Business

Chinese auto firms out in force at Frankfurt car show, led by battery makers

Reuters

Chinese suppliers and manufacturers have stepped up their presence at the Frankfurt auto show, capitalizing on their strong position in electric technologies being forced on European carmakers by regulators seeking to curb pollution.

Though the number of exhibitors has fallen, to 800 in 2019 from 994 in 2017, Chinese automakers and suppliers now make up the biggest foreign contingent with 79 companies, up from 73.

Several European and Japanese carmakers, including Fiat, Alfa Romeo, Nissan and Toyota, have skipped the show as the industry cuts costs.

Europe’s automakers making multibillion-euro investments to develop electric and autonomous cars are finding themselves forced to rely on Chinese companies for key technologies such as lithium ion battery cell production — an area where Asian suppliers dominate.

German firms have been striking major deals with Chinese suppliers to help them meet stringent EU antipollution rules introduced in the wake of Volkswagen’s 2015 emissions cheating scandal.

“All carmakers face the challenge that they will have to fulfill fleet consumption targets,” Matthias Zentgraf, regional president for Europe at China’s Contemporary Amperex Technology (CATL), said.

Zentgraf said he expected further supply deals to be struck in Europe this year following agreements with BMW and Volkswagen.

Daimler on Wednesday said it had chosen China-backed Farasis Energy to supply battery cells for its Mercedes-Benz electrification push.

Farasis is building a €600 million (¥71.3 billion) factory in eastern Germany, close to where Chinese rival CATL is erecting a €1.8 billion battery plant.

SVOLT Energy Technology, which was carved out of China’s Great Wall Motor Co., said it would start building battery cells in Europe at a new €2 billion plant in 2023.

Chinese companies have been paying more attention to Europe since the United States and China embarked on a global trade war, which has resulted in tariffs.

“We put Europe up in priority,” said Daniel Kirchert, chief executive of Chinese electric car maker Byton and a former BMW executive.

“We are at a tipping point” for acceptance of electric vehicles in Europe, he added.

Byton has taken its prototype vehicles on road shows in Europe, and received expressions of interest from 20,000 customers, he said. In electric vehicle hot spots, such as Norway and the Netherlands, “we see a very positive response.”

Byton plans to export vehicles from its factory in Nanjing to Europe in 2021, Kirchert said, adding that exporting to the United States will be a challenge if Washington and Beijing do not resolve their trade war.

He said Byton still hoped to launch in the United States in 2021, but tariffs would threaten the company’s goal of selling vehicles at a starting price of about $45,000.

“We decided no matter what” Byton will launch in the United States, even at a higher price, he said.

China’s Great Wall Motor may consider building car manufacturing facilities in the European Union once its sales there hit 50,000 units a year, its chairman said at the show.

German carmakers have been forced to accelerate electrification plans after the EU imposed a 37.5 percent cut in carbon dioxide emissions between 2021 and 2030 in addition to a 40 percent cut in emissions between 2007 and 2021.

PSA Group Chief Executive Carlos Tavares used the show to step up criticism of Europe’s aggressive approach toward emissions limits.

“The word dialogue has become meaningless in Europe,” he said, referring to the requirements placed on the auto industry.

“Politicians can decide rules without any discussion with industry,” he told journalists on the sidelines of the show.

Electric cars made up only 1.5 percent of global sales last year, or 1.26 million of the 86 million passenger vehicles sold, JATO Dynamics said.

If carmakers fail to meet the 2021 targets they could face a combined €33 billion in fines, analysts at Evercore ISI have estimated.

They also estimate it will cost the auto industry an aggregate €15.3 billion to comply, assuming a €60 cost per gram to reduce carbon dioxide emissions for premium carmakers and €40 per gram for volume manufacturers.

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