeping costs low, Li Auto has a long way to go if it wants to build China’s Toyota. The Japanese legacy carmaker is known for making reliable cars. Li Auto has limited experience in vehicle development—and has faced multiple complaints about the quality of its cars. 

• The company’s first car, the Li One, has been criticized by multiple owners for quality issues ranging from the vehicle incorrectly reporting faults to the driver to suspension problems (in Chinese).
• These complaints exclude a recent car fire in the central Chinese city of Changsha. The company said the issue resulted from carelessness rather than a defect. Its staff left materials from a pre-delivery check in the car’s engine compartment, which eventually led to the fire, it said. 
• On the bright side, Li Auto’s cars have received wide praise for their driving feel, luxurious interior, and reasonable price point.

Who is Li Xiang?

Li Auto CEO Li Xiang is no stranger to entrepreneurship. In fact, the EV maker is not the first company he’s taken public. In 2005, Li founded Autohome, a recognized Chinese auto portal that listed on the New York Stock Exchange eight years later. The company now has a market cap of around $10 billion, nearly 10 times that of close rival Bit Auto.

• A high-school dropout, Li’s hero was Michael Dell, the billionaire founder of US tech giant Dell Technologies. Li started his first business in 2000 when he was just 18. The company was an online forum for digital gadgets called PCPOP.com. 
• Six years later, the company was China’s third-biggest consumer electronics portal. Li found himself worth RMB 200 million and in charge of 900 employees, according to an interview (in Chinese) with state broadcaster China Central Television.
• When starting Li Auto, Li Xiang also invested in now-rival EV maker Nio. Li is a friendly competitor to Nio founder and CEO, William Li. Li Xiang owned 1.8% of Nio as of mid-2018, according to the company’s IPO prospectus.
• The two founders, along with Xpeng Motors CEO He Xiaopeng, have a close-knit relationship. Li Xiang in April said he hoped Nio and Xpeng would be the only two “comrades” left alongside his own company in the Chinese EV market after weaker players are pushed out.
• Li’s founding of an EV company last year caught the eye of Chinese tech billionaire Wang Xing, a serial entrepreneur known for starting dozens of failed projects before founding Meituan, China’s biggest food delivery platform. Wang spoke highly of Li as an admirable innovator focusing on user demand and team management, when leading Li Auto’s $550 million Series C last year.

Prospects after IPO

As investors’ enthusiasm for Tesla has spilled over to other companies in the industry, Li Auto stock looks even more appealing than its peers. The company’s second-quarter financial details showed a double-digit gross margin of 13.3% and a 128% quarter-on-quarter growth in deliveries. But Li Auto is far from a safe bet. 

• Li Auto’s monthly deliveries have fallen sequentially for two months after the company delivered a record 2,622 vehicles in April, raising widespread concern in Chinese media that existing orders had been exhausted. Li Auto did not reveal details about its current order flows when contacted by TechNode. 
• Analysts also point out that Li Auto doesn’t have enough physical stores to maintain continued sales growth—and it’s precisely this expansion that would be an important driver of short term growth. Li Xiang has clearly identified this risk, announcing in June that the company plans to run a total of 60 stores nationwide, not 20, as initially planned. 
• Industry watchers also voiced concerns that a weak, blurred identity could hinder the young EV brand from becoming popular. The benefits of EREVs are more difficult to communicate to customers than Nio’s fancy customer-oriented strategy built upon luxurious clubhouses or Tesla’s automated driving capabilities.
• Another longer-term concern is a relatively small budget for research and development. Last year, Li Auto spent RMB 1.17 billion on research, compared to Nio’s RMB 4.4 billion. The company plans to start developing Level 4 self-driving capabilities later this year, with an investment of at least RMB 1 billion, its founder said.

It is plausible that extended-range technology is a pragmatic solution to key bottlenecks in EV adoption. But there are risks. As the affordability of EVs improves and more charging stations are rolled out, Li Auto will need to scale up fast in order to survive a shakeout in the industry—one that has already taken its toll on dozens of EV startups in China.

Li Xiang in April said he believed the company could achieve profitability with just another $1 billion funding injection. However, the narrow window for EREV technology is closing, fast.

US electric carmaker Tesla is expanding its Chinese engineering team to accelerate the launch of self-driving features in the country as it pursues “full vehicle autonomy” by the end of this year, CEO Elon Musk said on Thursday.

“I really want to emphasize that it’s not just copywriting sort of stuff from America to work in China. We will be doing original design and engineering in China,” Musk said in a recorded video speech played on Thursday during Shanghai’s annual World Artificial Intelligence Conference (WAIC).

The electric vehicle giant maintained an earlier statement that its vehicles will be capable of “basic functionality for Level 5 autonomy completed this year,” according to Musk.  

Level 5 (L5) autonomy refers to a fully autonomous driving system which can handle all driving tasks without the need for human guidance, according to definitions set by the Society of Autonomotive Engineers (SAE).

Musk also said that Tesla has already produced the hardware needed for full self-driving capabilities, including an in-house designed AI chip known as Autopilot Hardware 3. The company can achieve L5 autonomy “simply by making software improvements,” he said.

Tesla has been ramping up its hiring in China, creating positions in departments from data engineering to server architecture as part of a broader strategy to localize software and user data in the world’s biggest auto market, according to a report from Chinese media. It had 3,200 employees in China as of late last year, Reuters reported citing its chairwoman Robyn Denholm.

The announcement comes as competition for market share with Chinese EV companies has intensified amid slowing growth. Chinese Tesla challenger Nio partnered with Intel’s automotive sensor company Mobileye to jointly mass-produce highly automated vehicles, which are scheduled for release in 2022. Alibaba and Xiaomi-backed Xpeng Motors, meanwhile, released their first sedan, the P7, with an advanced driving-assist platform which the company said was optimized to handle Chinese traffic conditions. CEO He Xiaopeng in April said the company will introduce a highway self-driving function to car owners with over-the-air updates next year.

Traditional automakers are also catching up. Changan Automobile launched earlier this year what it said was China’s first volume-production vehicle model with Level 3 autonomy. The state-owned automaker sourced self-driving chips for vehicle perception from Horizon Robotics, a Chinese chipset startup backed by Intel, Hillhouse Capital, and Sequoia Capital China.

Tesla pulled ahead of local automakers with the delivery of a record 14,954 China-made vehicles last month, a fifth of the country’s total EV market share. Meanwhile, Nio’s June deliveries almost tripled year on year to 3,740 units, while Meituan-backed Lixiang followed with sales of around 2,000 vehicles during the month.

Young Chinese EV makers sold a total of 9,470 units in June, accounting for 14% of the EV segment, compared with a mere 7% market share the same period a year earlier, according to figures from the China Passenger Car Association (CPCA).

2020 is shaping up to be the year Chinese EV batteries broke through, despite the effects of the Covid-19 pandemic.

US EV giant Tesla has deepened its ties with China’s biggest battery maker to launch a locally-built Model 3 with an expected 20% reduction in battery cost. German automaker Volkswagen, poised to compete with Tesla in EVs, recently became the first global carmaker to invest in a Chinese battery supplier. Meanwhile, several auto majors have their eyes set on BYD’s new fire-resistant “blade battery.”

In these partnerships, lithium iron phosphate (LFP) batteries, which Tesla and its challengers once shunned for their low energy density, are gaining favor for their low price and improved performance.

Batteries are key to the figures that matter in EV competition: price and range. The price tag and energy density of an EV battery largely determines whether or not a vehicle will succeed. Automakers have realized that forging alliances with battery makers ensures they have a consistent supply of a core component at a favorable price.

Chinese battery makers will be a vital ally for global automakers in their pursuit of EV dominance.

Volkswagen-Gotion

Volkswagen’s deal with Chinese battery manufacturer Gotion recently made history. Signed in May, it will be the first time in Beijing’s decade-long EV push that a global automaker has taken a controlling stake in a Chinese battery supplier.

VW is known for its ambition to become a world leader in EVs, aiming to leapfrog Tesla by making 1 million electrified cars annually by the end of 2022. More than half of these vehicles are expected to be produced in China.

However, its supply chain has been largely dependent on battery giants. Early last year, South Korea’s LG Chem reportedly threatened to cut off VW from its battery supply after the German automaker sought to partner with LG rival SK Innovation to build a gigafactory in Europe.

Consequently, establishing a supply chain from battery to chargers has become a matter of urgency for VW.

Gotion is China’s third-largest battery supplier. The company is based in Anhui province, where JAC Motors, one of VW’s manufacturing partners, is also located.

• VW will pay RMB 8.7 billion (USD 1.2 billion) for a 26.47% stake in Gotion, and will become its biggest shareholder when the transaction is completed later this year, the two companies announced in late May.
• Gotion will be a certified battery supplier to VW in China, “actively responding to the demands from VW” [our translation], including supplies for its all-electric vehicles built on MEB, the German auto giant’s first high-volume EV architecture, according to a filing.
• VW’s voting rights will be at least 5% less than those of the founding shareholders for a minimum of three years, during which time Gotion founder and president Li Zhen will remain in control of the company. VW will take the helm after that.
• Gotion mainly supplies LFP batteries.
• Gotion is currently investing RMB 540 million to expand its production capacity. The company expects that it will reach cell production of 16 GWh annually, around half of that of Tesla’s joint battery plant with Panasonic.

Tesla-CATL

Batteries used to be a soft spot in Tesla’s empire.

The company’s Shanghai Gigafactory has rescued it from years of bleeding cash and doubts on Wall Street. After only a few months of operation, the factory now contributes to more than half of Tesla’s global sales.

Now, a deal with CATL is aimed at further reducing costs.

In July, Elon Musk’s electric car company dethroned Toyota as the world’s biggest automaker by market value, and its locally built Model 3 is already the most popular EV model in China. However, the RMB 355,800 purchasing threshold is still too high for most Chinese customers.

Sourcing local parts will be essential for the company to slash prices without sacrificing profits. Analysts expect the Tesla-CATL deal will help expand the American automaker’s lead in the Chinese market.

• In February, Shenzhen-listed CATL said it had signed a deal for an undisclosed amount to supply batteries to Tesla in China for a two-year period starting this month.
• This was followed by Tesla receiving government approval to make Model 3 cars in China equipped with LFP batteries, according to the Ministry of Industry and Information Technology.
• Given that battery packs currently comprise around 40% of a vehicle’s cost, the move is a critical step in Tesla’s efforts to localize its entire supply chain in China by the end of this year.
• If Tesla is able to source all of its parts—including CATL’s LFP batteries—in China, the automaker could see a 20% drop in production costs and a leap in its vehicle margins from 20% to 53%, analysts from Chinese equity firm Bohai Securities said in a report released earlier this year.
• Previously, the automaker had sourced NMC and NCA batteries from LG Chem and Panasonic due to higher energy density, a critical factor in determining an EV’s range.
• Tesla will continue using NMC and NCA batteries in its long-range Model 3 vehicles. Still, as LFP battery performance catches up, a standard range plus version with LFP batteries will be soon available to Chinese customers.
• Meanwhile, a price war is looming for local EV makers. Tesla will retain a remarkable gross margin of 35%, even if it cuts the starting price of Model 3 to RMB 230,000, Bohai analysts added. The vehicle is currently priced at RMB 271,550.

BYD

While Tesla and VW attempt to secure their supply of batteries, one Chinese automaker has been producing them in-house all along.

BYD, once the colossus of the EV battery market, lost its crown to CATL in 2017 due to its slow move into the NMC battery segment. The company chose to stick with the cheaper and safer—but less energy dense—LFP batteries.

BYD produces batteries for its own vehicles but also sells them to other automakers. Approximately 10% of its revenue comes from battery sales.

The company is now attempting to make up lost ground with the launch of its “blade battery,” an LFP battery boasting a 50% improvement in energy density and 30% cost reduction over conventional alternatives. These batteries could take a significant share of the market in the short term, but still come off second-best compared to NCM and NCA batteries.

BYD claims that these batteries are already gaining traction. “Today, almost all vehicle brands that you may know are in discussion with us for future cooperation based on blade battery technology,” said He Long, vice president of BYD, during a press event in March. TechNode was unable to independently verify He’s claims.

• Currently, only one vehicle uses the blade battery: BYD’s own premium sedan, the Han. The vehicle has a range of 605 km (376 miles) and is 25% cheaper than the starting price of the Tesla Model 3. The Han is scheduled for delivery in mid-July.
• The company claims the blade battery is fire- and explosion-proof.
• Credit Suisse analysts expect BYD’s profitability to improve in the coming quarters. The blade battery could contribute by reducing costs while boosting an EV’s driving range. BYD plans to double its production capacity for blade batteries by the end of the year.
• A major reason for BYD’s focus on LFP batteries was Beijing’s support for these energy sources in commercial EVs. In the electric bus segment, where BYD has been recognized as a global leader, LFP batteries currently make up more than 90% of the market.
• Conversely, NCM and NCA accounted for 90% of the market for passenger EV batteries last year, according to figures from research firm Adamas Intelligence. Market tracker SNE Research said BYD only ranked sixth with a mere 4.9% share in the global EV battery market in the first quarter of this year, compared with the CATL’s 17.4%.

The rise of China’s batteries

Chinese battery makers are now catching up with their overseas rivals. BYD is aiming to increase the energy density of its blade battery to 180 Wh/kg in two years, while Gotion has said it will produce LFP cells with an energy density of 200 Wh/kg by 2021. This is only 30% less capacity than the NCA battery Panasonic currently builds for Tesla. The two Chinese companies are expected to make EVs with driving ranges on par with Tesla cars by improving the organization of cells within a battery pack.

Years of EV subsidies are also finally paying off, according to UBS analyst Paul Gong. An industrial supply chain—from battery materials to charging piles—is emerging after a decade of government support for EV purchases, giving China an early advantage in the global competition, Gong said in a media briefing earlier this year. To pool resources and ensure profits, overseas automakers consider China to be an ideal production base for their global EV businesses, he added.

Chinese battery makers peddling LFPs still have big hurdles to overcome. LFPs still lag behind NMC batteries in energy density. JPMorgan analyst Nick Lai estimates NMC will remain the dominant type of battery in the Chinese passenger vehicles sector, extending its growth “at a solid rate.” In the near- to medium-term, analysts expect automakers to switch to high-performance LFP batteries that also offer the advantage of lower costs.

These battery makers realize that their futures depend on their ability to innovate. Failing to continuously improve technologies could hurt competitiveness given the rapid development of lithium-ion battery technology, CATL wrote in its first-quarter financial report in April. The company has no alternative but to increase investment in R&D of battery technology. 

The biggest challenges are yet to come.

Sales of Chinese all-electric vehicles fell 40% year-on-year to 67,000 units in June, while Tesla grew to account for 23% market share, the Chinese Passengers Car Association (CPCA) said Wednesday.

