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Pragmatism prevails among global automakers at Beijing auto show
Yang Jian | 2018/5/4

SHANGHAI -- With Beijing planning to press automakers to boost electrified vehicle output and announcing a phaseout of limits on foreign ownership of local production ventures, one would expect global brands to show urgency in launching electric vehicles and relief at the prospect of breaking away from their forced partnerships with local companies. 

But last week at the Beijing auto show, they exhibited neither. Unruffled by the regulatory changes, foreign automakers still deem it their top priority to supply the market with the right products.

Such pragmatism was in full display in the gasoline crossovers and SUVs they showed at the auto show. 

Leading foreign automakers in the rollout of such products is Volkswagen Group. 

Nearly all of the new vehicles VW¡¯s joint ventures with China FAW Group Corp. and SAIC Motor Corp. exhibited at the show were crossovers and SUVs, including three Volkswagen-badged crossovers and an SUV, the Skoda Kamio crossover and the new Audi Q5 crossover. 

They are all gasoline models and will arrive in the market this year. 

As local car shoppers¡¯ appetite for crossovers and SUVs remains robust, VW Group needs these gasoline models to defend its position as China¡¯s largest carmaker. 

The pragmatism is also reflected in global brands¡¯ measured approach to introducing electrified vehicles in China.

EVs qualify for more credits than plug-in hybrids under the upcoming carbon credit program. But global automakers remain skeptical of consumer demand for EVs because China lacks an extensive battery charging network. 

To play it safe, most global brands will bring in plug-in hybrids first and won¡¯t start selling EVs under their proprietary brands until 2020. 

Meanwhile, to earn more carbon credits and to avoid affecting sales of their own brands, VW and Ford Motor Co. have each established a joint venture to produce affordable EVs and market them under new brands. 

Some of the other foreign automakers have chosen to build affordable EVs at their joint ventures and sell the vehicles under the partnerships¡¯ proprietary marques. 

The latest example is Honda Motor Co. At the auto show, the Japanese company said it will begin selling its first EV in China this year. The compact car will be made at Honda¡¯s joint venture with Guangzhou Automobile Group Co. and distributed under the joint venture¡¯s Everus brand. 

To defuse the tension between China and the United States over bilateral trade and investment, Beijing pledged last month to let foreign automakers operate in China free of local partners. 

The deregulation will be first applied to electrified vehicles this year. It will become effective for commercial vehicles in 2020 and for passenger vehicles in 2022.

Unlike U.S. President Donald Trump, who welcomed the move by the Chinese side, global automakers appear nonchalant. At the auto show, executives of several global brands told the press that their companies would continue to run joint ventures as they are today. 

Audi now builds vehicles at FAW-Volkswagen, a 60-30-10 partnership among FAW, VW and Audi. 

CEO Rupert Stadler told reporters at the auto show that rather than seeking a change to FAW-VW¡¯s shareholding structure, Audi wants to partner with VW and SAIC to produce its vehicles at SAIC-Volkswagen, a 50-50 joint venture between SAIC and VW. 

¡°With a partner, you share risks and opportunities,¡± he said.

China has been the world¡¯s largest new-vehicle market since 2009. Despite the ending of tax incentives for small vehicles, the market has continued to grow. In the first quarter, auto sales in China rose 2.8 percent year on year to approach 7.2 million vehicles on demand for crossovers and SUVs. 

Judging by what they displayed and said at the Beijing auto show, global automakers are trying to safeguard their generally prosperous businesses in China by minimizing the disturbances from a flurry of recent regulatory changes. 

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