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China's Wanxiang Challenges Tesla For Dominance Of Global Electrics Market
6/29/2014
“The road is still very long,” said Lu Guanqiu last month, employing the imagery of a famous Chinese proverb as he talked about building electric cars. “We want to concentrate for now on manufacturing in the U.S. If I don’t succeed, my son will continue with it. If he doesn’t make it, my grandson will.”
Talk about perseverance and ambition. The founder and boss of Wanxiang Group, China’s largest auto parts manufacturer, is throwing down a multi-generation challenge to Tesla Motors’s Elon Musk. The likable Lu, who started life as a peasant 69 years ago, has often been compared to that American entrepreneur.
In fact, the battle for dominance of the global electric-vehicle market is now being portrayed as a Lu-Musk contest. “Every now and then an industry boils down to a fight between two guys,”writes Jeffrey Towson in the South China Morning Post.
Lu has been gearing up for the planet-wide struggle. This year, his Wanxiang bought Fisker Automotive, the builder of the Karma hybrid. The purchase followed last year’s acquisition of A123 Systems, the maker of the Karma’s batteries. Furthermore, in the middle of this month A123 announced the completion of the purchase from Leyden Energy of more than 20 patents needed for electric cars. The patents cover non-flammable electrolyte and lithium titanate technologies that permit faster charges and discharges. As part of the deal, A123 will employ some Leyden staff, who will relocate from California to Massachusetts.
Not only does Wanxiang have a car and technology, it has the financial resources. “I’ll put every cent that Wanxiang earns into making electric vehicles,” Lu famously said this year. Last year, the Hangzhou-based company, which supplies both General Motors and Ford, earned profits of 7.85 billion yuan, about $1.3 billion.
What makes the Wanxiang-Tesla faceoff so fascinating to observers is that they see both companies pursuing the same strategy: first building cars in America with American technology, selling them in the American market, and then bringing their vehicles to China. China, virtually everyone believes, will become the world’s largest electric car market by the end of this decade, as Karsten Engel, BMW’s president for China, said at the end of last month.
Tesla, of course, is busy building its global brand. Not only is the American company on fire in America with its all-electric Model S, it is now selling vehicles in China. Its first supercharging station in the country went online at the end of April, and Elon Musk personally delivered keys to the first nine Chinese Model S buyers then. The company can charge cars in Shanghai, and at the beginning of this month added a supercharger station in Beijing. It is planning to open others this year in Chongqing, Chengdu, Hangzhou, Guangzhou, and Shenzhen with Dalian also in the works. As Tesla now proclaims, “China is charged!”
Yet it is also unhappy. The rollout in China remains troubled, and despite Musk’s efforts to assuage owners in April, one of them, Yu Xinquan from Inner Mongolia, smashed his new white Model S with a wrench on Friday, moments after taking delivery in Beijing.
Despite Tesla’s early problems in China, Wanxiang has a longer road to success. It has a failed hybrid, the Karma, as a platform for a future all-electric car, but on the plus side of the ledger the company in October received approval to make electric trucks and buses in China. The buses are now in tests in Shanghai, Qingdao, and Hangzhou.
Despite Tesla’s big head start—perhaps as much as five years—there are reasons to believe the game is Lu’s to lose in the Chinese market. It is, after all, inconceivable that Beijing would allow a foreign company to attain and keep a lead in an area considered critical to China’s future.
And Chinese technocrats are already beginning to help Wanxiang. In an interview on Wednesday, Wang Cheng of the China Automotive Technology and Research Center, which reports to the State Council, said his agency would recommend that the government open electric-vehicle manufacturing to companies other than carmakers. The permits will apply only to all-electrics, not hybrids. The State Council could issue a policy change incorporating the recommendation as soon as this year. No wonder Lu Guanqiu has been publically saying, like he did last month, that he expects Wanxiang to receive approval to make electric cars in China.
Up to now, analysts expect Lu to first build an electric car in America. Yet it would make more sense for him to start where he has home-court advantage and, once successful in China, move to the American market. This means he would be the one to have the head start. Musk in April saidhe hoped to begin manufacturing cars in China in three to four years. To do that, he will have to joint venture with a Chinese company, which has less incentive to team up now he has offered open licenses to his technology.
Moreover, everyone assumes that because he bought the Karma that Lu will start with luxury models. If he were to do so, in China he would have to compete not only with Tesla but also BMW, which plans to sell German-made cars in September. The Munich-based company will offer the all-electric i3 and the plug-in hybrid i8. Lu will also have to worry about the Denza, to be made by a joint venture between Daimler and BYD Auto, when it hits the market, perhaps in September.
Lu, however, could surprise analysts and enter the market at the bottom, where the real action in China is expected to be. There, he would go up against BYD Auto, which has underperformed expectations.
Yet there are some small-car companies that could be hard for Wanxiang to beat. There is, for instance, microcar maker Kandi Technologies Group
, which some think will ultimately dominate the Chinese market. If Lu Guanqiu makes good on his promise to spend every last cent building an electric car, it may be Kandi, not Tesla, that forces him to hand over the coin at the bottom of his pocket.