Why it matters: Tesla’s dominance in the Chinese EV market has driven its share price to record highs, and it is leading a market recovery during the post-Covid period.

Details: Tesla sold 14,954 vehicles in China in June, reporting a 35% growth month-on-month, CPCA secretary general Cui Dongshu said on an online briefing.

• Sales of new energy vehicles (NEVs), including all-electrics, plug-in hybrids, and fuel-cell vehicles, dropped 35% to 85,600 units in June from the previous month, according to figures from CPCA (in Chinese).
• Premium EVs, such as Nio and Lixiang, sold well across the board, amid 27% year-on-year growth for all premium autos.
• Lower-priced EV makers such as BYD and Geely, who traditionally focus on taxi and ridesharing fleets, suffered falling sales.
• CPCA expects a “significant rebound” in the Chinese NEV market in the coming six months, as market demand is coming back.

Context: Tesla sales in China dipped in April, with only 3,635 units delivered to customers amid allegations that the company’s salespeople cheating customers to maintain its sales rate.

• The US EV giant has delivered a total of 45,721 vehicles in China in the first half of this year, according to CPCA figures.
• CEO Elon Musk in late April said the Gigafactory in Shanghai will achieve a production rate of 4,000 per week, or 200,000 units per year, by mid-year, as part of an annual goal to deliver 500,000 vehicles globally.
• The company is building phase two of the local plant in a bid to start production of Model Y electric crossover in the first quarter of 2021.

While China’s overall auto sales have rebounded strongly following the Covid-19 outbreak, the electric vehicle market cratered with a double-digit decline in May.

New energy vehicles (NEV) sales dropped 23.5% year on year to 82,000 units in May, according to figures from the China Association of Automobile Manufacturers (CAAM), while total auto sales leapt 14.5% on an annual basis. The decline continues a nearly year-long dropoff since Beijing announced in July cuts in EV subsidies of up to 60%. The world’s biggest EV market recorded its first-ever annual decline last year, with 1.2 million units sold.

China’s top industry regulator in 2017 set a 2020 goal of 2 million EVs, to reach 20% of new car sales by 2025. Whether China will be unseated as the world’s biggest electric vehicle market seems unlikely, yet bleak auto sales figures are a stark reminder of the chasm between Beijing’s near-term goals and actual sales.

TechNode’s recent conversations with analysts show a sharp divide on that question as well as their views on government subsidies and consumer demand. Let’s look at their estimates first.

Higher prices, tighter budgets

China’s EV adoption is strongly tied to government incentives. The central government began slashing subsidies by up to 60%, or RMB 27,000 per unit, on electric cars late last June. The market has been on a roller-coaster ride as a result, from 80% year-on-year growth to falling into a months-long slump.

Beijing in April announced that it will extend EV subsidies until the end of 2022 in an effort to stem further collapse, though they will be 10% lower in 2020 than 2019 levels, 20% lower in 2021, and 30% lower in 2022. This means for an EV with a driving range of more than 400 kilometers (around 250 miles), the qualifying subsidy is RMB 20,000 (around $2,820) compared with RMB 55,000 at the peak in 2016—leaving many to doubt its effectiveness.

China International Capital Corp (CICC), however, sees value even in a downsized subsidy, saying in an April report that it will have a calming effect by “stabilizing consumer expectations” (our translation). UBS analyst Paul Gong agreed, adding that additional financial incentives from local governments would help with market recovery.

Still, CICC recently cut its 2020 EV sales forecast by a third, to fall between 1 and 1.5 million units, on account of the shattering blow Covid-19 has dealt to economies across the globe. UBS estimated annual sales will continue at the 2019 level this year, without giving specific figures.

The subsidy crutch

The NEV sector is still not a market that can thrive without subsidies, global consultancy AlixPartners wrote in a recent report. It pointed to weak overall demand for autos amid the lowest annual economic growth China has seen in decades due to the pandemic.

This holds even more true for the less affordable electric car relative to traditional gasoline engine vehicles. The EV price differential is at least $8,000 more than an equivalent model with a gasoline combustion engine, owing to the expense of the car battery. This difference will probably deter Chinese consumers who are now more price sensitive, pressured by higher mortgages and lower incomes, AlixPartners Managing Director Stephen Dyer told journalists on June 9 during an online briefing.

Meanwhile, Bernstein estimates 67% of car sales in China last year came from models with a sticker price below RMB 150,000, “far below the prices of most EVs excluding subsidies,” analyst Robin Zhu wrote in a March report. Cui Dongshu, secretary general of China Passenger Car Association (CPCA), expects that sliding oil prices will make internal combustion vehicles more attractive to customers.

UBS, however, maintained that consumer demand for all autos is recovering as the virus outbreak shows signs of slowing. According to two surveys by UBS Evidence Lab, around 27% of 1,000 respondents from across China expressed their intent to buy cars in April, compared with 17% in February when the number of cases started climbing.

Such latent demand will boost market growth in the following months, making up for the loss in sales volume in the first six months of this year, analyst Paul Gong said at a media event on June 4. The year-on-year growth rate could be “pretty positive” in the coming months given the low base in the second half of 2019, and as competitive EV models enter the market, he added.

JP Morgan analysts also expect EV market penetration will continue. The cost of compact EVs is expected to reach parity with that of conventional vehicles as early as 2021, and larger EVs with bigger battery packs in 2024.

Competition for share

“All OEMs—foreign and local—are pushing out new models to the market to grab shares in this rapidly growing opportunity and at the same time comply with China’s strict emission requirements,” JP Morgan analyst Nick Lai wrote in a report.

Still, analysts expect Chinese EV brands will face more intense competition as foreign automakers accelerate local production in China. Tesla continues to expand its Shanghai plant and Volkswagen is eyeing the market with two jumbo investments.

Tesla has cemented its position as a market leader by delivering 11,095 China-made Model 3 vehicles in May, making it the top-selling EV model for the month, according to CPCA figures. Tesla challengers Nio and Xpeng Motors countered with new models to be delivered later this year.

Meanwhile, local EV major BYD made a big move, launching in March its new blade battery with 50% higher energy density and a 30% reduction in battery cost. Bernstein and Credit Suisse expect BYD’s profitability will improve on a sequential basis, as the local EV major will soon begin mass production of the battery as well as deliver the “Han,” the first EV model equipped with the battery, in mid-2020.

A federal judge in California on Wednesday rejected a request from US electric vehicle giant Tesla Motors to access grand jury materials related to a former Apple employee charged with stealing trade secrets before joining Chinese electric vehicle maker Xpeng Motors.

Why it matters: The ruling is the latest chapter in the legal battle between Tesla and an employee of Xpeng, a Chinese company that has been involved in two protracted legal disputes in the US over trade secrets.

• Tesla in mid-January subpoenaed XMotors, Xpeng’s US business unit, in bid to gather evidence in its civil lawsuit against Cao Guangzhi, a former Autopilot engineer and now Xpeng employee charged with misusing Tesla’s intellectual property for the benefit of his new employer.
• Tesla requested access to a wide array of materials such as the entire repository of Xpeng’s autonomous-driving source code and clones of its senior executives’ hard drives.
• The US EV giant also sought court records related to a criminal charge against former Apple employee Zhang Xiaolang for stealing trade secrets while switching jobs and joining Xpeng in May 2018. Xpeng terminated Zhang’s employment after the criminal charges were filed.

Details: US District Court Judge Vince Chhabria on Wednesday denied Tesla’s request to access grand jury materials related to Zhang and information related to Zhang’s conduct, saying the relevance of those materials to Tesla’s claims against Cao was “speculative and tenuous.”

• “Discovery of this information is not proportional to the needs of this case at this time, especially given the potential for interference with an ongoing criminal prosecution, a concern raised by the US Attorney,” Chhabria wrote.
• Xpeng also does not need to provide images of the work computers of several executives including CEO He Xiaopeng and president Brian Gu since they are employed by its Chinese operation Xiaopeng Motors, rather than by XMotors.
• However, the Chinese EV startup must produce its self-driving source code and related log files as requested by Tesla, which requested those dated from November 2018 through the present. Cao joined XMotors in January 2019 and was placed on leave when the investigation began two months later.
• The two companies will discuss using a neutral third party to review the source code from both companies.
• “The ruling highlights Tesla’s gamesmanship and use of discovery as an improper measure to stop with its competitor from competing successfully in the self-driving industry,” Xpeng said in an announcement.
• Tesla did not respond to request for a comment.

Context: Alibaba and Xiaomi-backed Xpeng is running at full tilt to produce and deliver on time the carmaker’s first electric P7 sedan, a model in direct competition with Tesla’s made-in-China Model 3 with assisted driver functions including highway lane-changing and valet parking.

• The Guangzhou-based EV maker last month was granted a government license to produce cars in a revamped plant which it previously acquired from a local automaker in the southern Guangdong province.
• Delivery of its P7 cars is scheduled for late June but the latest version of its advanced driver assistance system Xpilot will be available in the fourth quarter of this year, the company said.

Read more: Tesla’s apprentice: Is Tesla bullying its own biggest fan?

On Sunday night, Nio founder and CEO, William Li, appeared on the livestream of Wang Han, a famous TV personality, in front of 20 million people. As part of the sponsored appearance, Li introduced Wang to Nio’s ES6 SUV during his 40 minutes. Over 5,000 people signed up for a test drive and 320 made car orders with non-refundable deposits, the company said Monday.

Why it matters: One of the first Chinese automakers to embrace livestreaming during the epidemic, Nio is ramping up efforts with the help of Wang Han, known for being a veteran host at Day Day Up (one of China’s most-viewed talk shows) just days after Tesla made its debut on Chinese livestreaming platforms.

• With a focus to promote China-made products only, the Sunday livestream was the first-ever one for Wang, a well-liked variety show host known as a key talent at satellite television broadcaster Hunan TV.
• A major promotion during Wang’s first e-commerce livestream could cost at least RMB 2 million ($281,400), persons familiar with the knowledge told TechNode.
• Nio declined to comment when contacted by TechNode on Monday.

Details: More than 20 million viewers watched a webcast on Taobao as of Sunday during a 40-minute period session where Nio founder and CEO William Li made his debut as a salesperson for the company’s five-seater electric crossover ES6.

• The company on Monday announced it has secured a total of 320 non-refundable deposits, amounting to RMB 128 million ($18 million) in total sales.
• Nearly 5,300 people booked a slot to test drive Nio’s lineups, priced at RMB 1 as of Sunday.
• Tesla in mid-April opened its Tmall flagship store with the launch of a similar online campaign of free test drive. This was followed by a webcast featuring a top livestreaming celebrity Viya who presented her experience of test driving Made-in-China Model 3 on Taobao 10 days later.
• The one-hour show attracted 4 million viewers with more than 2,600 of which ordered for a Model 3 test drive, according to an Alibaba press release.

Context: Nio became the champion among Chinese EV startups last year with deliveries of 20,565 crossovers nationwide, several thousand units more than Baidu-backed WM Motor and Guangzhou-based Xpeng Motors. This was, however, only half of its previous annual sales target.

• Loss from operations increased by 13% year-on-year to around RMB 11 billion in the past year, compared with more than 90% surge in 2018, as the company have been prioritizing margin improvement by cutting jobs amid a series of restructuring measures, according to Nio’s annual report.

US electric vehicle maker Tesla is facing at least eight civil lawsuits by Chinese individuals and two possible class-action lawsuit over “disputes in sales contracts,” according to information released recently on the Shanghai city court system.

Read more: Tesla’s apprentice: Is Tesla bullying its own biggest fan?

Why it matters: Only five months after delivering its China-made Model 3 vehicles, Tesla has drawn growing criticism that has turned into lawsuits due to lack of transparency, too-often price changes, and alleged deceptive sales pitches.

Details: A local court in Shanghai Pudong New Area will hear eight civil lawsuits filed by eight different individuals against Tesla Motors Sales Service (Shanghai) Co., Ltd., a fully-owned subsidiary by the US EV giant in a month starting May 19.

• Meanwhile, two local small enterprises with businesses in sales of electronic devices have filed civil lawsuits against Tesla China sales operation separately due to issues in “sales contracts.”
• One of the plaintiffs said it is a “class action lawsuit” without giving further details, when contacted by TechNode on Friday.
• Tesla did not respond to a request for comment.
• The claimed class action lawsuit probably relates to “price reduction” in Tesla’s made-in-China Model 3 vehicles, Chinese media reported citing a company representative of the plaintiff.
• Early last month, a female customer surnamed Zhang complained that she was not informed of the upcoming price cut and therefore ended up paying RMB 30,000 ($4,300) more for her new car.
• Zhang said the salesperson promised no price cuts in the near future when she finished the payment early April. However, two weeks after the purchase, Tesla on May 1 announced a 10% price cut in locally-built Model 3 with the after-subsidy price of the cheapest version reduced from RMB 303,550 to RMB 271,550.
• Tesla’s recent cut price was supposed to meet the latest government requirements for EV subsidies. It came just one week after the company raised the prices by around RMB 5,000 to maintain its margin level, since each Model 3 vehicle is now qualified for fewer subsidies under the new incentive scheme.

Context: More legal complaints are probably on the way facing Tesla. More than 600 consumers have collectively expressed their fury against the company last month as its salespersons allegedly pressured them to buy the entry-level Model 3 while hiding the release date of more competitive long range version, with delivery expected to start in June.

• Speaking with TechNode on Monday, a Tesla owner surnamed Fu said a number of Tesla owners are planning to file lawsuits against the company, as it has not yet provided any satisfactory solutions.

Sales of Tesla cars tumbled in April by nearly two-thirds from March, according to the country’s industry group. The electric vehicle maker is facing outcry from hundreds of owners who were pressured into paying full price for the standard range Model 3 before the release of a long range version.

Why it matters: Tesla’s revenue and margin are likely to come under pressure in the near term, given the weak April sales in a market expected to be a growth engine for the company.

• Tesla announced they would raise the production capacity goal for the Shanghai Gigafactory by one-third to 200,000 Model 3 sedans per year in its first quarter earnings result last month. It maintained a goal of delivering 500,000 vehicles globally this year.

Details: Sales volume of Tesla’s made-in-China Model 3 sedans tumbled by 64% to 3,635 units in April from a previous month, figures released by China Passenger Car Association (CPCA) on Monday show.

