In EV race, China speeds, Europe pedals – Monthly Billet

Auto industry leaders in Europe are feeling a little agita over EV companies in China, where the domestic competition is overheating, that are moving abroad, penetrating the global market by undercutting prices.

To focus on China’s price competition with finished EVs is to miss the point. A bigger question the industry should ask is: When the heart and soul of next-generation vehicles are no longer internal combustion engines, but software and semiconductors, what’s left for most European carmakers to do?

At the recent IAA Mobility conference in Munich, China had 116 exhibitors, more than any other country at one of the world’s largest auto shows.

Even Yang was surprised by the presence of “quite a complete supply chain from the ADAs part in China, ranging from the ADAs controllers to the algorithm suppliers, and the SOC designers. This is really the first time to see so many in Europe.”

Moreover, Chinese players came to Munich with real products “ready to use, or already used in vehicles in China,” noted Pierrick Boulay, principal analyst, automotive semiconductors at Yole Group.

And Boulay cited Chinese companies “opening new offices in Munich to design in Europe, which is a new change.”

Chinese OEMs are making cars in Europe. Last month, BYD announced plans to produce all its European market EVs locally by 2028. Other Chinese brands including Chery, Geely, and SAIC are poised for significant production in Europe.

According to an Automotive News report, Chinese brands are expected to account for up to 6 percent of European auto production by 2028. Some Chinese carmakers are leveraging underused European production facilities of Stellantis and Ford. Localized production will play a key role for Chinese OEMs to shape pricing and market strategy in the future.

But ultimately, the big prize for China is to have key components with features, functions, software stacks and SoCs that are attractive to Western car OEMs and designed into Western vehicle brands.

That scenario, in reverse, is already playing out in Volkswagen’s “In China, For China” strategy.

In a desperate move to restore its presence in China, VW partnered with China’s Horizon Robotics. VW spent $2.3 billion to establish Carizon, a joint venture between Horizon Robotics and Cariad, the VW Group’s automotive software development team. The JV’s goal was in-house vehicle software for Volkswagen.

Today, the companies are working to adapt Horizon’s smart driving platform, called “Horizon SuperDrive,” for a Carizon rollout across upcoming VW models in the Chinese market.

In its booth at IAA Mobility in Munich, Horizon was also showcasing those very ADAS processors, Yang observed, with a family of solutions covering a range of ADAS functions.

This move indicates that VW’s “In China, for China” strategy is in fact helping Horizon’s “In Europe, for Europe” strategy.

This story isn’t unique to VW. Yole Group sees European Tier Ones such as Bosch, Aumovio (formerly Continental) and ZF becoming catalysts that will expand this trend in both directions (“In China for China” to “In Europe for Europe.”)

Given the Chinese government mandate that OEMs source 25 percent of chips used in a vehicle from local suppliers, European Tier Ones doing business in China are helping European OEMs expedite their design-in process with Chinese chip suppliers in China. Simultaneously, Chinese chip vendors are happily teaming with European Tier Ones, Yang noted.

The Bosch/Horizon partnership is one good example. But Horizon also has a JV with Aumovio, called neueHCT, added Yang.

Yang also added that the strength of China’s ADAS supply chain, although still linked to the low-cost solutions, “is built on the massive production expertise serving the world’s largest automotive market in size and adoption of ne technologies.”

It remains premature to declare China’s “ecosystem” victory in the global automotive market. As Boulay stressed, Chinese automotive chip vendors still hold only 4% of the global automotive market. This includes any type of semiconductors that go inside vehicles. If there’s a sea change coming, it’s only beginning.

So called “China speed” – picture one team riding motorcycles in the Tour de France – is driving Europe’s automotive industry to look for new business models. The longstanding raison d’être of automotive Tier Ones was developing or finding the new technologies that OEMs need. Now, however, European Tier Ones are increasingly pressed to bring “China speed” to OEMs’ business, observed Alexander Ekiong Tan, vice president, strategy and global sales of Ethernovia.

China speed is even putting EuroNCAP (the European New Car Assessment Programme) under pressure. At the AutoSens conference in Barcelona last week, Adriano Palao, technical manager ADAS/AS at Euro NCAP, noted that Chinese OEMs are uniformly impatient with process. Regardless of how it gets done, they want results, and they want them now.

In a historical context, Detroit, driven by capitalism, learned to outsource the supply of parts and components elsewhere in the world. In Japan, when Honda became the first Japanese auto manufacturer to produce cars in the United States, the Japanese OEM brought its own suppliers to Ohio. Honda’s decision was rooted in nationalism. Reportedly, Honda doubted the quality of parts and components they could source from local US suppliers.

Today, the Chinese have landed ready-made in Europe, with car OEMs and China’s ecosystem players. This strategy derives from China’s national policy of massive investment in semiconductors and from the imperative of Chinese self-sufficiency. By combining a national industrial strategy with aggressive global capitalism, China has forged a distinct advantage in an automotive industry changing with dizzying or “China” speed.

Source: www.yolegroup.com