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BEIJING – This year's Shanghai auto show highlights the race that leads the global industry to manufacture electric cars that Chinese drivers want to buy while Beijing removes subsidies to promote sales .
Communist leaders are putting the burden on automakers by imposing mandatory sales targets for electricity, adding to the financial pressure on them as sales collapse. Chinese purchases of pure electric and hybrid sedans and SUVs climbed 60 percent year-on-year to 1.3 million, or half of the global total, but total auto sales fell 4.1 % to 23.7 million.
Electricity buyers have been attracted by subsidies of up to 50,000 yuan ($ 7,400) per car, but this support has been cut in half in January and ends next year.
"The competition is getting fiercer," said Paul Gong, an badyst at UBS.
Communist leaders have been promoting electricity for 15 years in the hope of cleaning up smog-hit Chinese cities and quickly taking the lead in a promising industry.
General Motors, Volkswagen, Nissan and other majors of the world are developing models adapted to Chinese tastes. They have money and technology, but local competitors have experience: brands such as BYD Auto and BAIC Group have been selling cheap electricity for a decade.
At the Shanghai show, which will open to the public Friday, manufacturers plan to display dozens of electricity, luxury SUV micro-compact price less than $ 10,000. They aim to compete with gasoline models on performance, cost and appearance.
From here the end of next year, "it will be very difficult for a customer to give up an electric car," said Volkswagen AG CEO, Herbert Diess.
"The cars will offer room, room, fast charging," Diess said during a visit to Beijing in January. "They will look exciting."
Automakers are turning to China, their largest global market, to drive revenue growth at a time when US and European demand remains sluggish or declining. This encourages them to cooperate with Beijing's electricity promotion campaign.
This week, General Motors Co. unveils the first 100% electric model in Buick's all-Chinese Velite lineup, which includes a hybrid based on the Chevrolet Volt. VW will present an SUV concept as part of the project to launch 50 electric models by 2025.
Nissan Motor Co. and its Chinese partner will present the Sylphy Zero Emission model, a 100% electric model designed for China and put on sale in August. BYD Auto will present a fully electric sedan with an announced range of 400 km.
The pressure to switch to electricity is "more an opportunity than a threat" for Chinese automakers, said Gong, of UBS.
Chinese brands account for only 10% of global sales, mostly at low prices, said Gong. But they account for 50% of electricity sales in the world.
"In the world of electric vehicles, Chinese companies started earlier and reacted faster," Gong said.
The ruling Communist Party has spent billions of dollars on research grants and incentives for buyers. State-owned electricity companies have covered China with 730,000 charging stations, a much larger network than any other country.
Meanwhile, automakers are struggling to revive sales of SUVs, minivans and traditional sedans that fell last year for the first time in three decades.
A tariff war with Washington and the weakening of economic growth have made consumers nervous about engaging in large purchases. This slippage has worsened this year. First quarter sales were down 13.7% from a year earlier.
Despite this, Chinese manufacturers estimate that Chinese sales could exceed 30 million vehicles per year by 2025.
Ford relaunched its operations in China this year after a 37% drop in sales in 2018. The company has blamed a range of aging products.
Global brands forge links with experienced Chinese partners in low-cost production.
Ford has an electric company with Zotye Auto. GM and its Chinese partners are planning 10 electric models here next year. Mercedes Benz launched the Denza brand with BYD. VW's electric joint venture, SOL, began selling an SUV the previous year.
Under the new system, automakers must earn credits corresponding to at least 10% of purchases this year and 12% in 2020, for electricity sales. Automakers who do not meet the criteria may purchase competitor credits that exceed their targets.
Regulators say the goals will increase later.
The price of an electric sticker in China is still higher than that of a gasoline model. But charging and maintenance are cheaper. According to industry badysts, homeowners traveling at least 16,000 kilometers a year save money in the long run.
Great Wall Motors, the biggest SUV brand in China, reacted to sales quotas by launching an electric brand, Ola. Its compact R1, which looks like a toy next to the big SUV Great Wall, was put on sale in December at a price of 59,800 yuan ($ 8,950) after the grant.
In an effort to boost competition, Beijing lifted the ownership restrictions imposed on electric car manufacturers last year.
Tesla Ltd. responded by announcing plans to build its first factory outside the United States in Shanghai.
The official ambitions collide with the Chinese public's love for bulky SUVs, considered the surest option in crowded and bumpy streets. But feelings change.
A UBS poll found that 71% of Chinese buyers were willing to try electricity, up from 58% a year ago. The rate for the United States and Europe was less than 20%.
"The will of the customers is always bigger in China," said Gong.
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