• First month slump: Tesla sales in the first month of each quarter is normally “relatively lower,” said Cui Dongshu, secretary general of CPCA, who added the company still had made good performance by making over 10,000 vehicles last month.
• The sales decline comes as owners resorted to social media to express their outrage over pressuring buyers to purchase the cheapest Model 3 sedans to maintain its sales rate.
• Short term thinking: Tesla’s salespersons allegedly hurried customers to finish the payment for their orders of standard range Model 3 sedans, while hiding the release of locally-built long range version scheduled for delivery in June, Fu Jiayi, a Tesla owner wrote early last month on Weibo.
• Speaking to TechNode on Monday, Fu said Tesla has not provided any solutions to owners’ requests to fill the price difference for long range version, adding that more than 600 owners have collectively been seeking answers from Tesla.
• Previously, dozens of customers had filed complaints to local regulators against Tesla for quietly replacing its “full self-driving” computers, listed on their sales document, with less advanced HW2.5 chips. China’s industry ministry in early March urged the company for “immediate improvement” to ensure product quality and safety. (our translation)
• Tesla did not respond to a request for comment.

Context: China’s new energy vehicle (NEV) sales fell by 30% year-on-year to 64,000 units last month, as decline was narrowed from 49% in March. The recovery was still less than expected, compared with just 3.6% year-on-year decline in general auto sales last month, according to CPCA figures (in Chinese).

• Auto majors such as BYD and GAC reported strong results. BYD’s electric compact sedan Qin topped the list of best-selling EV models with 5,096 units being sold last month, and GAC followed Tesla by selling 3,586 Aion S all-electric sedans.
• Chinese young EV makers also outperformed. Nio deliveries in April more than doubled from the previous month to 3,155 vehicles, followed by Meituan founder Wang Xing-backed Lixiang with 80% month-on-month growth rate after delivery started for four months.

Tesla has reportedly halted production at its Gigafactory Shanghai due to shortages in its overseas supply chains. The impact from an extended worldwide shutdown are extending to its China operations that until now have mostly avoided the ripple effects of the COVID-19 pandemic. Tesla did not respond to request for a comment.

Why it matters: Shanghai was once Tesla’s only car plant remaining in operation amid the coronavirus outbreak in late March. However, it has not been spared as the shutdowns continue to impact its local operations and parts suppliers.

• Tesla currently relies heavily on global supplies for the Model 3 sedans it produced in China. Around 70% of car components on the made-in-China Model 3 come from abroad. The company expects production to be completely localized by the end of this year.

Details: Operations have ground to a halt starting on May 1. No new cars are expected to come off the final assembly line until this Saturday, Chinese media reported Thursday citing people familiar with the matter.

• The Shanghai factory was temporarily shut down first due to the five-day Labor Day holiday from May 1 to May 5, but it remained unopened when the national holiday ended Tuesday.
• At least part of the reason was due to a widespread disruption in the automotive supply chains caused by an extended shutdown in the North America, according to the report.
• Most components for locally-built Model 3 sedans, including battery cells produced by Panasonic in Tesla’s Nevada operation, are currently sourced from overseas suppliers.

Context: As sales in China have been going up, Tesla is progressively ramping up production. According to its Q1 2020 report last week, it is upgrading production goal for the local plant by a third to 4,000 Model 3s per week, or 200,000 per year.

• Speaking with Chinese media later that week, Tao Lin, Tesla’s vice president of external affairs confirmed that Shanghai expansion is progressing with locally-made Model Y expected to go on sale next year.
• Electrek reported the new facilities will enable local production of battery modules and electric motors.
• The US EV giant is reportedly planning to resume operation in its Fremont plant, after shutting it down on March 23.

In an unprecedented move, US-based electric vehicle maker Tesla has made a request to examine a competitor’s entire repository of autonomous-driving source code and senior executives’ hard drives as part of a lawsuit against a former employee.

Cao served as head of perception at XMotors, though he has been on leave since the investigation began. Tesla alleges that Cao copied Autopilot source code during his time at Tesla, and that the software could have benefited Xpeng.

Now, one year after filing a suit against the Chinese engineer, Tesla is attempting to gain access to a vast array of Xpeng’s internal communications and proprietary code in a push to indict Cao. Court documents reviewed by TechNode reveal that Tesla is taking an extraordinarily aggressive approach to the dispute with its smaller rival.

Tesla argues that Cao’s arrival at XMotors mirrors that of former Apple engineer Zhang Xiaolang, who was arrested in the US on charges of stealing proprietary information related to Apple’s self-driving car project before joining XMotors.

Xpeng is hardening its stance in the escalating legal battle with Tesla in an uncharacteristically public way.

Tesla’s offensive

Tesla first filed a civil complaint against Cao in March 2019, claiming the engineer had copied Autopilot-related source code to his personal iCloud account in a nine-month period before leaving Tesla. Neither Xpeng nor XMotors have been charged in Tesla’s suit.

In July 2019, Cao acknowledged that he had downloaded and stored Tesla source code on his personal laptop, but pleaded not guilty to theft charges. The dispute remained at a deadlock.

In November of 2019, Tesla issued its first subpoena to XMotors, seeking a broad array of information, including “all non-privileged” internal communications involving Cao. The request included any correspondence on the popular messaging app WeChat that was related to Tesla and Autopilot.

Tesla also requested Cao’s personal messages to XMotors employees, as well as his compensation and employment terms with Xpeng. XMotors responded to Tesla’s request in December by filing 6,333 pages of documents. An initial investigation found no evidence that XMotors encouraged Cao to exploit Tesla’s source code for its benefit. 

After nearly a year of litigation, Tesla issued a second subpoena to XMotors this January, requesting an array of documents as well as XMotor’s entire repository of autonomous-driving source code from before Cao was recruited, to after he was placed on leave in March 2019.

Tesla’s request extended to images of entire hard drives from various Xpeng employees’ work computers, including those of the company’s CEO He Xiaopeng and president Brian Gu. The request also demanded that Xpeng make an employee available for an interview.

Tesla’s latest requests have infuriated the domestic EV startup. This is “just a fishing expedition meant to bully and disrupt a young competitor,” Xpeng said in an announcement released April 24, just two days before the company launched the P7, its first sedan model, which competes with Tesla’s China-made Model 3. The Chinese EV maker said that Tesla’s request to broaden the scope of the investigation is “based on nothing more than sheer speculation.”

Most notably, Tesla asked XMotors for documents related to a case against Apple’s former employee Zhang Xiaolang, looking for a pattern of misconduct by XMotors in its operations and recruiting. What has caused the American EV giant to prolong its campaign against its Chinese rival? Here are some of the key findings revealed in the recent documents filed by XMotors in US courts.

Opposing views

Tesla’s arguments: The US EV giant is seeking to connect a previous employee accused of stealing trade secrets before joining Xpeng and the latest case against Cao. Tesla is also suspicious about the conditions under which Cao left the company.

• Cao copied more than 300,000 Autopilot files from a working computer to his personal iCloud account before starting at XMotors in January 2019, Tesla said in the lawsuit filed last March. The Silicon Valley carmaker also raised suspicions about Cao transferring confidential information to his new employer by noting that he gave only one day’s notice before leaving his job at Tesla.

• Tesla claims that Cao copied its Autopilot source code onto a Sandisk thumb drive, a popular brand of USB storage device. According to information gathered during Tesla’s investigation, a Sandisk drive was then inserted into an Xpeng-issued laptop. Cao’s personal device “could be the same” as the one inserted in Xpeng’s computer, Tesla argues.
• Tesla’s latest demands for documents related to the arrest of former Apple employee Zhang Xiaolong were made on the grounds that Cao texted a friend saying, according to a disputed translation from Chinese, that “I guess they [Zhang and Xpeng] agreed on the price before to get the documents.” Cao’s work experience at Apple had also caught Tesla’s attention, causing the EV giant to wonder if Cao knew or had contact with Zhang—and whether the two engineers had acted in concert.

Xpeng’s testimony: Meanwhile, Xpeng and Cao have contradicted Tesla’s claims, arguing that conversations between the engineer and his colleague had been mistranslated.

• Cao cloned the entire Autopilot source code repository to his personal computer, without telling anybody or asking if he was permitted to do so, according to his testimony in a deposition held earlier this year. Cao said he thought it was “common practice” for engineers at Tesla. “Everyone was using personal devices, personal storage, cloud storage to access Tesla information,” Cao said.
• Cao’s testimony contradicts Tesla’s claims that he only gave one day’s notice before leaving the company. Cao said he told his then-supervisor in late December 2018 that he planned to leave and expressed willingness to stay as long as necessary to ensure a smooth transition. “I don’t know who made that lie intentionally or unintentionally,” Cao said of his disputed resignation date.
• Xpeng challenges Tesla’s translation of the text message exchange. According to a certified translation, it was the friend who first brought news of Zhang’s arrest to Cao’s attention, not vice versa. It was also Cao’s friend who sent the text message about payment for documents to Cao. Cao rebuked the friend, saying, “It creates really bad impressions of us Chinese people.”
• Cao denied knowing Zhang, the defendant in Apple’s pending criminal case. “He and I did not work in the same division at Apple … and our respective engineering groups were located in different physical buildings and different campuses,” Cao wrote in his testimony.

In competing with their US counterparts, Chinese companies have long been known to seek shortcuts by poaching their employees. However, it is also true that not every job switch amounts to trade secret misappropriation. At the moment, Tesla’s suspicions remain mostly hypothetical: XMotors has not been named or charged in either the criminal case against Zhang or the civil action with Cao.

“We have engaged in no wrongdoing and we have fully cooperated with Tesla for months, including voluntarily providing our own confidential information. However, Tesla’s latest demands crossed the line, seeking to rummage through our IP on Tesla’s terms,” the company said in an announcement issued last week. Tesla did not respond to a request for comment.

Is Xpeng a threat?

In its court filing of last week, XMotors said Tesla’s latest demands are an attempt to “obtain competitive information” in order to make their rival less competitive. On the other hand, Tesla claimed it had no interest in the substance of XMotors’ source code but rather wants to ascertain whether there is anything resembling its intellectual property.

Given Tesla’s dominant position in the Chinese EV market, the argument is plausible. The US carmaker delivered more than 16,000 EVs in China during the first quarter of this year, representing nearly a third of market share—even as domestic EV giant BYD faltered amid the Covid-19 outbreak. Tesla’s first-quarter sales in China are on par with nearly all of Xpeng’s annual deliveries, a margin wide enough to solidify Tesla’s leadership in the market.

Tesla’s dominance could be challenged by companies like Xpeng, which launched its first electric sedan this week. Xpeng claims the P7 is the first “L3 autonomy-ready” production vehicle with the longest driving range in China.

The company also claims that its assisted-driver system Xpilot differs from those of its rivals because it is tailor-made for congested Chinese traffic situations. CEO He Xiaopeng promised to offer the “best user experience” with features that include autonomous lane changing on highways—to be made available via an update next year.

At a third of the price of Tesla Model S, Xpeng’s newest vehicle has elicited strong interest from some Chinese EV enthusiasts. “The P7 could be the most cost-effective EV sedan available in the market,” said one netizen in a WeChat group for EV fans after Tuesday’s press conference.

Although it’s still unclear whether the P7 could be a “Tesla killer” that may also help Xpeng outperform its Chinese rivals, the two companies’ escalating court battle and the fight for pole position in the world’s largest EV market is only just beginning.

Correction: A previous version of this newsletter incorrectly stated that two former Apple engineers joined Xpeng after leaving the US tech giant. Only Zhang Xiaolang joined the company. This text has also been amended to clarify that Cao Guangzhi was placed on administrative leave in March 2019. 

Xpeng Motors on Monday launched its first sedan model P7, boasting a range of 706 km (439 miles) and what it claimed the best-performed autonomous driving hardware stack among locally-produced vehicles.

Why it matters: One of the few sedan models launched by Tesla’s major Chinese challengers, P7 is now placed in direct competition against the China-made Model 3. It also brings the company one step closer to the premium market.

• This comes in the midst of a legal battle over a former Tesla employee who allegedly stole trade secrets for the Alibaba-backed EV maker.
• Tesla in January asked a judge to force Xpeng to disclose its entire autonomous driving source code and images of computer hard drives from various employees.
• Tesla has not brought a lawsuit against Xpeng due to insufficient evidence.

“I strongly believe that P7 will provide the best driver assist experience in China.”

—He Xiaopeng, Chairman and CEO during the online press conference

Details: The electric sports sedan P7 is available for order with a price tag of RMB 244,900 ($34,600) after subsidies.

• The car has a 439-mile range on an 81 kwh battery pack custom-built by China’s CATL.
• This makes P7 by far the mass production EV with the longest-driving range available in China, according to information revealed by the Ministry of Industry and Information Technology last month.
• In a video review made by Chinese media and revealed by Xpeng during an online press event, P7 achieved a range of 567 km in a test on urban roads and express highways, versus the 509 km of an imported long range version of Tesla Model 3.
• P7 was also touted China’s first “L3 autonomy-ready” production vehicle, equipped with Nvidia’s self-driving supercomputer Drive Xavier, as well as a perception suite including 14 cameras, 12 ultrasonic sensors, and five millimeter-wave radars.
• Featuring a detection distance over 200 meters and a 360-degree field of vision, the stack would enable Level 3 autonomy via a consistent over-the-air (OTA) software update for its Xpilot system.
• He added more advanced assisted driving functions will be available next year, including navigation guided pilot (NGP), a feature similar to Tesla’s navigate on autopilot (NOA) allowing autonomous lane change on highways.

Context: Ranging from RMB 229,900 all the way up to RMB 349,900, the P7 is Xpeng’s second mass production model.

• Xpeng in late 2018 released its first production model G3, an entry-level sports utility vehicle with a starting price of RMB 135,800 after subsidy.
• The company has delivered a total of 16,608 cars as of 2019, around half of Nio, which started delivery half year earlier.
• Nio president Qin Lihong said the company was accelerating the release of a sedan model by the end of this year in an livestream on the company’s app.

Tesla on Friday slightly increased the after-subsidy prices of two popular China-made Model 3 versions, immediately after Beijing announced a 10% cut in government incentives for electric vehicle purchase.

Why it matters: China’s latest adjustment for EV buying is expected to force Tesla into making tough choices: margins or market share.

• Four Chinese ministry-level authorities on Thursday announced a 10% cut from the subsidies for new energy vehicles, which include all-electric and plug-in hybrids.
• Beijing for the first time stipulated that luxury EVs priced RMB 300,000 (around $42,400) and above will not receive any subsidy.
• The policy gives companies like Nio an exemption: EVs with swappable batteries will not be affected.

Details: The standard range plus version of the made-in-China Model 3 is now rising by RMB 4,500 to RMB 303,550 after-subsidies, while the purchase price of the long range version is up by RMB 5,000 to RMB 344,050, according to Tesla’s website.