China's Wanxiang Challenges Tesla For Dominance Of Global Electrics Market - Forbes
6/29/2014
“The road is still very long,” said Lu Guanqiu last month, employing the imagery of a famous Chinese proverb as he talked about building electric cars. “We want to concentrate for now on manufacturing in the U.S. If I don’t succeed, my son will continue with it. If he doesn’t make it, my grandson will.”
Talk about perseverance and ambition. The founder and boss of Wanxiang Group, China’s largest auto parts manufacturer, is throwing down a multi-generation challenge to Tesla Motors’s Elon Musk. The likable Lu, who started life as a peasant 69 years ago, has often been compared to that American entrepreneur.
In fact, the battle for dominance of the global electric-vehicle market is now being portrayed as a Lu-Musk contest. “Every now and then an industry boils down to a fight between two guys,”writes Jeffrey Towson in the South China Morning Post.
Lu has been gearing up for the planet-wide struggle. This year, his Wanxiang bought Fisker Automotive, the builder of the Karma hybrid. The purchase followed last year’s acquisition of A123 Systems, the maker of the Karma’s batteries. Furthermore, in the middle of this month A123 announced the completion of the purchase from Leyden Energy of more than 20 patents needed for electric cars. The patents cover non-flammable electrolyte and lithium titanate technologies that permit faster charges and discharges. As part of the deal, A123 will employ some Leyden staff, who will relocate from California to Massachusetts.
Not only does Wanxiang have a car and technology, it has the financial resources. “I’ll put every cent that Wanxiang earns into making electric vehicles,” Lu famously said this year. Last year, the Hangzhou-based company, which supplies both General Motors and Ford, earned profits of 7.85 billion yuan, about $1.3 billion.
What makes the Wanxiang-Tesla faceoff so fascinating to observers is that they see both companies pursuing the same strategy: first building cars in America with American technology, selling them in the American market, and then bringing their vehicles to China. China, virtually everyone believes, will become the world’s largest electric car market by the end of this decade, as Karsten Engel, BMW’s president for China, said at the end of last month.
Tesla, of course, is busy building its global brand. Not only is the American company on fire in America with its all-electric Model S, it is now selling vehicles in China. Its first supercharging station in the country went online at the end of April, and Elon Musk personally delivered keys to the first nine Chinese Model S buyers then. The company can charge cars in Shanghai, and at the beginning of this month added a supercharger station in Beijing. It is planning to open others this year in Chongqing, Chengdu, Hangzhou, Guangzhou, and Shenzhen with Dalian also in the works. As Tesla now proclaims, “China is charged!”
Yet it is also unhappy. The rollout in China remains troubled, and despite Musk’s efforts to assuage owners in April, one of them, Yu Xinquan from Inner Mongolia, smashed his new white Model S with a wrench on Friday, moments after taking delivery in Beijing.
Despite Tesla’s early problems in China, Wanxiang has a longer road to success. It has a failed hybrid, the Karma, as a platform for a future all-electric car, but on the plus side of the ledger the company in October received approval to make electric trucks and buses in China. The buses are now in tests in Shanghai, Qingdao, and Hangzhou.
Despite Tesla’s big head start—perhaps as much as five years—there are reasons to believe the game is Lu’s to lose in the Chinese market. It is, after all, inconceivable that Beijing would allow a foreign company to attain and keep a lead in an area considered critical to China’s future.
And Chinese technocrats are already beginning to help Wanxiang. In an interview on Wednesday, Wang Cheng of the China Automotive Technology and Research Center, which reports to the State Council, said his agency would recommend that the government open electric-vehicle manufacturing to companies other than carmakers. The permits will apply only to all-electrics, not hybrids. The State Council could issue a policy change incorporating the recommendation as soon as this year. No wonder Lu Guanqiu has been publically saying, like he did last month, that he expects Wanxiang to receive approval to make electric cars in China.
Up to now, analysts expect Lu to first build an electric car in America. Yet it would make more sense for him to start where he has home-court advantage and, once successful in China, move to the American market. This means he would be the one to have the head start. Musk in April saidhe hoped to begin manufacturing cars in China in three to four years. To do that, he will have to joint venture with a Chinese company, which has less incentive to team up now he has offered open licenses to his technology.
Moreover, everyone assumes that because he bought the Karma that Lu will start with luxury models. If he were to do so, in China he would have to compete not only with Tesla but also BMW, which plans to sell German-made cars in September. The Munich-based company will offer the all-electric i3 and the plug-in hybrid i8. Lu will also have to worry about the Denza, to be made by a joint venture between Daimler and BYD Auto, when it hits the market, perhaps in September.
Lu, however, could surprise analysts and enter the market at the bottom, where the real action in China is expected to be. There, he would go up against BYD Auto, which has underperformed expectations.
Yet there are some small-car companies that could be hard for Wanxiang to beat. There is, for instance, microcar maker Kandi Technologies Group
, which some think will ultimately dominate the Chinese market. If Lu Guanqiu makes good on his promise to spend every last cent building an electric car, it may be Kandi, not Tesla, that forces him to hand over the coin at the bottom of his pocket.China's Wanxiang Challenges Tesla For Dominance Of Global Electrics Market - Forbes
