'Only the inventive can conquer NEV market'

Executives stress importance of innovation amid intense industry competition at forum

Carmakers are charging into the increasingly competitive new energy vehicle market, with the ability to innovate emerging as one of the most important things to stand out, said executives and analysts.

You Zheng, vice-president of State-owned Dongfeng, said technological innovations have become the "main battlefield" for carmakers as the century-old auto industry is entering a new era.

"Through the dramatic changes unseen in a century, we must seize the opportunities that are arising from electrification and smart connectivity to grow our local brands," said You.

He made the remarks at the 2023 China Auto Bluebook Forum held in Wuhan, Hubei province, last week.

You said over the past few years, Dongfeng has built an NEV system covering platforms, technologies and resources, which will enable the carmaker to offer 18 passenger NEV models and 22 commercial NEVs by 2025.

He explained that the carmaker has three platforms, including one for luxury off-roaders, which is the first of its kind in the country.

In terms of smart driving, its Level 4 Robotaxi fleet has accumulated a mileage of more than 2 million kilometers in Wuhan.

Dongfeng has partnered with leading Chinese chipmakers to develop semiconductors as their short supply over the past few years have hit the global automotive industry hard.

You said Dongfeng's investment from 2021 to 2025 in the smart NEV segment is expected to exceed 100 billion yuan ($14.05 billion) to sharpen its competitive edge.

He Xiaopeng, CEO of Xpeng, said the growing importance of software will reshuffle the automotive industry.

"The whole picture will change as software is becoming important. If hardware remains the most important thing, the NEV sector will be the same as the gasoline sector," said He at the forum.

He said software will see its importance surge in five years from now and that will make the competition more ferocious.

"As in the internet, mobile internet and smartphone industry, you are going to lose in the game if you are not among the top three or even the top two players," he said.

Statistics from the China Passenger Car Association show that Xpeng delivered 7,506 vehicles in May. Despite a slight increase from April, the figure was still down 25.8 percent year-on-year.

As its new models, including the G9, did not generate expected sales, Xpeng's deliveries from January to May totaled 32,800 units, down almost 40 percent from the same period of 2022.

Yet he expects Xpeng's performance to turn for the better from the third quarter this year and the growth will speed up from the third quarter of 2024.

"The core is long-term development ... in the automotive sector, you need to have a plan for 10 to 20 years. It is almost impossible to see a remarkable change in three years," he said.

"Now who is ready for the next round of the game? None of the Chinese startups is sure to be able to make it to the next round, I would say," said He.

Jack Yu, president of the China Auto Bluebook Forum, said the competition is now centered on NEVs instead of smart vehicles.

"Future vehicles are electric ones and they will be, more importantly, smart ones. Now we are still in the early stage of competition, which is electrification, and it is too early to predict the future scenario based on their current sales," said Yu.

While the NEVs are increasingly accepted in the Chinese market, analysts said there is no need to ban sales of gasoline vehicles, as the authorities in some countries are proposing.

"It would be irresponsible to stop sales of gasoline vehicles all of a sudden," said Xu Min, a professor at Shanghai Jiao Tong University. "It should be the market that has the say."

In May, 717,000 electric vehicles and plug-in hybrids were sold in China, up 60.2 percent year-on-year and accounting for 30.1 percent of overall vehicle sales for the month.

In the first five months, NEVs' cumulative sales totaled 2.94 million units, up 46.8 percent year-on-year, according to the China Association of Automobile Manufacturers.

In 2022, 6.89 million NEVs were sold in China, accounting for 25.6 percent of total vehicle sales in the country, higher than the 25 percent goal set for 2025 in a government estimate released in 2019.