• The company acknowledged that customers are now required to cover the price and tax difference. The subsidy for the standard range plus version has been cut from RMB 24,750 to RMB 20,250 after the adjustment, a similar rate of decline to the long range version.
• Nio changed its tune on Friday morning, saying in an announcement that it will make up the additional cost for customers, if they pay non-refundable deposits by the end of this week.
• The subsidy for its all-new ES8 SUV with an 84kwh battery pack was reduced by 10% to RMB 22,500 for personal customers after the adjustment, while that of ES6 dropped even further by 28% to RMB 18,000.
• Meanwhile, Li Xiang, founder of Meituan-backed EV maker Lixiang, made a bigger promise saying that “there is no need” for its potential customers to worry, since the company will cover the cost for them, without giving a timeframe.

Context: With a price range starting at RMB 323,800 before subsidies, the made-in-China Model 3 is currently eligible for the latest incentives over the next three months, but will be disqualified for that once the transitional period closes on July 22.

• “Tesla is not going to sacrifice profit to cover the additional cost for customers in the transitional period,” a Tesla Model 3 owner surnamed Lin told TechNode on Friday.
• Still, analysts expect the policy change could pressure to Tesla to further slash prices to expand its market share, resulting in an accelerated process of localization in Model 3 production in its Shanghai facilities, investment banks China International Capital Corporation (CICC) and Citic Securities said on Friday.
• China previously offered customers for RMB 25,000 ($3,550) as incentives for EVs with a range of over 400 kilometers. This is now reduced to RMB 22,500. The actual cut varies among EV models and could be at around 30% in some cases, depending on the driving range, energy density of battery pack, and energy consumption levels.

Chinese automakers are looking for novel ways to reach customers as people in China shy away from going outdoors.

To curb the spread of Covid-19, the new flu-like virus that has rocked the country over the past few weeks, cities across the country have imposed strict rules limiting people’s movement. The epidemic has had a profound impact on China’s auto sector, with numerous manufacturers repeatedly postponing the reopening of their production facilities. Just one-third of Chinese automakers have resumed production, the China Association of Automobile Manufacturers (CAAM) said on Feb. 13.

The move originated with Nio Houses, the company’s exclusive clubhouses for customers in its flagship stores. Prior to the Covid-19 outbreak, Nio owners had organized events and made connections in these spaces, which are equipped with a co-working space, a café, and even a childcare center.

In an online network that is not subject to the restrictions of space, Nio is not only trying to draw the attention of customers with different interests and backgrounds, but also fulfilling an ambitious goal: building connections with its community using a customer-centric strategy. Nio’s customer loyalty is the company’s strength, and it is playing to that strength to solidify its reputation.

Tesla: A latecomer in online engagement

Nio is not alone in its online crusade. Tesla has also taken to short videos and live-streaming in China, but unlike its competitor, the American EV maker has suffered from poor planning and unprofessional hosts.

On Feb. 8, just one day after Nio launched its revitalized online marketing campaign, two Tesla stores in the Pudong area of Shanghai opened accounts on Douyin. Tesla stores in other Chinese cities have also set up Douyin accounts.

In comparison to Nio, Tesla’s official Douyin account consistently posts swanky, yet less focused, content that ranges from videos of the Cybertruck and Roadstar 2 to goofy skits. The company’s default policy has been to let its local stores determine what content they post. Tesla has yet to designate a person to develop a central content strategy, two Tesla salespeople said when contacted by TechNode last week.

In one of these livestreams, a young Tesla employee used the last 15 minutes of the show to make small talk with his dozen viewers. These conversations included urging a customer to take out a loan on a new car, adding that a RMB 40,000 (about $5,700) down payment on a car was “quite cheap.” The host went on to make fun of his own hair, saying that he was unhappy with the wavy hairstyle and complaining that salons have remained closed because of the outbreak.

In another livestream, a salesperson wearing a facemask walked around a Model X in a Tesla store, providing detailed information about the car. A female assistant took the camera and occasionally asked questions sent by viewers. The sales supervisor was knowledgeable about EVs and careful in the choice of his words. Faced with a hardball question about the car’s wind noise, he acknowledged that the Model X’s fastback roof and frameless doors make wind noise reduction more challenging than for other cars. However, the distracting spectacle of several employees goofing off nearby spoiled the professionalism of the video. During the 20 minutes that TechNode viewed this livestream, fewer than 10 viewers were watching the show.

One possible explanation for Tesla’s less-focused content is less need—sales have been good since the company began accepting orders for its Chinese-made Model 3. Meanwhile, Nio has warned that it expects deliveries to drop off in February.

Unclear results

EV makers in China have always taken an internet-first approach to their businesses. But the recent virus outbreak has made this modus operandi a matter of necessity rather than just convenience.

As the government has encouraged—and constrained—people to stay indoors, the entire process of buying a car has moved online. Many EV companies are providing “online showrooms” via live-streaming, where potential buyers ask questions and interact with the host just as they would in a physical space.

Interested individuals can book a door-to-door test drive, in which the company brings the car to them and takes them back home after the drive. And if they decide to buy that electric vehicle, they can order and pay online, and have the car delivered directly to them.

A Tesla salesperson in Shanghai told TechNode that if the deposit for a China-made Model 3 is paid now, a test drive can be arranged for March. If the customer feels the vehicle isn’t up to standard, the deposit will be returned.

However, the process relies on piquing the interest of customers, and so far, live-streaming has had mixed results for EV makers.

According to TechNode’s investigation, vehicle-related live-streams do well in audience terms, often drawing more than 100 viewers per show. One Nio video detailing the company’s self-driving capabilities attracted more than 1,000 viewers. However, the company’s lifestyle livestreams typically get many fewer views.

“Everyone cares more about hardcore content,” an EV fan in Xiamen told TechNode, referring to videos about actual cars rather than other topics.

The diverse types of content are directed at different audiences: those who are interested in buying cars and those who are already part of the EV community. Nio in particular is clearly attempting to expand its Nio House concept to the online space by providing non-vehicle-related services and content.

Nevertheless, numerous viewers appear to be less than impressed with some of the livestreams, describing the live shows as “boring” and lacking in informative content. Given that these livestreams have yet to garner many viewers, it’s unclear how successful the format may be in converting viewers to buyers.

If EV live-streaming gains a widespread following, it could potentially allow companies to scale back their presence in brick-and-mortar stores, dramatically reducing overhead.

For now, however, this avenue of sales is all that EV companies really have, as many city governments have enforced temporary closures of nonessential stores to stop the spread of the virus.

“Offline channels are basically blocked,” said a user on microblogging platform Weibo. “Now only those online can be used.”

Tesla opened a flagship store on B2C marketplace Tmall April 16. The store sells accessories and allows customers to schedule a test drive for RMB 1 ($0.14).

Why it matters: Tesla’s move underscores an emerging trend in China, where automakers are relying more on online channels to boost sales.

• Chinese automakers and dealers have embraced live-streaming amid store closures.
• The number of live-streaming shows related to auto sales jumped 15-fold for the first three months of this year, according to a report jointly released Tuesday by Bytedance-backed auto service platform Dcar and the China Automobile Dealers Association.
• Up to 7,000 live streams are broadcast every day, according to the report.

Read more: Tesla and Nio buck EV sales slump

Details: Tesla and Alibaba on Thursday announced the first batch of car accessories, including cargo mats and tire repair kits, are now available to customers on Tesla’s Tmall store.

• Users can schedule test drives and renew their home-charging services as well.
• Customers from 15 Chinese provinces and cities could book test drives in nearby stores in an online campaign called “RMB 1 Test Drive” (our translation).
• More than 400 orders have been made for test driving China-made Model 3 in just two days, according to our observations.
• Tesla will begin live-streaming on Tmall starting next week, Alibaba said in an announcement on its official WeChat account (in Chinese).
• Direct car sales are currently not available on the marketplace.

Context: This is actually the second time Tesla has partnered with Alibaba to expand its reach to the country’s 800 million internet users.

• Tesla opened its first Tmall flagship store in October 2014, originally planning to create a buzz by joining in Alibaba’s Double 11 shopping extravaganza with 18 imported Model S vehicles.
• Tesla quietly ended the cooperation with the Chinese e-commerce giant later that year, probably due to opposition from Tesla US headquarters, according to a Chinese media report.

China has pledged to step up efforts to maintain its global leadership in the EV adoption race, planning to invest RMB 10 billion this year to expand the already world largest EV charging network, a top government official said on Thursday.

Why it matters: More investment from government bodies could ease the burden of struggling automakers and reverse the downward trend in sales by making charging more accessible.

• The move comes as Beijing pushes a new round of technology investment initiative with focuses on 5G networks, data centers and charging facilities for EVs, called “new infrastructure” by Chinese top leaders beginning this year.

Details: China will invest RMB 10 billion ($1.42 billion) to expand the country’s charging network by 50% this year to stimulate EV deployment, Cai Ronghua, a deputy director at the National Development and Reform Center (NDRC) said during a media briefing on Thursday in Beijing.

• A total of 600,000 charging points will be established this year, with private charging points accounting for two thirds of the total number, according to a Xinhua News Agency report (in Chinese). China runs the world’s biggest EV power network with over 1.2 million charging points as of 2019.
• The top economic planner expects over 200,000 new public chargers, or 48,000 charging stations, available along highways, urban roads and in the countryside.
• Widespread charging infrastructure is expected to reduce the “range anxiety” from potential customers. China in 2015 planned to build a countrywide network of 4.8 million charging points to accommodate 5 million EVs on the roads by 2020 but has only achieved one-fourth of that.
• EV makers are ramping up the efforts. Chinese media reported in January about Tesla’s plans to open 4,000 new superchargers across China this year, which almost doubled the current number.
• Nio, however, plans to expand its battery-swapping network by 40% to 173 stations this year. It currently runs 25 supercharging stations but offers users access to more than 300,000 public chargers from service operators on its app.
• The cash-strapped EV maker has reportedly spent RMB 2 billion on charging service network and been looking to spin off Nio Power, its EV charging service unit in search of external funding since mid-last year, with no updates being disclosed.

Context: China has announced a series of policy stimulus, including two-year extension of subsidies and tax breaks on EV purchase in bid to cement its position as the world biggest EV market.

• Germany is playing catching-up. Chancellor Angela Merkel’s government in November increased EV subsidies by 50% to €6,000 (about $6,600) per vehicle, almost double the subsidy in China, while calling for industry for participation to build one million points over the next 10 years.

The slump in sales for China’s EVs continued in March, but were still four times better than February. Tesla accounted for over 20% of the total market share, the country’s top industry body said on Thursday.

Why it matters: The latest sales figures show that China’s EV market, hit hard first by subsidy cuts and then by the Covid-19 outbreak, is now on the mend.

• Tesla is playing a growing role in the world biggest EV market, echoing industry expectations that the company would lift the market from its nine-month slump.

Details: New energy vehicle (NEV) sales in March fell 49% year-on-year to around 56,000 units. In February, sales fell nearly 80% year-on-year, the China Passenger Car Association (CPCA) said on Thursday.

• Just over 11,000 NEVs were sold in February, as EV makers struggled to resume operation from a nationwide business disruption caused by the pandemic. It was the lowest point after January 2017, when Beijing began imposing as much as 30% cut on EV subsidy.
• Tesla contributed sales of 10,160 cars, more than one-fifth of the country’s 47,000 pure electric passenger vehicles sold last month. The EV giant delivered 3,563 and 2,314 cars to customers in the first two months, respectively, according to the government’s car registration numbers.
• The company’s Shanghai Gigafactory is now its only production base making cars given a large-scale shutdown in its US factories and has been ramping up production to make 3,500 cars per week.
• Meanwhile, sales of China’s biggest EV maker BYD plunged for the third consecutive month by nearly 70% from a year earlier to 12,256 units.
• Much the same thing was found in Geely whose EV sales dropped 69% year-on-year to 2,503 units in March.
• Tesla’s main rival Nio was one of the few automakers bucking the trend, with deliveries growing 11.7% year-on-year to 1,533 vehicles last month.
• Sales of general passenger car from manufacturers to dealerships fell 40.4% year-on-year to around 1 million units last month, a quick recovery from an 82% nosedive in February.
• CPCA maintained its projections on China’s NEV sales at around 1.6 million units in 2020, up 23% from last year. Around 111,000 clean energy vehicles were sold this year as of March.

Context: China last year recorded its first-ever decline on an annual basis in NEV sales to 1.2 million units, as the central government moved to cut subsidies on EV purchases.

• The total market sales have been falling for nine months since then. Beijing earlier this month announced extension of subsidies and tax breaks for another two years in bid to revive the market.
• Cui Dongshu, secretary general added the prolonged incentive policies would be a big and long-term boost for the market, offering EVs a price advantage against internal combustion engine vehicles.

Gigafactory Shanghai is now the only Tesla production facility making cars following a full-scale shutdown of its factories in California and New York alongside continued job cuts at its Nevada factory, as Covid-19 infections in the US continue to escalate.

Why it matters: Giga Shanghai resumed operations in early February with support from the Chinese government. It has been relatively insulated from the pandemic and its contribution to the company’s annual target of 500,000 cars is expected to rise as a result.

Details: Tesla is slashing jobs for hundreds of contract workers in its vehicle plant in Fremont, Calif. and the Gigafactory factory near Reno, Nev., according to a CNBC report on Friday citing people familiar with the matter.

• Giga Nevada makes battery packs and energy storage products in partnership with Panasonic, and reportedly began layoffs last month which will amount to 75% of its staff. Meanwhile, its Japanese partner had shut down its own operations at the plant.
• Tesla temporarily closed its Fremont factory and Giga New York starting March 24 under pressure from local authorities. Four of its employees have tested positive for the novel coronavirus—two in California and one each in New York and Nevada.
• The US EV giant temporarily shut its Shanghai facility for two weeks beginning in late January as required by regulators amid a nationwide lockdown, but reopened on Feb. 10, supported by local governments.
• Giga Shanghai had recovered to a production level of about 3,000 cars per week in late March and is ramping up for annual output goal of 150,000 cars this year, a Tesla executive said to Chinese media. Preparation for Model Y production in China is also underway.
• Tesla was not immediately available for comment on Tuesday.

Context: Tesla on Thursday reported its best-ever first quarter deliveries of 88,400 cars, thanks to earlier-than-planned delivery of its Model Y vehicles in the US and accelerated production ramp-up in its Shanghai facility.

• “Our Shanghai factory continued to achieve record levels of production, despite significant setbacks,” the company said in the announcement. Details in sales by region were not revealed.
• China accounts for around 10% of its total deliveries in the first quarter, according to estimates in Chinese media reports. In January, 3,563 Tesla electric vehicles were registered in China, followed by 2,314 car registrations in February, figures from state-backed China Automotive Information Net showed.
• The company said it expected to “comfortably” deliver more than 500,000 vehicles this year during its fourth quarter earnings call in late January. It has not revised its earnings guidance despite effects from the COVID-19 pandemic.

The made-in-China Model Y may start rolling off the Shanghai Gigafactory production lines of US electric carmaker Tesla earlier than expected. The company has placed a RMB 220 million ($31 million) order from a Chinese auto parts supplier for its compact SUV, TechNode confirmed on Thursday.

