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Chinese EV suppliers eye Japan as domestic competition heats up

Written by Nikkei Asia Published on   4 mins read

The push by carmakers to electrify offers new opportunities abroad.

Chinese auto parts makers are eyeing overseas markets as the country’s electric vehicle boom intensifies competition at home, with some seeing opportunities, particularly in Japan.

BYD, China’s largest electric vehicle maker, which is poised to overtake Tesla in pure electric vehicle sales this year, and three Chinese component suppliers have put in high-profile appearances at the Japan Mobility Show, the flagship industry event for the world’s fourth-largest auto market. Recently rebranded, the event has traditionally been dominated by local brands.

“We hope to supply our power batteries to major Japanese auto manufacturers after our yearslong cooperation with Nissan,” William Wang, chairman and founder of Sunwoda Electronic (SEVB), told Nikkei Asia on the sidelines of the show.

“The development of China’s electric vehicle industry is very fast. Ten years ago, when people talked about batteries, they would probably think of Japanese brands like Sony and Panasonic. However, in the past decade, China’s battery industry has made tremendous progress across the entire supply chain and there is hardly any difference between the Chinese ones and the Japanese ones now,” Wang said, adding that his company is in discussions with several other leading Japanese auto manufacturers about potential battery supplies.

Sunwoda started to mass produce power batteries in 2019 and is now one of the world’s 10 biggest EV battery manufacturers, as China dominates the global industry.

The market for China’s so-called new energy vehicles, which include pure electric vehicles and plug-in hybrids, has benefited greatly from various forms of state support, including massive subsidies. Component makers have thrived along with the sector, although there has been a shakeout in recent years. There were hundreds of EV manufacturers and power battery makers at the height of the boom, but now only a couple dozen of each remain.

Both China’s FAW Group and Changan Automobile said earlier this year that China’s power battery industry is facing a “serious overcapacity problem,” and manufacturers continue to expand production capacity.

Wang disputed that assessment, saying any overcapacity in China’s battery sector is cyclical and partly a factor of how capacity is measured.

“When calculating the production capacity, it is necessary to only consider the active and operational production lines, because the phased-out ones can no longer produce the upgraded products required by our auto clients,” Wang said. “The cost of retrofitting these old production lines is often prohibitively high, so we need to establish a new production line to meet customer needs.”

Sunwoda has also started building a factory in Hungary, even though the costs are expected to be higher than in China. Wang said the move is to “comply with the policy requirements of the European Union and respond more quickly to clients in the region.”

While Wang did not directly address competition levels at home, another Chinese auto supplier at the Japan Mobility Show was unequivocal.

“We are here because the competition at home is crazy, and we hope to find some Japanese clients here because profit from overseas clients is much higher than from domestic clients,” Shenzhen-based Industrial Man, whose biggest client is BYD, told Nikkei on the sidelines of the event.

This was the supplier’s first time attending the Tokyo event, which runs through Sunday.

“The number of EV suppliers in China is so excessive that clients would push our prices extremely low, leading to a very low-profit margin,” Jason Peng, a senior manager at the company, said.

Li Yi, president of Nihon Sanhua Automobile Parts, the Japanese arm of Zhejiang-based Sanhua Automotive Components, which produces integrated modules and other cooling products for electric vehicles, also sees an opportunity to expand in Japan.

“Toyota is now determined to catch up with international peers in terms of electric vehicles. They are not used to incorporating external suppliers into their system, but they have started to use our cooling plate,” Li said.

While rival automakers have rushed to focus resources on pure electric vehicles, Toyota has been far more cautious, arguing that EVs are just one of the many types of vehicles that will play a role in decarbonizing the industry. Faced with mounting criticism of its slow progress in rolling out electric models, Toyota’s new president, Koji Sato, has vowed to get serious about speeding up development. The world’s largest automaker has set a target of increasing its EV sales to 1.5 million cars by 2026 and 3.5 million by 2030.

“If you look at Toyota’s sales target, we do see a chance,” said Li, adding the company is also discussing future cooperation with other Japanese automakers.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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