ZHAOQING, China – Xpeng Motors, a Chinese electric car start-up, recently opened a large assembly plant in southeast China and is building a corresponding factory nearby. He has announced plans for a third.
Another Chinese electric car maker, Nio, has opened a large factory in central China and is preparing to build a second one a few miles away.
Volvo owner Zhejiang Geely last month showcased a massive new electric car plant in eastern China, rivaling some of the world’s largest assembly plants in size. Evergrande, a struggling Chinese real estate giant, has just built electric car factories in the cities of Shanghai and Guangzhou and hopes to make almost as many fully electric cars by 2025 as all of North America.
China is building electric car factories almost as fast as the rest of the world combined. Chinese manufacturers are using the billions they have raised from international investors and sympathetic local leaders to beat established auto makers in the market.
Success is far from assured. The players include start-ups, electronics manufacturers and other recruits from the automotive industry. They’re betting that drivers in China and elsewhere will be willing to spend $ 40,000 or more on brands they’ve never heard of.
Chinese automakers recognize that the experience gives some advantages to established automakers. But they insist their plans will work.
“We have the will and we have the patience,” said He Xiaopeng, chairman and general manager of Xpeng, in an interview. “I think we will find it very difficult, but we also have to move forward.”
Chinese industry is dynamic. China will manufacture more than eight million electric cars a year by 2028, estimates LMC Automotive, a global data company, up from one million last year. Europe is on track to manufacture 5.7 million fully electric cars by then.
General Motors and other North American automakers plan to catch up. In April, President Biden called on the United States to step up its efforts on electric vehicles. During a virtual tour of an electric bus factory in South Carolina, he warned, “Right now we are way behind China.”
North American automakers are on track to build just 1.4 million electric cars per year by 2028, according to LMC, up from 410,000 last year.
Global automakers are helping China lead. Volkswagen recently started construction on its third Chinese plant designed to produce electric cars.
China already has an electric car infrastructure, thanks to a government-backed nationwide deployment of more than 800,000 public charging stations. That’s almost twice as much as in the rest of the world, although drivers in the United States – who are more likely to live in single-family homes – can more easily plug their cars in at home.
With the slower deployment of charging stations outside of China, automakers elsewhere plan to continue building plug-in hybrid cars with small gasoline engines for a few more years. But the market for fully electric cars is already larger than that for plug-in hybrids, and the lead for electric cars is expanding rapidly. Automakers like GM plan to phase out gasoline and diesel engines completely over the next 15 years.
For new Chinese cars, name recognition will be a major challenge. The brands are mostly unfamiliar, even to Chinese drivers. On roads filled with Buicks, Volkswagen and Mercedes-Benz, they might struggle to stand out.
Alibaba, the e-commerce company, and two state-backed companies have formed an electric car joint venture under the name IM Motors, which plans to start delivering cars early next year.
Evergrande named his brand Hengchi, pronounced “Hung-cheh”. A market fad for electric cars has propelled the Hong Kong-traded shares of the company’s electric car unit, Evergrande New Energy Vehicle, to almost the same market cap as GM.
Evergrande plans to manufacture and sell one million fully electric cars per year by 2025. So far, it has not sold any.
Geely, an industry veteran with well-known brands in China, named his electric brand Zeekr, which rhymes with “researcher.” It plans to start delivering cars in October.
The Zeekr is manufactured in a new electric car factory near Ningbo on the east coast of China. The factory is a cavernous space with miles of white conveyor belts and rows of 15-foot cream-colored robots made by ABB of Sweden. It has an initial capacity of 300,000 cars per year, larger than most auto plants in Detroit, and floor space for expansion.
“What is most important is that China has the market,” said Zhao Chunlin, general manager of the factory.
Mr. He named Xpeng, pronounced “X-pung,” after himself. Xpeng’s niche feature is a cooing, Siri-like voice assistant that guides the car’s internet services, like directions and music, and its computer-assisted highway driving. Xpeng plans to have the capacity to manufacture 300,000 cars per year by 2024; last year it sold less than a tenth.
Mr. He made his first fortune by developing a mobile phone browser company, UCWeb. He sold it to Alibaba in 2014 and became chairman of Alibaba’s mobile business service unit. In the same year, he helped finance two former executives of the state-owned Guangzhou Auto company to start Xpeng.
Three years later, Mr. He took direct control of Xpeng and left Alibaba, which also acquired a small stake in the automaker. Mr. He said that his second child was born and that he wanted to be able to tell his son that he was running an automobile business. Mr. He owns 23% of the shares of Xpeng, while Alibaba owns 12%.
Chinese government officials helped along the way. A state-owned company in Zhaoqing, a 1,000-year-old jade carving town near Guangzhou, loaned Xpeng $ 233 million in 2017 to build its initial factory with an annual capacity of around 100,000 cars. The city has subsidized the company’s interest payments since then, according to Xpeng’s regulatory documents.
Wuhan City helped Xpeng buy land and borrow money at low interest rates for a new factory there. The government of Guangzhou also helped Xpeng to start building its factory there, said Brian Gu, vice president and chairman of Xpeng.
Last year, after resisting the pandemic, Xpeng cashed in on Wall Street, where Tesla’s rise to power has boosted investor appetite for the industry. The Chinese company raised $ 5 billion in an initial public offering and subsequent share sales. He spends part of the money on new factories and part on research and development, especially in autonomous driving.
Xpeng’s deep pockets can be seen in the expensive automation of its Zhaoqing plant. The robots lift 44-pound car roofs of dark tinted glass, apply aerospace glue, and squeeze them into place. Waist-up robots glide across the gray concrete floor, carrying dashboards while playing an instrumental version of Celine Dion’s “My Heart Will Go On”. (The robots were programmed this way, company officials explained.)
Construction of the plant took only 15 months, much faster than the assembly plants in the West. Yan Hui, general manager of the factory’s final assembly area, said decisions were made faster than at the German auto parts maker where he previously worked.
“Any design change took time – sign, sign, even sign in German,” he said. “But at Xpeng, we can just make the switch.”
Even though many brands of electric cars are new to China, their owners already have ambitions abroad. Xpeng begins to export cars to Europe, starting with Norway. Chery, a large public automaker in central China, announced last week that it would start exporting gasoline cars to the United States next year and follow with electric cars.
The United States will be a tough market. The Trump administration imposed 25% taxes in 2018 on cars imported from China, which slowed exports. Many parts of electric cars are covered by the same tariffs. This makes it more difficult, but not impossible, for Chinese companies to start shipping electric cars in kits to the United States for assembly.
For now, Chinese companies see huge potential to develop their brands.
Michael Dunne, managing director of ZoZo Go, a consulting firm specializing in the electric car industry in Asia, said the outlook for the industry was becoming clear: “China is going to be the world leader in the manufacturing of electric cars.”
Liu Yi and Yang Coral contributed to the research.