Why it matters: Locally sourcing parts and assembling vehicles helps the company slash the prices of its vehicles without cutting profits, therefore boosting sales and improving its balance sheet.

• Tesla could potentially lower the cost of materials for its made-in-China Model 3 sedans by 13% if it localizes the entire supply chain for its China operations, Chinese equity firm Bohai Securities said in a report published in late February.
• The Chinese-made Model 3 could improve its gross margin to 49% using all locally made parts, compared with 20% using US-made parts. Keeping the narrower margin on vehicles with all Chinese parts would lower the price to RMB 210,000, or one-third lower than its current sticker price of RMB 299,000, according to the report.

Details: Tesla China recently wrote up an order worth RMB 220 million of electronic controls for Model Y production in its Shanghai plant from Ningbo Joyson Electronic Corporation, an auto parts supplier listed on the Shanghai Stock Exchange, Chinese media reported Monday citing company insiders.

• A company representative confirmed the order when contacted by TechNode on Thursday, adding that several of its business units had received orders from Tesla in different amounts.
• Joyson declined to say when it would be delivering its parts to Tesla, only that it is running production “dynamically” to accommodate the carmaker’s production.
• The manufacturer last month confirmed (in Chinese) it will supply Tesla parts for its locally built Model 3 and Model Y vehicles over a five-year period with an order value expected to reach RMB 1.5 billion.
• Tesla began deliveries of its locally made Model 3 sedans in early January, around the same time CEO Elon Musk at a ceremony confirmed rumors that the Model Y would be produced at its Shanghai factory.
• The pace of the Chinese-made Model Y appears faster than initial estimates targeting 2021. It may begin production as early as October, according to Tesla news outlet Teslarati citing a meeting record for Shanghai-based Shengang Securities.
• The US EV giant has since been expanding its assembly to include the compact SUV. Its Shanghai factory resumed partial operations on Feb. 10 alongside Joyson, with the support of local governments, but immediately faced customer complaints for delivering cars with “downgraded” parts.
• Tao Lin, Tesla’s vice president of external affairs last week told Chinese media that its production capacity has recovered to the level before the Covid-19 outbreak at about 3,000 units per week. The company earlier this year said around 30% of its supply chain has been localized and it aimed to increase that proportion to 70% by July and 100% by year-end.

Context: Joyson, with a subsidiary just a few miles away from Tesla’s Shanghai facilities, has secured orders worth more than RMB 7.5 billion from Tesla for human machine interface (HMI) parts and safety products such as airbags. TF Securities last month estimated all the contracts could contribute revenues of up to RMB 2.5 billion on average each year.

• The Chinese parts maker boasts a wide range of product offerings, including vehicle control units, airbags, and steering wheels. Earlier this month the company announced that it will also supply parts such as battery management units to Volkswagen for its first mass-produced electric vehicle model ID.4, which is expected to land in Europe later this year.
• Tesla did not immediately respond to requests for comment.

Correction: added text to clarify that the Model 3 price of RMB 210,000 was for a 20% gross margin on a Chinese-made vehicle, not 49% as an earlier version suggested.

Electric car maker Nio delivered just north of 700 cars in February, half the number it had produced a month earlier, it said on Tuesday as automakers report plunging sales due to the Covid-19 virus crisis.

Why it matters: Nio is one of many Chinese EV makers that have been heavily affected by both weak demand amid a national health crisis and increased competition from Tesla’s China-made Model 3.

• Tesla bucked the industry-wide slump in February, delivering 3,958 Model 3 cars during the month, or around a third of the country’s total volume, Bloomberg reported citing Cui Dongshu, secretary general of the China Passenger Car Association (CPCA).

Details: Nio’s car deliveries dropped 55.7% sequentially to 707 units in February, according to an announcement released Tuesday. More than 90% of cars delivered were its five-seater SUV ES6, with the bigger premium SUV ES8 making up the balance.

• Still, Nio’s February decline was a moderate 12.8% on an annual basis, significantly outperforming the drop seen in the wider EV industry.
• Nio attributed the sales decline to ripple effects of the Covid-19 outbreak, saying that deliveries have been restricted since the company is taking a cautious approach to restarting its service operations and as people avoid public gatherings.
• Founder William Li said the company has since made an “aggressive” push into online sales channels with “some encouraging order numbers,” but did not reveal further details.
• Chinese media on Friday reported that the Tencent-backed EV maker captured more than 1.25 million views for its 925 livestreams on Chinese short-video platforms as of March 2.

Context: China’s new energy vehicles sales including all-electric cars and plug-in hybrids plummeted 77% year on year to around 11,000 units in February, marking the eight consecutive month of decline since July, according to figures released Monday by CPCA.

• Nio reported a year-on-year decline of 12% to 1,598 units in January deliveries, bringing an end to five months of growth while issuing a warning about reduction in production and deliveries in February.
• The Shanghai-based EV maker has raised a total $435 million via convertible bonds this year, along with a strategic investment project with the government of the eastern Chinese city of Hefei announced late last month.

Dozens of Tesla customers have reportedly filed complaints to a Chinese consumer watchdog after discovering older-generation hardware in their domestically made Model 3 rather than the highly anticipated HW3 self-driving computer.

Why it matters: Tesla has become the latest automaker affected by the Covid-19 outbreak. It blamed the hardware “downgrade” to wide shortages in the auto supply chain.

• Meanwhile, a slew of consumer protests could expose Tesla to risk of lawsuits and hurt its credibility in the world’s largest electric vehicle market.

Details: Chinese Model 3 owners last weekend discovered that their vehicles’ self-driving controlling hardware was the older version 2.5, or HW2.5, instead of the latest driverless computer HW3 which was listed on their sales documents, multiple Chinese media reported.

• One alleged Tesla owner asked the company for an explanation on Chinese microblogging platform Weibo on Monday, which featured attached images of the part label and sales documents.
• Two other Weibo users who said they were Tesla owners commented under the post saying that they found themselves in the same situation, but had received no response from the company after accepting deliveries between Feb. 27 and Mar. 1
• Dozens of Tesla owners later found the same issue and filed complaints to China Consumers Association, a government-backed consumer rights watchdog, reported (in Chinese) National Business Daily.
• In a statement published on the company’s Weibo account on Tuesday, the carmaker promised that it would retrofit all domestically made Model 3 cars which currently have HW2.5 chips to HW3 once the production and supply chain have fully resumed.
• The US EV giant said that HW2.5 and HW3 are virtually the same for owners who did not purchase the additional full self-driving (FSD) option, which costs RMB 56,000 (around $8,000).
• A Weibo user commented under the statement posted by Tesla’s official account, saying if the situation took place in the US, consumers will file class-action lawsuits against it for jackpot payouts. However, “this could be settled with just a Weibo post in China” (our translation).
• The company did not immediately respond to a request for comment.

Context: Tesla unveiled its “full self-driving” computer, previously known as Autopilot Hardware 3, in April and began offering retrofits to current owners later that year. The FSD chip was installed in all new Model 3 vehicles at that point, it said.

• The new hardware offers 21 times the computing power compared with the previous generation which used Nvidia chips. A widely anticipated feature, traffic cone recognition, is only available through the software update and self-designed HW3 chip.

Hillhouse Capital, a longtime Nio investor and once its third-largest shareholder, sold off its holdings in the Chinese electric vehicle (EV) firm in fourth quarter after reducing its stake significantly earlier in the year, according to a filing on Friday.

Why it matters: Caution about the EV maker and about the electric car sector in general from a top-ranked private equity firm underscores the industry’s fragility and as well as the uphill battle Nio still faces in attracting badly needed funding.

• Hillhouse also sold off all of its 147,700 Tesla shares at the end of 2019 which it had bought in the second quarter, according to a regulatory filing.

Details: Asia-focused investment firm Hillhouse Capital Management has sold its entire stake in Nio over the last quarter, the company revealed on Friday in a filing made to the US Securities and Exchange Commission (SEC) after market close.

• The fund-management company nearly doubled its Nio holdings to 41.9 million shares in Q2 of last year, but reversed and sold off two-thirds in the third quarter, reducing its holdings to 13.36 million shares.
• Known for being an early investor in Chinese tech giants Tencent and JD.com, Hillhouse was Nio’s third-largest institutional shareholder with a 6.2% stake in the company behind Tencent and Scottish investment house Baillie Gifford, Nio wrote in its annual report released in April 2019.
• The investment firm was an early Nio backer, leading its $100 million Series A in 2015 with a follow-on investment in the EV firm’s $600 million Series C two years later. It held 7.5% of its shares as a principal shareholder when Nio went public in the US in September 2018.
• Nio’s share price reached its lowest point of $1.19 in the beginning of October and remained depressed for most of the quarter. Shares shot up by more than 53% to $4.87 on Dec. 30 after the EV maker posted smaller-than-expected quarterly losses.
• A Nio executive told Chinese media that the company respects investor choices, and declined to comment further. Hillhouse did not respond to TechNode’s request for comment.
• Hillhouse held 210 million shares worth $8 billion by year-end from 54 companies including Chinese e-commerce giant Alibaba, video-streaming platform iQiyi, and video-conferencing firm Zoom, according to filings.

Context: Hillhouse’s filing follows a day after Nio announced another $100 million short-term debt offering in convertible bonds from two unnamed Asia-based investment funds, which is expected to close on Feb. 19. The company had just announced a similar deal to raise $100 million just a week earlier, on Feb. 6.

• Nio’s stock price dropped 6.5% to $3.77 on Friday amid lingering concerns over whether it will be able to raise new financing in amounts significant enough to sustain growth.

Red carpet treatment in China has not spared Tesla from the effects of country-wide factory shutdowns as fallout from the coronavirus epidemic grinds on. The company said Tuesday that it is delaying the deliveries of its highly anticipated China-made Model 3 vehicles, but is working to keep up with its schedule.

Why it matters: Tesla has been trying to downplay the potential hit to sales from the current novel coronavirus outbreak, but there is growing uncertainty about how it will weather the impact of the epidemic that has had catastrophic effects on local businesses, particularly already-troubled electric vehicle (EV) makers.

• The announcement about the delay triggered a sizeable sell-off as Tesla’s share price fell 17% to $734.7 on Wednesday.

Details: Tesla will push back deliveries for its China-made Model 3, which was initially scheduled for early February, Tao Lin, Tesla vice president, said Tuesday on Chinese microblogging platform Weibo.

• In response to the question of whether the delivery in the second quarter will be delayed another three months, Tao said the company is making plans to “keep up with the timetable” once the virus outbreak winds down, but did not disclose further details.
• Lixiang, a Chinese EV maker backed by Meituan founder Wang Xing, has delayed the delivery of its first mass production model Leading Ideal One, originally scheduled for February and March.
• In an announcement (in Chinese) sent to users earlier this month, Lixiang said it hopes to reschedule the delivery date in a month as it works to recoup widespread impact on the domestic supply chain.
• Lixiang said that more than 10% of its components are supplied by manufacturers in Hubei province, the area hardest hit by the outbreak.
• A major component hub for the auto industry, Hubei has drawn a bunch of global Tier-1 suppliers, including Bosch, Valeo, Delphi, and Aptiv, which all have production bases located in the province.
• Bosch CEO Volkmar Denner late last month warned of a hit to the industry from the outbreak, saying the global supply chains “will be disrupted” if things continue as they are, according to a Reuters report.

Context: Tesla expects that the Shanghai Gigafactory will resume production on Feb. 10, in line the with a schedule set out by the Chinese government.

• During its fourth-quarter earnings call last month, the company was forecasting a delay of up to a week and a half for production of the domestically made Model 3.
• Tesla CFO Zach Kirkhorn assured investors that the closure will have a modest impact on first quarter profitability, as profit contribution from the Chinese-made Model 3 remains in the early stages.
• Automakers including Toyota, Honda, and Nio have yet to reveal a schedule to resume production.

Tesla kicks off trial production in Shanghai, surprises with Q3 profits

Tesla has kicked off the new year with an aggressive bid to expand its presence in the Chinese market, lowering by 15% the price of its domestically made, base version of the Model 3 following months of speculation.

Why it matters: Tesla’s latest price reduction is expected to shake up the Chinese electric vehicle (EV) industry, as the move is likely to grab market share in the short-term from rivals it is undercutting.

• A more affordable Model 3 is expected to catalyze EV adoption as consumers attracted by the high-profile performance EV will help lift the electric car market over the long-term.
• Competitors such as Nio and global luxury car makers such as Daimler and BMW may feel the pinch. Nio’s lower-price model, its ES6 SUV, costs RMB 338,000 after the subsidy, while the starting price of Mercedes Benz’s EV, the EQC SUV, is nearly double that of locally built Model 3 after applying the subsidy.

Details: Tesla on Friday revealed the long-rumored reduction of its cheapest Model 3 version by dramatically lowering the starting price of the standard-range model by more than 15%. The China-made Model 3 now starts at RMB 299,050 ($42,920), according to the company’s website.

• The price reduction includes a subsidy of around RMB 25,000, which China’s Ministry of Industry and Information Technology granted the company last month.
• Beijing also exempted Model 3 buyers from a 10% purchase tax of around RMB 26,000. The company reduced the sticker price by 9% to RMB 323,800, but warned that the final sale price is subject to change in accordance with government policies.
• The prices for the all-wheel drive models remained unchanged.
• Tesla is scheduled to deliver the first batch of China-built Model 3 sedans to consumers on Tuesday.

Context: Tesla late last year reported robust 48% year-on-year revenue growth to $2.14 billion in China for the first three quarters. A report by well-known auto market blogger, Chang Yan, said that the company’s sales target in China could increase 500% to 250,000 units in 2020 as a result of the price reduction.

• Tesla delivered 10,542 units in China for the first three quarters of 2019, according to figures from consulting firm LMC Automotive, falling short of rival Nio by nearly 7,000 units.

Tesla Model 3 price cut could jolt China market: analysts

Electric vehicle startup Nio on Saturday announced it will not begin delivery of its third mass-market model until the beginning of the fourth quarter of 2020. The long-rumored compact crossover comes with a new 100 kWh battery pack. Unveiled at a yearly launch event, the battery’s reception was much warmer as details about the new vehicles had already been leaked prior to the event.

Why it matters: With the new battery pack, Nio is hoping to eliminate range anxiety and beat competitors.

• Tesla is looking to release a version of Model 3 with a 100kWh battery pack, according to code reportedly leaked in its recent software updates.

Details: Nio fans at the annual “Nio Day” in Shenzhen were ambivalent about the liquid-cooled battery pack.

