On the road to EV dominance – DW – 18/03/2024

Chinese electronics manufacturer Xiaomi plans to deliver its first electric car in China on March 28, three years after the company first presented its idea for a battery-powered sports car.

Now premium carmakers in the US and Germany will have to deal with another competitor from the Far East.

The new vehicle is called the SU7, where SU stands for ‘speed ultra’. The car needs just 2.78 seconds to accelerate from 0 to 100 km/h (0-60 mph). The top speed is 265 km/h.

The maximum range with a fully charged battery is stated by the manufacturer as 800 kilometers (500 miles). The base price of the SU7 is around €33,000, which makes the SU7 comparable to a Tesla model 3, and only about a third of the price of Porsche’s Taycan.

Xiaomi CEO Lei Jun has set his sights on competitors from the US and Germany. “We don’t want compromises or mediocrity,” Lei said. “We want to build a dream car that can compete with Tesla and Porsche.”

From smartphones to cars

China has long been the world’s largest manufacturer of electric cars. E-mobility would be unthinkable without innovations from Chinese companies, including many electronics companies that did not originally focus on the automotive industry.

Xiaomi mainly produces so-called intelligent household appliances with web functions, such as door sensors or rice cookers that send notifications to the mobile phone when the rice is ready.

In Europe, Xiaomi is best known for its smartphones, just like the other telecommunications supplier Huawei, which has been launching its e-SUVs in China under the name AITO since 2021.

Byton: another ‘Tesla killer’ from China?

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Electronics companies trying to make the transition into car manufacturing are not limited to China. The Californian company Apple also had the idea to start producing cars 14 years ago. However, at the end of February 2024, the Cupertino iPhone manufacturer announced that the “Apple Car” project had been permanently discontinued. The company is said to have invested a total of $10 billion.

China’s dominant car market

China is the largest and fastest growing automotive market in the world. Germany’s major automakers sold about one in three cars worldwide in 2023. But their market position is now being challenged by domestic e-car manufacturers.

“China leads the global supply chain for lithium-ion batteries,” said Bernd Diepenseifen, partner at consultancy KPMG.

In terms of battery production, industrial innovation and sales, China clearly ranks number one in competitiveness. “Asian suppliers have a dominant position here, at least for now,” he added. And for German car manufacturers, things are not going in the right direction.

“The production of raw materials is certainly not an area where German suppliers are sensibly looking for opportunities, and this also applies to battery production,” Diepenseifen said.

The high standards to which Chinese carmakers strive became even clearer at the Geneva International Motor Show in February.

There wasn’t a single car manufacturer from Germany present, but there were plenty from China. Exhibition vehicles showcased a new generation of connected cars, with entertainment packages that integrate audio and video streaming services, and navigation that uses a countdown to indicate when the next traffic light turns green.

China is building a new generation of cars

The Chinese auto industry now views cars as more than just a means of transportation. Cars are more than just an engine plus gearbox, and e-mobility is not just a chassis with a socket.

China is thinking ahead with an emphasis on automated driving and artificial intelligence, an environmentally friendly transport concept and technological leadership in industrial production.

This is why electronics and telecommunications giants like Huawei and Xiaomi are positioning themselves in this competitive market.

“Currently, cars are ‘mobile data centers’,” says Xiaomi CEO Lei. “The automotive industry of the future will produce advanced and connected ‘smart spaces’.”

Chinese EV maker NIO has called its cars a ‘living room on wheels’.

At the IAA 2023 motor show in Munich, Wan Gang, China’s former Research Minister, enthused that electric cars could be used to store energy in the power grid during charging and discharging.

How strong is Chinese competition in the e-car market?

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A data-driven future

“For production and the vehicle of the future, ‘smart’ is the next big step,” said Jürgen Unser, who was president of Audi China until January 2024. This includes smart cars, smart manufacturing and smart infrastructure.

Production will soon be controlled by data and artificial intelligence. “It is very important for our society, including in Germany, that we become much more open in the way we handle and use data,” he added.

Compared to other countries, Chinese drivers are not prone to collecting private data. By using data, the innovative digital industry can then develop algorithms for the application of artificial intelligence to develop tools in the future.

“Artificial intelligence will contribute to our progress and prosperity,” Unser said. “We have to be fast, open and flexible.” However, the collected data must also be exchanged in a regulated manner.

In 2018, the German government and China signed a joint declaration of intent for automated and connected driving.

According to the document, both countries want to “create and develop non-discriminatory multilateral standards and requirements for data access and storage, data transmission and IT security (cybersecurity) in the field of automated and connected driving and associated infrastructure.”

Why Major Automakers Are Losing China

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But the reality of cross-border data sharing is much more complicated. According to the European Commission, many EU companies complain of difficulties in using industrial data from their subsidiaries in China.

Foreign investors must operate their data centers in China, which are typically disconnected from the parent company’s database or cloud service.

According to reports from Brussels, China’s data and cybersecurity regulations are “a problem” for European industry. Transfers of data from China require state approval from cyber regulator CAC, which wants to control all exports of “important data.”

The German government is also aware of the high hurdles. Federal Digital Minister Volker Wissing emphasized the need for free data transfer during the German-Chinese intergovernmental consultations in 2023.

The EU and China are currently negotiating uniform industry standards for information and communications technologies (ICT) in the interest of borderless data regulation. They are still looking for common ground.

“Decoding China” is a DW series that examines Chinese positions and arguments on current international issues from a critical German and European perspective.

This article was originally written in German.

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