• The new 100 kWh battery pack will be equipped in both the EC6, its third electric SUV model, and redesigned the ES8 SUV. According to founder William Li, it only takes 5.5 hours to fully charge the battery with a new 20 kW DC fast charger for home use.
• The company also released a set of energy upgrade plans for current owners with the 70 kWh pack. The plan includes a one-time RMB 58,000 ($8,300) fee for replacement or a subscription of RMB 1,280 per month.
• The new battery pack allows EC6 drivers to go up to 615 km (382 miles) on one charge. It extends the range of the ES8 to 580 km. Nio fans cheered when this announcement was made.
• Prices for EC6 models were not revealed, and all the vehicle models with 100 kWh battery pack will not be delivered until the fourth quarter of 2020.

Nio seeks to allay customer fears over range with new battery swap stations

On-site reactions: TechNode was at the launch event and talked with a few Nio owners.

• Several said they would buy the new battery pack. Others were more concerned about the availability via Nio’s battery swapping service network.
• A Nio owner surnamed Tian told TechNode that he will not consider it until the new battery pack is available for swapping. Currently, he swaps his battery free of charge every day on his way to work.

Context: Nio has bet big on battery swapping technologies as part of a broader “Battery as a Service” strategy. This term was coined by William Li to describe a comprehensive energy ecosystem including battery swapping and valet charging services.

• Li revealed on Saturday that Nio owners have so far swapped batteries over 230,000 times in the company’s service network of over 120 swapping stations in China.
• Investors have questioned if the incentive policy is economically sustainable for the company. Li responded in an earnings call in September, saying that the cost of electricity is “quite low” with an additional cost of around RMB 50,000 each day.

A little known Chinese electric vehicle startup will likely become the first of its kind to be saved by a government-led buyout. After shelving its plan to invest in struggling EV maker Nio, a county government of China’s eastern city of Huzhou is planning to take over Youxia Motors. Youxia’s chairman, Wei Jun, said in 2017 that the company would be “China’s Tesla,” but the company has yet to deliver a real car after five years of operation.

Why it matters: Chinese local governments have been strong backers of electric vehicle startups, in line with Beijing’s goal to be the world’s leader in clean energy transportation. Now, as the once soaring industry is deflating, some of them are finally biting the bullet with further bailouts.

China NEV sales decline extends in November

Details: A fully state-owned urban investment corporation, controlled by the Wuxing district government Huzhou, is planning to acquire land from Youxia Motors. It will also take over its unfinished construction project, the government said in the minutes of a recent meeting published (in Chinese) last week.

• The regulator has approved a takeover plan submitted by Huzhou Wuxing City Investment Development Group, intended to “better utilize resources” and prevent the project from going into default.
• A coastal city in the eastern Zhejiang province, Huzhou is known for being a potential new backer of cash-strapped EV maker Nio with an RMB 5 billion bailout plan in October.
• The local government later confirmed it had held talks with Nio on the matter, but had dropped the plan, given a high investment risk.
• A spokeswoman of the district government declined to comment when contacted by TechNode on Thursday. Youxia Motors was not available for comment.

Context: Youxia Motors released an all-electric vehicle model in July 2015 after being set up for one year, the first among Chinese companies. However, it also gained a notorious reputation as the so-called “Youxia X” coupon model was almost completely converted from Tesla Model S.

• The company secured support from the Wuxing district government in 2017, striking a deal with local authorities to build an EV factory in the eastern Zhejiang province.
• Construction began later next year with plans for the series production of its first model in an annual capacity of 200,000 units in 2019. The company closed its latest financing of $350 million in Series B in August last year with no new investment since then.
• The government of China’s southwestern municipality Chonqing in October warned local banks to stop collecting payment from Lifan, a local OEM close to bankruptcy earlier this year, along with others. A debt commission was also formed under the support of the city government, Chinese media reported.
• Lifan posted a staggering net loss of RMB 947 million for the first half of this year. It sold a manufacturing plant with a license to EV startup Lixiang for RMB 650 million ($93 million) a year ago.

Tesla is closing some of its high-rent retail stores and replacing them with larger, more cost-effective “Tesla Centers” as part of a broader strategy to tighten belts while capturing a wider swathe of China’s auto consumers.

Why it matters: Tesla is consolidating its sales showrooms and service centers, and shifting to areas with lower rent in an effort to boost its bottom line as well as grow its presence in less saturated consumer markets.

• The American electric car giant last month opened an official account on Kuaishou, a Chinese short-video platform known for its influence in the vast market encapsulating China’s lower-tier cities and rural areas. It has around 3,600 followers with 34 posts, including a teaser video of its upcoming driving courses in northern Heilongjiang province.

Details: Tesla is deliberately allowing leases on some of its retail outlets known as “Tesla Stores” to expire, especially those located in popular, high-rent shopping centers in first- and second-tier cities, Chinese media reported citing a person familiar with the matter.

• A Tesla showroom in a high-end shopping center run by Kerry Properties in Shanghai’s Pudong district has closed. Another location in a Joy City mall in the Chaoyang district of Beijing has been replaced by a Lynk & Co showroom.
• Meanwhile, Tesla is planning to open bigger locations called “Tesla Centers” that will offer sales, delivery, and maintenance, with charging facilities nearby.
• Operational costs for a Tesla Center is close to that of the higher-rent Tesla Stores—around RMB 400,000 ($57,000) on average per month—but it incorporates after-sale service centers, which the company had been operating separately at a cost of RMB 300,000 per month each, according to the report.
• Tesla did not respond to a request for comment when contacted by TechNode on Tuesday.

Context: Tesla is not the only EV maker that is shifting its sales strategy to win an uphill battle in a challenging auto market.

• During an earnings call in September, Tesla rival Nio unveiled plans to open 200 “Nio Spaces,” a smaller and more capital-efficient sales office compared to its “Nio House” clubhouse-style flagships.
• China’s auto sales weakened 0.6% year on year to 2.28 million cars in October, while new energy vehicles, including fully electric cars, plug-in hybrid EVs, and fuel cell EVs, fell for a fourth consecutive month, plummeting 45.6% from the same period a year ago, according to figures from China Association of Automobile Manufacturers.

Tesla kicks off trial production in Shanghai, surprises with Q3 profits

Mercedes-Benz confirms its EQC electric vehicle model will go on sale in China early next month, as the German company joins the queue of players taking aim at Tesla in the world’s largest EV market.

Why it matters: The arrival of the EQC comes at a time when China’s auto sales are in a 15-month prolonged slump.

• The German luxury carmaker will face fierce competition from Tesla in the high-end market. The US market leader began selling its China-built Model 3 sedans with advanced assisted driving function last week.
• Launched in Stockholm, Sweden late last year, the EQC is Mercedes’ first EV model.

Details: Mercedes on Thursday confirmed that the EQC 400, a fully electric sports utility vehicle with a range of 415 kilometers (258 miles), will officially go on sale in China on Nov. 8.

• The company will deliver the cars from a joint factory with partner BAIC Motor.
• Reports of the model’s release date and features circulated on Chinese media last week, with a rumored starting price of around RMB 580,000 (roughly $82,400).
• The exact price is not known but a dealership told TechNode that it will be around that price, adding deliveries will start as early as December.
• The launch follows Tuesday’s recall of some new EQC vehicles made at its Bremen plant, due to potentially defective transmissions. A total of 1,700 vehicles are affected, local media reported.
• Sales in China will be unaffected by the recall, a spokeswoman told TechNode on Thursday.

Context: Mercedes-Benz parent Daimler AG accelerated its electrification push in late 2017 when its China head Hubertus Troska revealed a $755 million investment to make battery-electric cars with Chinese manufacturing partner BAIC.

• There are plans to roll out at least 10 different all-electric vehicles globally over the coming years, and most of which them will also go on sale in China, said the company.

Tesla took the markets by surprise on Wednesday with the announcement of third-quarter profits, perking the market up in after-hour trading shored by news that it has started test production in its new Shanghai facility.

Why it matters: The EV maker’s third quarter profit surprise comes in stark relief to that of its Chinese peers, many of which are struggling to stay afloat.

• Built in just 10 months, Tesla’s first overseas production facility in the outskirts of the eastern Chinese city of Shanghai cost 65% less to build than its Model 3 production system in the US, according to the company’s Q3 earnings report.
• The company’s share prices surged 20% to $306 in after-hour trading on Wednesday.

Detail: Tesla on Wednesday reported a quarterly profit (GAAP) of $143 million after two consecutive quarters in the red. Its profits compare with Wall Street analyst expectations of $257 million in losses, and against the backdrop of the $311 million in net profit it booked in Q3 2018⁠—its best-ever quarter⁠—in contrast to which its most recent earnings have fallen by more than half.

• Revenues from its automotive business were $5.35 billion in the third quarter, down 12% compared with the same period a year ago. The US EV giant failed to deliver on an internal goal of 100,000 vehicles delivered, missing by several thousand units.
• Tesla attributed the profits to fundamental improvements in operating efficiency, including higher fixed-cost absorption, reduced production costs, and enhanced vehicle quality. Total gross profit during the quarter ended September 30 climbed to 22.8% from 18.9% the previous quarter.
• The company also announced that it is already producing vehicles on a trial basis at the Shanghai Gigafactory, from general assembly to body to paint. The investor update contained nine pages of photos.
• It won approval on October 17 from the central government to manufacture automobiles in China and is now finalizing the license and other governmental requirements.
• Continued volume growth and cost controls will be important for “achieving sustained, industry-leading profitability,” said the company in the earnings update. Tesla CEO Elon Musk confirmed in the earnings call that it will expand the new Shanghai factory into battery and module production.

No JV for Chinese EV firm Zotye and Ford as pressure mounts in auto sector

Context: The Chinese government has laid out aggressive EV sales targets for 2025 and has offered ample help for Tesla to establish its manufacturing facilities in the world biggest EV market.

• Musk expressed his appreciation to the Chinese government publicly at the government-led World Artificial Intelligence Conference in Shanghai in late August.
• “Look how much progress you can make in China. This is extremely impressive,” the Tesla founder said, expressing his gratitude for the “China speed” achievable with strong government support.

Tesla is offering a 50% discount on the “fully driverless” version of its Autopilot assistance system in China, part of efforts to boost its adoption in the country.

Why it matters: Increased use of full Autopilot in China will help Tesla to optimize its localized self-driving solution for the Chinese market, which is its second-largest globally after the US.

• Tesla’s China software team currently sends data and feedback from local users to the US for processing, according to a media report.
• It will finish work on a local research and development center in Beijing later this year to handle optimization efforts for the Chinese market in the future.
• Tesla, which enjoys support from the Chinese government, released a picture of its Gigafactory 3 Shanghai on its social media account on Wednesday, saying it will go into operation by the year-end.

Details: Chinese Model S and Model X owners who bought the enhanced version of the Autopilot, can spend 50% less on replacing their system with the full self-driving package at RMB 27,800 (roughly $3,950).

• This is not the first time the US auto giant has slashed prices of Autopilot in China. The company offered the system to Model 3 buyers free of charge during May and June this year.
• Tesla also cut Model X car prices by up to RMB 341,100 in March.
• Chinese media cited a company spokesperson as saying it hopes to “provide more customers access to driverless functions.”
• Tesla’s Autopilot supports a range of capabilities, including automatic parking and prompted lane changes.
• Tesla was unavailable for comment when contacted by TechNode.

Context: Tesla has come under scrutiny following the deaths of at least three drivers when using the Autopilot system globally over the last three years.

• There is a regulatory void in China’s legal system at present regarding liability in self-driving car accidents. Drivers are not protected by the law in car crashes even if the collision was due to vehicle failure rather than human error.
• To adapt autonomous driving solutions specific to Chinese traffic conditions, self-driving developers need to collect and input local traffic data to optimize AV decision algorithms for Chinese roads.

Tesla vehicle fire in Shanghai caused by single battery module – TechCrunch

What happened: Tesla on Friday released its investigation results for a car fire in Shanghai, saying the incident involving one of its cars catching fire in Shanghai was caused by failure of a single battery module in the front of the vehicle. The US EV giant said its investigation team found no defects in the car’s systems after analyzing the battery, software, manufacturing data, and vehicle history. The company issued a software update to protect the battery and improve its longevity in Model S and Model X vehicles. An update to Model 3 vehicles was not provided.

Why it’s important: Tesla said on Weibo that passengers will “have enough time to get out of the car” if its vehicles ignite, and restated that its vehicles catch fire far less frequently than gasoline-powered cars. The statement was poorly received by Chinese netizens. “What is the statement talking about? Teslas safely ignite and should be rewarded?” (our translation) read one comment on the company’s Weibo announcement which received more than 550 likes. Tesla’s statement was released immediately after Chinese EV maker Nio began recalling nearly 5,000 of its flagship ES8 SUVs and apologized, following three incidents of its cars catching fire in two months.

Tesla loses key Autopilot engineer to self-driving truck start-up Embark – CNBC

What happened: Zeljko Popovic, Tesla’s Autopilot team lead, has stepped down and will join Embark, a self-driving truck startup in San Francisco. Popovic reportedly built and managed the perception team for the EV giant’s suite of advanced driver-assistance features, leading the development of highly accurate US highway maps for Tesla vehicles. He also created a set of perception software solutions that collect data from sensors and radars which offers a simulated “view” of the surroundings for the vehicles. Embark confirmed the hire, according to the CNBC report.

Why it’s important: The departure comes just two months after Tesla’s CEO Elon Musk said it will run 1 million robo-taxis on the road next year. Wall Street believes the technology is far from ready, and that it pits Tesla against Nvidia in hardware, Google in software, and current ride-hailing giants. The EV maker has missed some of its business goals over the last two years, including a much-delayed release of its first all-electric SUV Model X. Chinese AV players are also piling into the driverless taxi services to fight for a share of the potentially profitable robotaxi market. Baidu said it will launch a fleet of 100 autonomous vehicles, including taxis and buses, by year-end in Changsha, the capital of southern Hunan province. Pony.AI plans to test run 200 driverless vehicles in the next three years in the Nansha district of Guangzhou, the capital of southern Guangdong province.

Tesla Denied Tariff Exemption for Chinese-made CPU in the Model 3 – FutureCar

What happened: The U.S. government denied Tesla’s tariff exemption request for the Chinese-made CPU used in its popular Model 3 sedan. In a letter dated May 29, the US Trade Representative’s Office said the component is “a product strategically important or related to ‘Made in China 2025’ or other Chinese industrial programs.” The CPU is manufactured by Quanta Shanghai. A separate exemption request by the supplier of the Model 3’s touchscreen, SAS Automotive USA Inc, was also denied.

Why it’s important: In a securities filing on April 29, Tesla wrote, “our costs for producing our vehicles in the US have also been affected by import duties on certain components sourced from China.” The company previously claimed that choosing a different CPU supplier would have “delayed the Model 3 launch by 18 months.” The 25% import tariff has also affected other  US automakers, with General Motors stopping domestic sales of its Chinese-made Buick Envision, which accounted for nearly 15% of the brand’s sales in 2018.

Build Your Dreams (BYD), a Chinese battery and electric vehicle maker backed by Warren Buffett, announced Sunday that it was investing RMB 4 billion ($58 million) to build a battery gigafactory with an annual output value of RMB 13 billion in Guangzhou, the capital of southern Guangdong province.

The new battery plant will mainly develop and produce lithium-ion batteries for consumer electronic devices such as smartphones and laptops, reported Chinese media. Construction will begin late this month and BYD hopes to begin production by 2020, it said. The company began selling batteries to a list of global tech giants beginning in the early 2000s, including Samsung, Dell, Motorola, and Huawei.

BYD was not immediately available for comment.

Founded in 1995 as a battery manufacturer by Wang Chuanfu, a former government chemist, BYD moved into automobiles in 2002 with the acquisition of a state-owned carmaker Xi’an Qinchuan. The Shenzhen-based company launched its first plug-in hybrid in the name of BYD Auto in 2008 and started mass-producing electric vehicles a year later.

Official sales records show that BYD held the lead in global EV sales by a tiny margin in 2018, selling around 248,000 electric vehicles, surpassing Tesla by around 2,000 units. China’s BAIC and BMW lagged far behind, with sales figures of around 158,000 and 143,000, respectively.

However, Tesla surpassed BYD in the global EV battery deployment with 2,889 MWh (mega-watt hours) as of end-March, more than doubling second-place BYD’s 1,387 MWh, according to figures from research firm Adamas Intelligence. This means BYD’s average battery capacity is much lower than Tesla’s. The US EV giant has deployed nearly as many MWh as the next nine automakers on the list combined, including Nissan, Renault, and BMW.

In addition to the battery plant in Guangzhou, BYD has launched two battery production bases for electric vehicles this year in Changsha, capital of central Hunan province, and the southwestern municipality of Chongqing. China’s largest EV maker reportedly aims for an annual cell production of more than 100 GWh (gigawatt-hours) with its five production bases in China by 2020.

Tesla has yet to reveal detailed figures of its Gigafactory 3 that is presently under construction in Shanghai, but Panasonic’s 10 production lines in Tesla’s Gigafactory 1 have an output of 24 GWh per year despite the theoretical capacity of 35 GWh, according to a tweet by Tesla founder Elon Musk in April.

Tesla Gets Ready to Reveal Prices of Model 3 in China – Bloomberg

What happened: US electric vehicle (EV) maker Tesla is close to revealing the price of its Model 3 in China, with Bloomberg sources saying that vehicles could be priced between RMB 300,000 (around $43,400) and RMB 350,000 before subsidies. The final number is still being decided upon. The EV manufacturer plans to make an announcement on Friday, according to a post on microblogging platform Weibo, which invites people to guess the price of the domestically made model.

Why it’s important: Tesla already sells Model 3 vehicles in China, but they have to be shipped from the US, subjecting them to import tariffs and disqualifying them from government subsidies. Prices for the Model 3 currently start at RMB 377,000, including taxes and import duties. The company is currently building a factory in Shanghai, which it is counting on to increase sales in China. But competition could stand in Tesla’s way. The country is already home to nearly 500 registered EV companies, including Nio, Xpeng, Byton, and WM Motor. Telsa has also seen its share of controversy, with two of its vehicles catching fire in the Greater China area in the past two months.

Tesla issues battery software update after Hong Kong vehicle fire – TechCrunch

What happened: American electric vehicle (EV) maker Tesla is issuing an over-the-air software update to change the battery charge settings in its Model S and Model X vehicles after one of its cars caught fire while parked in Hong Kong. Tesla said the update is being done out of “an abundance of caution,” though it will not be applied to the Model 3. 

Why it’s important: Tesla has yet to identify the cause of the Model S fire in Hong Kong, which occurred just weeks after one of the company’s vehicles self-ignited while parked in a Shanghai parking garage. The incidents come as Tesla attempts to deal with flagging sales and challengers in the Chinese market. Chinese EV maker Nio reported a similar incident in which one of its SUVs caught fire while being repaired in central China. Nio said the fire was caused by a battery short circuit as a result of a chassis impact. The incidents have prompted concerns over the safety of EVs, which Tesla said is not an issue as its vehicles are far less likely to catch fire than their gas-driven counterparts.

Tesla Suddenly Catches Fire in Hong Kong Parking Lot, Times Says – Bloomberg

What happened: A Tesla Model S caught fire in a Hong Kong parking lot on Sunday, requiring firefighters to work for 45 minutes to put out the blaze. No indication as to what caused the fire has been given, and the company did not have an immediate comment on the matter, according to Bloomberg.

Why it’s important: The fire comes less than a month after a Model S spontaneously combusted in a Shanghai parking garage, destroying surrounding vehicles. Just days later, Chinese rival Nio reported one of its vehicles had caught fire while being repaired in the central Chinese city of Xi’an. The fires have sparked concern over the safety of electric vehicles (EVs). Last year, at least 40 new energy vehicles, which include electrics and hybrids, caught fire in China, according to the State Administration for Market Regulation. Tesla has previously claimed that its vehicles are 10 times less likely to combust than gas-driven cars.

Morgan Stanley: Tesla is going to need big China sales next year in order to make it – CNBC

What happened: Tesla’s recently announced $2.7 billion capital raise is a “bridge” solution, and the company needs to begin manufacturing and selling lower-cost vehicles in China, according to Morgan Stanley analyst Adam Jonas. However, he said that the electric vehicle (EV) maker’s increased dependency on China and robotaxis undermines its investment story. Morgan Stanley said it doesn’t expect significant deliveries of Tesla’s Model 3 until the first quarter of 2020.

Why it’s important: Jonas’ less-than-optimistic outlook comes after Tesla reported disappointing first quarter results and has attempted to boost slow deliveries in China. The company’s image took a hit last month following an incident in which one of its vehicles self-ignited while parked in Shanghai’s Xuhui District. Chinese luxury ride-hailing platform Shenma Zhuanche has also taken to social media to voice its grievances over the EV maker’s after-sales service and quality issues, saying that 20% of its 280 Teslas have had electromechanical faults. The US company is expected to begin production at its Shanghai plant later this year to provide lower-priced vehicles to the Chinese market.

Ride-hailing platform Shenma Zhuanche has called out US electric vehicle (EV) manufacturer Tesla for quality issues, claiming that problems with the automaker’s vehicles have cost the company up to RMB 6.5 million (around $965,000).

With nearly 280 Tesla vehicles in its fleet, Shenma asserts that it is the largest buyer of the company’s vehicles in the Asia Pacific region. However, Shenma said in a post on microblogging platform Weibo on Friday that 20% of the Teslas it owns have had electromechanical issues.

The company also claimed that Tesla’s after-sales service is “unsatisfactory,” and inefficiency when dealing with complaints has directly impacted its services, with the average disruption time from repairs and maintenance lasting 45 days.

Shenma said Tesla’s after-sale service did not meet its needs because the EV manufacturer does not have enough service stations or vehicle parts available in China.

Tesla refused to comment when reached by TechNode.

Shenma has subsequently posted three ads on the Thompson Reuters building located in Times Square in New York City to draw attention to the issue.

Telsa faced scrutiny in China last week after one of its vehicles caught fire and exploded in a parking garage in Shanghai. Following the incident, the hashtag “Tesla self ignites” (our translation) went viral on Weibo, with related posts viewed 110 million times as of Sunday morning.

Tesla CEO Elon Musk took to Twitter to defend the safety of EVs shortly after the incident, saying there are “over a million combustion engine car fires” a year.

Shenma’s complaint and last’s week’s fire come at a sensitive time for Tesla. The EV company has been working to boost flagging sales in China. Tesla missed its expected revenue for the first quarter, earning $4.5 billion of an anticipated $5.2 billion. The company’s share price fell to $235 by the end of the day Friday from $258 when it reported its first-quarter results on April 24.

Shenma is aimed at the higher-end market and operates a fleet of new energy vehicles, including Teslas and BMWs, among others. According to the company’s website, it offers its services in major Chinese cities including Shanghai, Shenzhen, and Guangzhou.

Update: This story has been updated to reflect Tesla’s response to Shenma’s claims. 

An incident on Sunday in which a Tesla vehicle caught fire in a Shanghai parking garage may have been caused by a battery short circuit, a preliminary investigation has found.

Tao Wei, an automobile defect expert at China’s General Administration of Quality Supervision, Inspection, and Quarantine, who is part of the investigation, told The Paper (in Chinese) that the finding came as a result of an initial check on Wednesday morning, though no data could be recovered as the car’s chip and battery had been destroyed. The evaluation was carried out at a Tesla test center in Shanghai.

In a statement on microblogging platform Weibo, Tesla said no preliminary conclusions had been formed, and that it would announce the results in a timely manner. “Please do not spread rumors,” the company added.

Closed-circuit video footage of a Tesla Model S billowing smoke and catching fire began making the rounds on social media earlier this week. The car was mostly destroyed while surrounding vehicles also sustained damage. Tesla responded by saying it was sending a team to Shanghai to investigate the incident.

The fire comes at a sensitive time for Tesla. The company has been trying to boost flagging sales in China and will report its first-quarter results on Wednesday, in which it is expected to post a loss.

Rival EV maker Nio said it was launching a similar investigation after one of its SUVs caught fire on Monday at a service center in Xi’an, a city in central China. Nio said at the time that no there were no casualties or other property damage as a result of the fire.

Sunday’s incident is not the first time a Tesla vehicle has self-ignited in China. In 2017, a Model S caught fire at a charging station in the city, damaging a vehicle nearby. The company has previously claimed that its vehicles are 10 times less likely to catch fire than gas-driven cars.

According to China’s State Administration for Market Regulation, around 40 new energy vehicles, including electrics and hybrids, caught fire in China last year.

Tesla says investigating incident of parked car exploding in Shanghai – Reuters

What happened: US-based electric vehicle manufacturer Tesla said it is investigating an incident in which one of its vehicles caught fire in a Shanghai parking garage. A video of the incident went viral on Chinese microblogging platform Weibo with the hashtag “Tesla self-ignites.” The Model S burst into flames and exploded, damaging surrounding vehicles. Tesla said it had sent a team to the scene and that no one was hurt.

Why it’s important: The incident comes at an inopportune time for Tesla. The company is trying to revive its sales in China, which have flagged as a result of Sino-US trade tensions. Tesla is also due to hold an investors’ day on Monday focusing on autonomous driving. This is not the first time Tesla’s vehicles have caught fire in Shanghai. In 2017, a Model S self-ignited at a charging station in the city, destroying another Tesla nearby. Similar incidents have occurred in the US, both while stationary and as a result of a crash. The company has said previously that its vehicles are ten times less likely to catch fire than gas driven cars.

Tesla accuses self-driving startup Zoox and former employees of trade secret theft – The Verge

What happened: On Wednesday, Tesla filed two lawsuits in California courts. One accuses Guangzhi Cao, a former member of Tesla’s Autopilot 40-member team, of sharing source code for its driving assistant feature with Chinese electric vehicle maker Xiaopeng Motors (XPeng). The company claims that Cao moved 300,000 files and directories related to Autopilot, some of which were copies of Autopilot-related source code. He then abruptly announced he was moving to a job at XPeng on Jan. 3 and tried to delete his browser history. XPeng responded by saying that it “was not aware of any alleged misconduct by Mr. Cao.”

Why it’s important: Experts and media reports found that XPeng’s electric SUV G3, which was released in December 2018, oddly similar to Tesla’s Model X. Many of the features were the same, but the price tag was much lower. As Tesla is trying to enter the biggest automobile market in the world, even building a Gigafactory in Shanghai, competition from Chinese manufacturers can be detrimental to its success. In the past, high import taxes prevented Elon Musk’s ambitions from spreading through China. By cutting such costs, it hopes for a competitive price tag in the Chinese market, in which case, proprietary technology will be crucial to its edge.

When Tesla announced last month that it was planning to close “many” of its retail outlets around the world in favor of online sales, some industry watchers in China were left scratching their heads.

After all, in the world’s largest market for new cars, brick-and-mortar car dealerships play several vital roles, including where many first-time car buyers come to learn about driving. Perhaps more than any other major market, dealerships in China are still a place for consumers to come kick the tires, touch upholstery, and get up to speed about the vehicle they are planning to buy.

On March 10, Tesla largely reversed its earlier decision to shutter stores, saying that it would keep many more than originally planned.

But there’s a catch: To compensate for the less-than-planned cost savings, the company also announced it would pass some of the costs on to consumers, raising vehicle prices globally by around 3% on average, beginning March 18.

In China, Tesla currently runs 40 retail stores and 24 service centers, according to the company’s website. Now the company says it will retain some retail stores in high-traffic locations, a spokeswoman for the luxury brand in China told TechNode. She declined to provide specifics.

Wei Lanfang, a salesperson at Tesla’s first Shanghai showroom located in the city’s glitzy Xintiandi shopping district, told TechNode she also wasn’t aware of the details.

“We don’t know which stores will be closed, but will act in line with company’s new regulations updated next quarter,” she said.

Feng Shiming, an automotive analyst with Shanghai Menutor Consulting, stressed the importance of physical stores for auto buyers in China. “Retail stores serve as advertisements, which is important in China to attract customers and keep them informed,” Feng said.

Yale Zhang, managing director of Shanghai-based auto consultancy Automotive Foresight told TechNode that as a relative newcomer to the Chinese car market, Tesla has the “luxury” to cut the number of its outlets in China because, unlike other foreign luxury carmakers, the company wasn’t entangled in a broad network of expensive dealerships. “Many luxury automakers would want to do that, but they couldn’t,” said Zhang.

Even if other auto brands say that online ordering of their vehicles is possible in China, it was all “fake,” added Zhang. “In the end, they have to go through their dealers,” he said.

“I honestly don’t think [Tesla] need [the stores],” he added. “One per city is enough. Then they can put the money to building out their service network.”

While some of the storefronts in China have been spared, it’s unclear how the 3% price hike will affect Tesla’s performance in the country.

Recent events suggest that, like auto buyers elsewhere, Chinese buyers are sensitive to price fluctuations. After slashing prices across its Chinese range on March 1, Tesla faced anger from earlier customers who had paid the higher prices and wanted compensation.

Wei, the Shanghai salesperson, said that the company had yet to reach a resolution with customers seeking price-matching compensation and that there had been an increased number of buyers coming to the showroom beginning last week.

Tesla’s China revenues declined 13.3% year-on-year in 2018. The US-based electric vehicle manufacturer has secured a loan for up to RMB 3.5 billion ($521 million) from Chinese lenders to fund its Shanghai plant, which is scheduled to start producing its Model 3 vehicles by the end of 2019.

With contributions from Colum Murphy. 

Tesla blames misprinted label for China customs hiccup – Reuters

What happened: Tesla said on Tuesday that it has reached a resolution with Chinese customs to resolve the suspended clearance snafu involving its Model 3 imports at all Chinese ports. Shanghai customs authority had found improper labeling on a batch of 1,600 Model 3 vehicles and blocked their release, and Tesla was directed by authorities on Friday not to sell or use the improperly labeled Model 3 sedans that had already been cleared, according to business news organization Caixin. The national customs authority has urged its subordinate bodies to strengthen inspections on other Tesla imports.

Why it’s important: Tesla has stuttered in its inroads to the Chinese market. After slashing prices of its Chinese range last week to attract more customers, the EV manufacturer consequently faced angry customers who had paid the higher price asking for compensation. The US-China trade tensions have raised the price tag for the imported cars in China while domestic rivals, such as Byton and Nio, qualify for government subsidies. The company’s Shanghai factory is under construction with the aim to begin Model 3 production at the end of this year.

Tesla owners protested at Tesla’s showroom this weekend in the central city of Changsha after the electric vehicle manufacturer slashed prices across its Chinese range on March. 1.

The biggest cut comes at the top of the range, with Model X variants seeing reductions of up to RMB 341,100 (just under $51,000). The Model S and Model 3 versions have price cuts of up to RMB 277,500 and RMB 44,000, respectively.

In light of these huge price gaps, some recent Tesla buyers are seeking compensation from the electric car manufacturer. One Weibo user by the handle luweijuzi said that he was aware of the price reduction only five days after receiving his Model X on Feb. 25, adding that he arguably could be considered as one of the “most unlucky” buyers of the brand. A photo posted by the user shows a banner mounted across the showroom windows of a Tesla outlet in Changsha, the capital of Hunan province. The sign reads: “Tesla cuts prices randomly, infringing customers’ legal rights.”

However, luweijuzi described the negotiation process as friendly and said that the showroom manager had allowed him to post the banner, even offering to take photos of it so that he could report the incident to Tesla management. Tesla could not be reached immediately for comment. 

Many other Tesla owners are still waiting for an official response from the company. Some comments posted under entry by luweijuzi post argued that such price reductions were just regular market mechanisms and that Tesla owners unhappy with them had no legal grounds to claim for compensation. Other netizens were more empathetic, saying the reaction by some Tesla buyers was understandable given that the decline in price was so considerable.

Tesla has also slashed prices in Australia, with its top-notch P100D range seeing reductions of more than AUD 80,000 (just under $57,000).

Separately, the carmaker announced last week that it will shut down retail stores and sell online only, a move that will lower average prices for all vehicles by 6%, according to The Guardian.

Tesla saw a rapid growth in revenue last year, but its performance in the Chinese market under performed. The brand’s revenue in China reached around $1 billion, marking a 13.3% decrease compared to 2017.

Meanwhile, construction of the company’s Shanghai plant is progressing. Four main workshops will be completed by September, and the power system workshop is scheduled to finish by March 2020. The factory will produce 150,000 Model 3 cars every year once put into use.

Tesla is lining up about $2 billion in loans for Shanghai Gigafactory: analyst report — CNBC

What happened: Tesla is looking for about $2 billion (RMB 13 billion) in loans for its Gigafactory 3 project in Shanghai, the company’s first production base outside of the US. A slew of local state-owned banks are expected to provide the massive loans jointly to the US EV giant, including Shanghai Pudong Development Bank, Industrial and Commercial Bank of China, China Construction Bank, and others, according to New York-based investment research firm JL Warren Capital. The interest rate for the first stage of financing will probably be 3.9%, below the current 4.35% benchmark rate set by China’s central bank.

Why it’s important: China represents a critical growth market for Tesla, as Beijing vigorously promotes electric vehicles amid environmental concerns and new energy ambitions. More than 1.25 million electric cars were sold in China in 2018, and the central government wants to hit 7 million by 2025. Without a production base in China, Tesla doesn’t qualify for government subsidies, driving the price of its Model S to $140,000 compared with the $80,000 price tag in the US.

US car manufacturer Tesla on Friday began delivery of the first batch of its popular Tesla Model 3 in China, one month after its Shanghai plant, the first production base outside the US, started construction amid a prolonged US-China trade war.

According to The Paper (in Chinese), over one thousand US-made Tesla Model 3 arrived in Shanghai Pudong Waigaoqiao Port before dawn on Friday. Chinese media cited a local customs official as saying vehicle inspection would be finished over the coming weekend, before Chinese customers could pick them up as early as next month.

Tesla announced the role-out of Model 3 in China in one of its Beijing stores on Friday morning, with a starting price of RMB 433,000 (roughly $64,440) for the rear wheel drive model. It was first launched in US in July 2017 and became the best-selling deluxe model in North America in 2018.

Tesla had sent Model 3 vehicles in a total of three vessels to China, and the last one is expected to land in the port of Tianjin in northern China by Sunday morning, according to the Beijing News. Analysts believe Tesla is rushing to complete the shipments by the end of this month, as China would probably end its temporary 15% tariffs on US-made cars in March.

China has levied heavy tariff rates of over 40% on imported American vehicles since August 2018 when the US-China trade war escalated. This was halted by central government in December with the replacement of 15% for the period of three months.

In a recent visit to China, Tesla CEO Elon Musk expressed his affection for China to the Premier Li Keqiang, with Li responding by saying Musk could be granted permanent residency. Musk said on Twitter earlier this year that its Shanghai Gigafactory will start low-volume production by the end of 2019.

Tesla boss Elon Musk says he loves China, so Premier Li Keqiang offers him a green card – SCMP

What happened: Chinese Premier Li Keqiang offered Tesla CEO Elon Musk a green card earlier this week during a meeting at Zhongnanhai, the headquarters of the Communist Party and the government. During the meeting, Musk expressed his affection for China, with Li responding by saying he could be granted permanent residency. The meeting followed Musk’s visit to Tesla’s Gigafactory 3 project in Shanghai, the company’s first production base outside of the US.

What happened: China is looking to promote foreign investment and attract international talent. However, Chinese green cards are notoriously difficult to obtain. In 2016, around 10,000 were awarded to foreign nationals. In contrast, more than 1 million people were granted permanent residency in the US during 2017. Tesla’s factory is a big deal for Shanghai. It is the largest foreign investment-funded industrial project in the city’s history. Li said he welcomed greater cooperation with companies from around the world.

Tesla cuts China car prices to absorb hit from trade war tariffs-Reuters

What happened: Tesla is cutting the price of its Model S and Model X cars in China by 12 to 26% respectively to absorb the impact of the US-China trade war on Chinese consumers. In response to the trade tensions from the United States, China imposed extra tariffs on U.S. imports into the country. The move hurts Tesla’s China business, which imports all the cars it currently sells in the market.

Why it’s important: Automobile is one of the industries that suffered the most from the China-US trade tension. Tesla has adjusted its pricing strategy in China several times this year. Lowering price at the cost of the company underlines intensifying competition in China, the world’s largest car market where electronic vehicles are rising fast. But local experts believe that the company has more space for lowing the price of its Model 3, which is going to be manufactured by its Shanghai-based Gigafactory by 2020.

特斯拉中国工厂建设加快 国产化利好国内供应商 – Sina Tech

What happened: Electric carmaker Tesla is planning to make 3,000 Model 3s each week in its Shanghai plant, according to a document filed to the SEC on Friday. The US-based EV startup also plans ramp-up investments on factories and equipment to up to $6 billion over the course of the next two years. The company said it will start transferring part of the Model 3 production to China in 2019, and the vehicles produced in its Shanghai factory will only be offered to consumers in China.

Why it’s important: In October, Tesla secured a plot for its mega factory in the world’s largest EV market. The new facility will be Tesla’s the first factory outside of the US and is expected to significantly boost its overall production. In July, Tesla was forced to raise its prices in China due to rising import taxes that came in the midst of the on-going US-China trade tension. Having a manufacturing plant in China would help Tesla avoid these import taxes.

Tesla has secured the plot for its mega factory in Shanghai, local media is reporting (in Chinese). The US electric car maker and Shanghai Urban Planning and Land Resource Administration Bureau today signed the contract for land use right transfer.

Elon Musk’s EV company reached a preliminary agreement with the Shanghai government to build a factory capable of producing 500,000 vehicles a year. The new facility is expected to significantly boost Tesla’s production in China, the world’s largest electric car market. The company previously said the first vehicles would roll off the Shanghai production line two years after the construction of the new facility begins.

After registering a new company in Shanghai on May 10, which is owned by Tesla Motors HK, it took Tesla only another 3 months to secure a plot for its first factory outside of the US. While the price has not been confirmed, earlier this month Bloomberg reported that the auction price is around RMB 1 billion yuan ($145 million).

The company recently increased the registered capital for its China unit by almost 46-fold to RMB 4.7 billion in a bid to widened the business scope to include car parts and prepare to roll out its first products in China by 2020.

Unlike, other foreign automakers, Tesla has no production and no partnerships with local companies in the country. Exporting its vehicles to China means sky-high import taxes. In July, the EV maker was forced to raise its prices in China because of the ongoing US-China trade tension, the Chinese government raised the tariff on Tesla to 40%

Tesla is likely to face another difficulty in the Chinese market. During September, China’s car sales fell the most in nearly seven years leading to concerns that the world’s biggest auto market could contract for the first time in decades. Aside from the economic slowdown, deleveraging, and pollution issues have led to the 11.6 percent slump, according to the China Association of Automobile Manufacturers (CAAM).

The 864,885 square-meter (213.7 acre) property is located in the Shanghai Lingang Industrial Zone in Pudong New Area. With the government’s push, Lingang has become a popular spot for auto assembly and equipment plants. The Shanghai authorities recently opened up 26.1 km of public roads in Lingang area for testing smart connected vehicles.

Tesla Is Closing In on $145 Million Plot for China Factory – Bloomberg

What happened: US-based electric car maker Tesla is said to be close to securing an RMB 1 billion plot of land for its new Shanghai factory. The Shanghai government could allocate the land to Tesla as soon as this month. In July, the company announced a deal with the Shanghai authorities to build a factory capable of making 500,000 vehicles a year.

Why it’s important: Tesla is a step closer to having its own auto plant Shanghai, which is expected to significantly boost production in the world’s largest electric car market. Currently, Tesla has no production in China and no partnerships with domestic companies like many foreign carmakers. With a factory in China, Tesla could avoid paying high import taxes resulted from the ongoing US-China trade war.

Embattled Tesla Bolsters Its Investment in China Unit Over 40-Fold to Make a Car —Yicai Global

What happened: Tesla’s China unit, the first one overseas, has lifted its registered capital to RMB 4.7 billion ($682 million) from RMB 100 million which is a 46-fold increase. The high-end EV maker also widened the unit’s business scope to car parts and plans to roll out its first products by 2020.

Why it’s important: Tesla has been facing heavy losses in the second quarter of this year. The company’s CEO Elon Musk announced taking Tesla private in August but apparently abandoned the plan. Musk’s strange behavior during the past month has attracted attention. Tesla’s stock has taken a hit falling 6% after Musk smoked a joint and used a flamethrower during a live broadcast of a radio show on Thursday. Despite the circus surrounding its stocks, Tesla’s plans for China seem clear. Musk previously announced an investment of $2 billion or higher into its first Gigafactory in China, which will have an annual capacity of 250,000 vehicles. The factory will enable Tesla to avoid high tariffs and ensure a steady supply for the world’s largest automobile market.

US electric vehicle maker Tesla Motors has set up a technology innovation center in Beijing, Ren Yuxiang, Vice President of Tesla Motor, revealed in an interview with The Beijing News (in Chinese). The Tesla Beijing Technology Innovation Center was registered last October in Beijing.

Ren told reporters that China is the world’s largest new energy car market, and Beijing is the first stop and headquarters of Tesla’s entry to China as well as one of Tesla’s largest markets in China.

“Beijing is a very important market in China for Tesla, we have to especially thank the Bejing government’s vigorous support and promotion of new energy vehicles,” Ren said, adding that Beijing has set an example for many cities around the world.

It is obvious that Tesla has big plans in China. On Tuesday (10 July), during his three-day visit to China, Tesla CEO Elon Musk signed an MOU with the Shanghai authorities to build Tesla’s first factory outside the US in Shanghai, making Tesla the first wholly foreign-owned car maker in China. The upcoming China factory is said to be capable of manufacturing 500,000 vehicles annually.

With my team after a profoundly interesting discussion of history, philosophy & luck with Vice President Wang in 中南海紫光阁 pic.twitter.com/pHd52YTZD2

— Elon Musk (@elonmusk) July 12, 2018

However, amidst the excitement, Tesla’s recent announcements was a mixed bag. According to this week’s reports, Tesla has raised its prices in China to offset the significant increase in import tax, which in order to sidestep these taxes is to manufacture the vehicles locally. What’s more is the intensified tension between US and China over trade and technology.

In 2013, Tesla opened its first store in China in Beijing. Since then the company has opened 7 experience centers and 6 service centers in the city. In 2017, Tesla sold 103,000 vehicles globally, nearly 20,000 of which is sold in China.

The new innovation center will focus on electric vehicles R&D—spare parts, battery, energy storage equipment, information technology, and more—which future product developments will be eligible of filing patent applications and cross-license patents in China.

Google has been recognized as a leader driving the global AI revolution, but the tools it offers to developers might not be as safe as many thought. A security team of China’s social and gaming giant Tencent recently claimed (in Chinese) that it had found a “significant security loophole” in Google’s machine-learning platform TensorFlow and that programmers are prone to malicious attack when editing codes using the platform.

“Simply put, if the design professionals happen to be using the vulnerable component when coding a robot, it’s likely that the hacker can control the robot through that loophole. This is very scary. So far we have only made a small step in security for AI. We look forward to making AI better and safer with the help of more technical talents,” says Yang Yong, head of Blade, a team under Tencent’s security division.

If an unsafe code is edited into an AI use case such as face recognition, the hacker can gain full control over the system, steal the design model from the designer, invade user’s privacy and cause even more serious damage, Yang adds.

In 2015, Google unveiled the free, cloud-based machine-learning platform TensorFlow to simplify programming steps for AI. Blade discovered security vulnerabilities while conducting code reviews on TensorFlow and has reported the matter to Google, who officially opened its AI center in Beijing less than a week ago.

This isn’t the first time Chinese hackers have safety flaws in overseas players products. In 2014, security company Qihoo 360 claimed (in Chinese) it gained control of some Tesla Model S functions including the lock, horn, flashing lights and sunroof. This July, Tencent’s renowned Keen Security Lab managed to remotely hack a Tesla for the second year in a row. The lab reported all related exploits to Tesla.